Friday, February 02, 2024

I Don't Understand Analysts

 This is from the industry's favorite guy to give a microphone to, Jay McBain:

The MSP space is expected to experience significant growth in 2024 - here's the top 10 predictions from our MSP guru, Robin Ody from Canalys:

1. Total managed services revenue in the channel will grow 12% in 2024. Double digits in a tough macro environment.  [RAD: That seems reasonable.]

2. Over 50% of all MSPs will be operating an ecosystem (co-managed and/or co-partnering) model in 2024. The decade of the ecosystem!  [RAD: Define ecosystem because I don't think HALF will be operating one, since 90% of the MSPs do under $5M in revenue!]

3. At least 33% of MSPs will be using generative AI to build their own tools and automation processes by 2025. Once in a generation internal opportunity.  [RAD: unless Jay defines MSP as something other than the definition that CompTIA uses, I don't see it when 90% of MSPs do less than $5M in revenue.]

4. MSP partner programs will become widespread across IT vendors in 2024. We are tracking 35,000 vendors asking how to do this!  [RAD: sure]

5. Compliance consulting services will grow 60% for MSPs in 2024. Governance becomes the next frontier of managed services.  [RAD: I have seen other analysts with similar projections for compliance consulting, but I think they mean for the Big 5 like Deloitte.]

6. MDR services will be the number one growth engine for MSPs in 2024, growing at least 50%. Cyber is becoming a team sport - there is a natural MDR/XDR extension to every managed contract.  [RAD: sure]

7. At least three vendors in the RMM and PSA space will be acquired by 2025. Watch this space closely. I know Robin already has a couple under NDA.  [RAD: 3 large ones like CW or Kaseya or any 3 RMM/PSA like Halo or Screenconnect?]

8. M&A activity in the MSP channel will grow 50% in 2024, returning to 60% of 2021 levels. Not the surge from years back, but a return to roll-ups and exit opportunities for entrepreneurs.  [RAD: certainly looks that way with just December and January numbers]

9. Cybersecurity managed services revenue will grow 15% in 2024. Outgrowing overall managed services growth - and also outgrowing the 6,500 software and hardware vendors too!

10. The three key challenges for MSPs in 2024 will be new customer acquisition, upskilling existing staff, and transitioning their business models. Now over a half-trillion services opportunity, MSP's will need to mature their business models and take advantage of the growing opportunity.  [RAD: if M&A is up and Cybersec is most of the growth, which requires special talent, how will that growth come? Combine sales issues and staffing issues, these predictions are counter-intuitive.}

Does anyone understand the MSP space in the US? Really understand who they are and what that sector of the market is? If you think MSP and immediately imagine Dimension Data/NTT, then you may not see the market from the street.  Ingram Micro has 160K global customers. Those customers are VARs and MSPs - two distinctly different business models. Microsoft says it has 62K partners in North America. So assume that there are like 65K MSPs in the US, that means 6500 of them are who the analysts are talking about, not the 58K that make up most of the market.  Even CRN can't correctly identify an MSP:  CRN lists BCM One as an Elite 150 MSP, when in fact they are a managed SIP provider. When you look at it as data in begets the data out, I now understand the predictions. I wrote in my summary post about 2023 that most people who talk about the channel really don't understand it -- and they prove me right with each article.  

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