2024 MSP Market Trends and Opportunities: Cloud Services
Planning and preparation are vital for leveraging MSP market trends and opportunities around cloud services. Analytics from various studies, surveys, and reports give MSPs a view into potential shifts in purchasing behaviors, solution needs, and client pain points. While some things we know to be true – ransomware and cyberattacks continue, and cloud services are providing answers – other factors like the economy and international relations can unexpectedly impact business operations.
This article highlights the most notable movements in the channel for MSPs to consider when strategizing cloud services for uninterrupted business continuity, accelerated disaster recovery, and profit growth in 2024. Staying on top of these shifts helps MSPs remain ahead of the competition, responding to client needs faster to reach business goals efficiently. Keep reading to see how these insights can be applied within your MSP to expand and reinforce cloud services this year and into the future.
Trend #1: SMB Public Cloud Dependence is Growing.
The tooling, infrastructure, ease, and cost of public cloud services continue to attract businesses of all sizes. Flexera’s 2023 State of the Cloud Report surveyed 750 cloud decision-makers and found that 72% use a hybrid cloud environment, 24% use public cloud only, and 4% use private cloud only. Among the 96% of respondents using the public cloud, Microsoft Azure has the highest usage, with Amazon Web Services (AWS) a close second and Google Cloud Platform (GCP) coming in third.
Alongside public cloud growth, we’re also seeing the impact of 2023 economic uncertainty – and it’s positive! Despite record-high inflation rates, interest rates, and fears of a recession, most businesses are spending more on cloud services. Forty-five percent of survey respondents spent about the same as was planned, while 36% spent somewhat higher, and 9% spent significantly more than expected.
What’s Driving the Trend?
- Business enablement: Cloud services are critical for SMB operational efficiency, and as more businesses see the cost and productivity benefits, they’re expanding their reliance on these tools.
- Cloud spend efficiency: As SMBs increase their dependence on cloud services, it’s no surprise that almost half of businesses spend more than planned. For the other half, paying about the same, they may reinvest new savings into expanding cloud services.
How to Take Advantage:
Expand BCDR for cloud services: If you’re not providing the business continuity and disaster recovery (BCDR) protections SMBs need to use to utilize cloud services safely, you’re leaving untapped revenue on the table – and risking client data loss. Deliver comprehensive BCDR by supporting Microsoft 365 and Google Workspace backup and Microsoft Azure data protection. Meeting these clients’ needs is critical to maintaining existing client relationships alongside SMB growth and winning new clients seeking modern protections.
Partner with like-minded solution providers: To live up to their values, MSPs must work with vendors who reinforce them. A strong vendor relationship backed by robust solutions allows MSPs to meet competitive SLAs, delivers 24/7/365 support, provides free MSP marketing resources, and acts as an extension of the MSP. Partnering with an MSP-only vendor offers specificity, guaranteeing that services, solutions, tooling, and product development are designed exclusively for MSPs and your SMB clients.
Carve out a target vertical or technical specialty: Narrow your standard service offerings by adopting a specialized service strategy that appeals to optimal target verticals for MSPs. Highlight compliance with local regulations, federal laws, industry-specific standards, and trending services and features to demonstrate your commitment to and authority within the vertical. Niche cloud services allow MSPs to standardize product development, marketing, and sales, often resulting in lower overhead and higher revenue.
Optimize marketing and sales strategies: It’s your time to shine. Make sure you’re ready! MSPs have what SMBs need to protect the data in the cloud being utilized by cloud services. Update marketing campaign messaging, images, and targeting to address the pain points impacting various SMBs. Prepare sales reps with parallel scripts to thoughtfully take clients down the sales funnel based on their unique needs.
>> Download the MSP Business Growth Guide: MSP Marketing and Sales Tactics
Trend #2: MSPs Are Focused on Vendor Consolidation
With cloud services growing, MSPs are following the trend toward slimming down stacks to reduce technical debt and technician frustration, administrative overload, and lost operational costs. Standardizing vendors with comprehensive and flexible BCDR solutions significantly streamlines management to boost productivity, profitability, and rapid and reliable disaster recovery.
According to a 2024 Trends and Forecasts Report surveying over 1,500 MSPs worldwide, 74% of respondents say they prefer to use fewer vendors to meet their technology needs – up from 64% in 2022. Further analysis of the data shows that MSPs with a higher percentage of recurring revenue are more focused on vendor consolidation and less interested in growing the size of their business. This highlights the correlation between fewer vendors and higher overall revenue relying on high-value solutions that enable MSPs while protecting clients.
What’s Driving the Trend?
- Disparate vendor processes: Each vendor in your stack has its own administrative processes for billing, support, onboarding, training, and recovery, burdening departments across the MSP with costly and time-consuming redundancy and inefficiency.
- Technical debt: A full tech stack demands that technicians spread their attention and focus among solutions, diluting their ability to respond to every cyber incident with the same expertise and speed. This forces MSPs to expand their tech teams and technical knowledge, which is difficult and expensive due to the IT skills gap. Furthermore, technicians must spend hours being trained and onboarded to manage each solution or risk an interruption in service if available techs aren’t capable.
How to Take Advantage:
Reassess your current stack: As you seek to consolidate your stack, you must evaluate the value of your vendors and solutions, quality of support and services, cost, and consistency. Focus on maintaining positive vendor partnerships that also deliver all-in-one solutions capable of doing more with less. At the same time, don’t be afraid to cut ties with vendors who aren’t adding value to your MSP.
Standardize your BCDR vendor: Choose an MSP-only solution provider that prioritizes business enablement alongside data protection. For example, the Axcient x360 portal is a unified platform that gives MSPs a single pane of glass to manage BCDR with x360Recover, Microsoft 365 and Google Workspace backup with x360Cloud, and secure sync and share with x360Sync. Single sign-on (SSO), multi-factor authentication (MFA), and multi-tenant management increases productivity and reduces TCO by streamlining routine tasks and enabling operational efficiency throughout the business.
>> Download the BCDR Buyer’s Guide: How to Choose the Best BCDR Solution for Your MSP
Keep clients informed: You will need to inform clients of the change in vendor, but you should also explain why you’re transitioning. Reducing vendor management directly impacts client services by speeding reliable recovery with focused technicians. When new clients want to remain on old solutions, highlight consolidation as a security-first approach to cybersecurity that reinforces business continuity. What may seem like it could be a limitation for clients is actually a sign of your commitment to keeping their business running – and it’s a good idea to let them know.
Trend #3: Competition is Getting Fierce
In 2022, the global managed services market size was estimated at around $267 billion and is anticipated to grow at a compound annual growth rate (CAGR) of 13.6% from 2023 to 2030. While the pool of potential clients swells, so does the number of hungry MSPs hoping to win their business. As a result, MSPs are feeling the heat, with 35% citing competition as their biggest challenge, up from 29% the previous year.
While competition is growing, so is MSP revenue. Most MSPs worldwide increased revenue by more than 10% in 2023, indicating a solid financial outlook for the industry. It also signals MSP resilience in the face of 2023’s economic pitfalls and strength in cloud services protection solutions. Despite stiff competition, most MSPs expect revenues to continue rising over the next three years, with North America anticipating the most significant increase compared to other regions.
What’s Driving the Cloud Services Trend?
- Strong demand: High-performing SMBs have realized the criticality of MSPs’ BCDR solutions, support, and cybersecurity efficiency. More SMBs are seeking these protections as the use of cloud services increases and cyber threats become more sophisticated. Additionally, local, federal, and industry-specific regulations, as well as cyber insurance requirements, are expanding to include the use of robust and automated security features.
- Growing utilization: Seventy-three percent of businesses that rely on cloud-based MSP solutions expect to increase usage as time passes. With increasing cyberattacks on SMBs, innovation in the channel, and widespread adoption, businesses are furthering their reliance on MSPs and optimizing their BCDR infrastructure.
How to Take Advantage:
Expand BCDR for cloud services: As a baseline for meeting client demands, MSPs must have the required solutions, support, and infrastructure. While consolidation is central to efficiency, there’s a fine line between limiting services and satisfying clients. BCDR solutions must be comprehensive, offering both appliance and cloud-based deployments for various client environments, compliance requirements, and budgets. MSPs must also protect client data in external systems, including Microsoft 365, Google Workspace, and Microsoft Azure. Protecting the cloud services SMBs use most is a jumping-off point to enhancing non-product-specific services that can differentiate you in the market.
Improve customer experience: Many MSPs have already established a foundation of BCDR solutions for SMBs and are now focused on elevating additional partner benefits to win new clients. Free and brandable sales and marketing resources, 24/7/365 support, pooled storage at a flat fee, and new improvements in automation and usability are some ways MSPs are getting noticed in the channel. In addition to the cybersecurity provided by BCDR solutions, SMBs want expert support, guidance, and assistance in meeting regulatory and cyber insurance standards, reducing error-prone manual tasks, and regularly updating and upgrading features to offer new capabilities. Choose vendors that understand the need for these constant improvements and have maintained a positive track record of developing both BCDR products and MSP partners.
Implement upsell and cross-sell strategies: A la carte services force MSPs to market and sell each service as an individual SKU, which requires a lot of costly resources from sales, marketing, and product development. Bundling services and solutions based on the client’s total needs simplifies the sales cycle while ensuring complete protection for SMBs and your MSP. Ethical upsell and cross-sell strategies that center on educating clients, providing solutions, and suggesting the next best action reinforce your relationships with new and existing clients. SMBs rely on your knowledge to make the best decisions for their cybersecurity, so MSPs should be utilizing initial sales discussions and quarterly business reviews as opportunities to help clients understand their current state and reinforce data protection.
>> MSP Marketing and Sales How To Guide: 4 Ways to Grow Your Business on a Budget
Next Steps for 2024
Now that you know what’s coming, it’s time to strategize how to take advantage. Consider the following questions to assess the impact of trends and opportunities on your MSP. Are you already riding the next big wave or feel dead in the water?
- What are we doing as a business with the trending information we have?
- How are we applying what’s constant in the market to increase our business? Or have we grown numb to the state of the channel?
- How could possible industry, market, or economic changes impact what we think we know?
- Does our current stack have the flexibility to ebb and flow with changes in SMB data protection? If not, how is the rigidity of vendors and solutions holding you back?
Make this year the biggest yet with the Axcient x360 Platform, designed specifically for MSP consolidation, flexibility, and profitability, leveraging built-in automation, multi-use case solutions, and unparalleled partner support.
Ready to see how Axcient’s one SSO platform, partner prioritization, and ongoing product investment can help you do things differently in 2024? Get a no-hassle quote from our team today.
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