MSP Growth Gets Harder: AI, Security, DRaaS, and Secure Access Lead the Shift

MSP growth is still real, but it is getting harder to earn, harder to prove, and harder to package into the kind of large, durable contracts that once made the business model feel more predictable. That is the core signal running through Kaseya’s latest MSP survey and this week’s channel announcements: buyers are more cautious, deal sizes are compressing, and providers are being pushed toward services that deliver measurable outcomes rather than simple product resale. At the same time, AI, cybersecurity, disaster recovery, and secure access are becoming the places where MSPs can still defend margins if they can operationalize them well. The channel is not shrinking so much as maturing under pressure, and the winners will likely be the firms that can show value faster, operate more efficiently, and turn complexity into recurring revenue.

Background​

The managed services market has spent years talking about scale, platform consolidation, and higher-value engagements, but the current environment is forcing a more sober conversation. Kaseya’s 2026 State of the MSP Report, based on a survey of more than 1,000 providers worldwide, suggests the growth engine is still running, just with more friction in every cylinder. The report says 71% of MSPs cite winning new customers as their top challenge, while the share of providers reporting typical customer spend above $25,000 a year fell sharply from 75% to 41%.
That matters because the MSP industry has historically relied on long-term relationships, broad tool stacks, and cross-sell opportunities to lift average contract values. When those larger deals get harder to close, the economics change quickly. Providers must spend more time on pre-sales, more time on proof-of-value, and more time on customer-specific packaging, all before they can turn a prospect into a profitable managed service engagement.
The broader context is that buyers are not walking away from managed services; they are becoming more exacting. They want lower risk, clearer outcomes, and less operational complexity. In that environment, the pitch shifts from “here are the tools” to “here is the service, the SLA, the outcome, and the business case,” which is exactly where the most durable MSPs have been heading for years. The difference now is that the market is forcing the pace.
AI is a perfect example of that shift. Kaseya says 48% of MSPs rank AI and automation as the top client need for 2026, yet only 13% are generating meaningful revenue from those services. That gap shows an industry in transition: demand is visible, customer curiosity is high, but monetization is still inconsistent. AI has become a strategic expectation before it has become a repeatable line item.
Security remains the old reliable. Kaseya says 71% of MSPs report cybersecurity revenue growth, and that lines up with the channel’s long-running pattern: in uncertain periods, buyers continue to fund what they cannot ignore. The security stack may be crowded, but it is still the anchor for recurring revenue, account retention, and adjacent services like backup, compliance, and disaster recovery.
This week’s announcements from TD SYNNEX, N-able, NWN, Microsoft, and Fleet all point to the same strategic theme. The channel is becoming less about owning the software category and more about operating the service layer that sits on top of it. The companies making noise right now are the ones helping partners turn infrastructure into managed outcomes, whether that means AI cloud capacity, DRaaS, secure access monitoring, Copilot enablement, or endpoint lifecycle services.

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The New MSP Growth Problem​

The headline problem is not that MSP demand disappeared. It is that demand is fragmenting into smaller, more specialized opportunities that take longer to close and are easier for buyers to compare. When average annual spend drops, providers must sell more accounts to hit the same growth target, and that increases both sales cost and delivery complexity.
That makes the market feel tighter even when the pipeline is healthy. MSPs are spending more time proving they can solve a customer’s actual problem, not just presenting a broad technology bundle. In practical terms, this favors firms that can lead with a clear niche, a focused outcome, or a well-defined operational improvement rather than a generic “full-service IT” story. The old umbrella pitch still works, but it no longer closes by itself.

Smaller Deals, Longer Sales Cycles​

Smaller deal sizes do not automatically mean weaker businesses. They can also mean more modular services, easier entry points, and lower-friction adoption. But they do require a different commercial model, especially if every new customer now demands a bespoke onboarding process or customized stack.
The hardest part is that each smaller deal often comes with the same expectation of responsiveness, security, and reporting that a larger contract would. That compresses margins unless the MSP has automated the delivery layer or standardized the service catalog. In other words, the business does not just need more wins; it needs a more efficient way to turn wins into repeatable revenue.

• Smaller accounts can be easier to land, but harder to scale profitably.
• Longer sales cycles increase pressure on pipeline quality.
• Standardized packages become more valuable than one-off custom solutions.
• Customer education now matters almost as much as technical capability.
• Revenue predictability depends on operational consistency.

The providers who are adapting best are treating growth as a systems problem, not just a sales problem. That means better qualification, tighter packaging, and a stronger story about business outcomes. It is less glamorous than a big strategic logo win, but it is more sustainable.

AI Is Hot, But Monetization Is Still Messy​

AI has gone from “interesting add-on” to “mandatory conversation,” yet the commercial model is still immature. Kaseya’s numbers are striking: nearly half of MSPs say clients want AI and automation, but only 13% are making meaningful revenue from it. That suggests demand is real, but the productization layer is missing.
This is not unusual for a new category. First comes the expectation, then comes the pilot, and only later comes a clear paid service model. The problem is that many MSPs are stuck between those stages, offering advice and experimentation without yet building a repeatable service that customers will buy month after month. That is where margin gets trapped.

The AI Revenue Gap​

A service can be strategically important without being financially mature. AI is showing up in that gap right now. Customers want help with automation, governance, and practical use cases, but MSPs are still figuring out whether to monetize through implementation, advisory, workflow engineering, managed adoption, or some blend of all four.
The biggest opportunity is not necessarily in selling AI as a standalone SKU. It is in embedding AI into existing services such as help desk automation, ticket triage, monitoring, security operations, and user support. That makes the value easier to explain and easier to renew, because the customer is paying for outcomes instead of experimentation.

• AI succeeds fastest when tied to an existing operational pain point.
• Advisory-only offers are easier to start but harder to scale.
• Workflow automation may be the clearest path to recurring revenue.
• Governance and training are becoming part of the paid conversation.
• MSPs that can show time savings will have a stronger sales story.

The market’s current challenge is not awareness. It is packaging. MSPs know AI matters, but many have not yet translated that fact into a service blueprint the finance team can sign off on.

Security Still Pays the Bills​

Cybersecurity remains the most dependable growth engine in managed services, and for good reason. Security demand is persistent, threat pressure is constant, and buyers generally understand that spending here is not optional. Kaseya says 71% of MSPs are seeing cybersecurity revenue growth, which is exactly why security continues to sit at the center of the channel’s recurring-revenue model.
That also explains why so many adjacent announcements this week are security-adjacent rather than purely security-first. NWN is extending its Palo Alto Networks work into more operational monitoring. Microsoft is bundling Copilot adoption with partner-led services. N-able is positioning disaster recovery as resilience rather than infrastructure. The pattern is clear: the best services are the ones that reduce risk while reducing operational burden.

Why Security Still Anchors Growth​

Security is not just a product category; it is a budget category with staying power. Even when customers slow down spending elsewhere, they still need protection, compliance support, backup, and response readiness. That makes security the one area where MSPs can often preserve pricing power if they can demonstrate effectiveness.
There is also a trust premium here. If a provider already manages cybersecurity well, it becomes easier to sell backup, recovery, identity support, endpoint management, and even AI governance. The security relationship often becomes the platform for broader account expansion.

• Security offers the strongest recurring revenue base.
• It creates natural cross-sell opportunities into recovery and compliance.
• Buyers are more willing to fund it during uncertain periods.
• It supports higher-value managed services when paired with monitoring and reporting.
• It is one of the few categories where urgency is easy to explain.

The strategic question for MSPs is not whether security matters. It is how to avoid becoming trapped in commodity security resale while building the operational services around it. That is where differentiation and margin both improve.

TD SYNNEX Bets on AI Infrastructure as a Service​

TD SYNNEX’s expansion of its AI infrastructure-as-a-service portfolio with dedicated NVIDIA HGX B300 clusters on Nebius AI Cloud is a meaningful channel signal, not just a product launch. The company says the new offering is intended to give partners predictable access to high-performance GPU capacity and help customer projects move from experimentation into production. TD SYNNEX also says this is the first time a global IT distributor has reserved a dedicated NVIDIA AI factory-grade cluster from an AI-native cloud provider.
That matters because one of the biggest barriers to enterprise AI projects has been infrastructure uncertainty. Many partners can sell the idea of AI, and many can even scope the use case, but they struggle to secure the compute necessary to deliver production-scale workloads on predictable timelines. When infrastructure becomes scarce, the partner that can guarantee access can also control the commercial conversation.

From Pilot to Production​

The real value here is not simply GPU capacity. It is the ability to wrap capacity, commercialization, and services into an offer that feels enterprise-ready. TD SYNNEX handles the route-to-market layer, Nebius operates the cloud environment, and partners can package the whole thing as part of a customer outcome.
That structure is important because AI infrastructure is still being industrialized. Enterprise buyers do not just want access to models; they want reliable deployment, governance, and support. The partners who can manage those layers will be in a much stronger position than those trying to sell raw compute alone.

• Predictable GPU access reduces project risk.
• Channel packaging improves the chance of turning pilots into production.
• Partners can attach consulting, integration, and managed services.
• AI infrastructure becomes a commercial offer, not just a technical capability.
• The distributor’s role is shifting toward orchestration and enablement.

For the broader market, this is another sign that AI is becoming a channel stack, not a single product line. Compute, software, support, and lifecycle management are all converging into one procurement story. That is good news for partners who can operate across layers, and bad news for those waiting for AI demand to mature on its own.

N-able Turns DR Into a Managed Service​

N-able’s new co-managed DRaaS offering for Cove Data Protection is the kind of move that looks incremental on paper but meaningful in practice. The company says it reduces the cost, complexity, and risk of building and managing disaster recovery environments, while introducing predictable pricing and no hardware footprint. That changes how MSPs can structure the service commercially.
Disaster recovery has always been important, but it has often been awkward to sell and cumbersome to operate. Appliance-heavy models can create capex friction, and custom-built recovery environments can create support headaches. N-able is trying to solve both problems by making DR easier to standardize, easier to price, and easier to run as a recurring service.

Why Predictable Pricing Matters​

Predictable pricing is not just a billing convenience. It changes customer behavior. When a service is easier to understand and less tied to hardware, buyers are more likely to adopt it, renew it, and extend it across more of the environment. That is especially relevant in a market where MSP customers want simpler contracts and fewer surprises.
It also changes MSP positioning. Instead of selling recovery as an emergency fallback that nobody wants to think about, the provider can frame DR as a resilience service tied to business continuity and operational readiness. That is a better story for procurement, finance, and the executive team.

• No hardware footprint lowers the adoption barrier.
• Co-managed delivery can reduce operational strain.
• Recurring pricing improves forecastability.
• Standardized service tiers support better margins.
• DR becomes easier to sell as an insurance-like business service.

The competitive implication is sharp. MSPs that are still tied to appliance-centric models may need to justify why their DR package is worth the added complexity. N-able is making the case that the modern customer wants resilience without the baggage.

NWN Pushes Secure Access Into Managed Operations​

NWN’s expanded relationship with Palo Alto Networks shows how secure access is becoming a managed experience rather than a deployment event. By adding Prisma Access monitoring into its Experience Management Platform, NWN is pushing more visibility, more standardization, and more operational control into the secure access workflow. The company says the approach is aimed especially at commercial, regulated, and public sector environments.
That is strategically relevant because secure access is one of those categories where complexity can easily overwhelm customers. Hybrid connectivity, compliance requirements, uptime expectations, and distributed work patterns all create operational risk. A managed model that focuses on monitoring and response can be more valuable than a one-time security deployment.

The Managed Visibility Layer​

NWN’s move reflects a broader shift in the channel: customers increasingly care less about owning a tool and more about whether someone is actively running it well. That is especially true in environments where downtime, policy drift, or misconfiguration can have real regulatory or operational consequences.
By tying monitoring to its Experience Management Platform, NWN is making the service feel more like an ongoing operations layer. That creates room for higher-touch support, better reporting, and potentially stronger stickiness. It also positions the company well in sectors where governance and visibility matter as much as raw security controls.

• Secure access is moving from project-based to service-based delivery.
• Visibility and response workflows are becoming the real differentiators.
• Regulated sectors value operational consistency more than flashy features.
• Monitoring services create recurring touchpoints with the customer.
• Managed access can become a platform for broader IT operations.

The competitive angle is clear. Vendors can sell secure access tools, but managed service providers can sell confidence, response, and oversight. That is a much more defensible position if they can execute it consistently.

Microsoft Uses Copilot Promotions to Expand the Funnel​

Microsoft’s update to its Copilot for All CSP promotions is another example of the company using incentives to move customers from experimentation to deployment. By expanding who qualifies for the 30% and 40% discounts through June 30, 2026, Microsoft is trying to make it easier for partners to grow small pilots into larger engagements. (channele2e.com)
The timing is important. Copilot adoption has been uneven, especially in SMB and mid-market segments, where buyers are often interested but not yet fully convinced. Promotions can help, but the bigger value for partners usually sits in the surrounding services: readiness assessments, training, change management, and adoption support. That is where the margin lives.

Why Discounts Alone Are Not the Story​

A discount can open a door, but it rarely closes a business outcome by itself. Microsoft knows that, which is why the promotional push is so closely tied to partner-led motion. The goal is to increase coverage, expand seat counts, and give CSPs a better reason to lead with Copilot in renewal conversations.
For MSPs and CSPs, the opportunity is to monetize the messy middle between “we bought it” and “we actually use it well.” That includes user enablement, governance, prompt strategy, policy alignment, and ongoing adoption work. Those services can be sold repeatedly, unlike a one-time license incentive.

• Promotions help accelerate adoption, but services create the durable revenue.
• Readiness and training are often easier to monetize than licensing.
• Broader eligibility can unlock accounts that were stuck in pilot mode.
• Copilot deployments need change management, not just resale.
• Partners that build an adoption practice can differentiate quickly.

This also reinforces a larger trend: Microsoft is still using its ecosystem to turn AI into a channel opportunity, but the actual economics depend on partners who can translate enthusiasm into operational change.

Fleet’s Channel-Only Model Signals a Market Opening​

Fleet’s move to a 100% channel sales model and its launch of a partner program suggest that endpoint and device management vendors increasingly see MSPs as the best path to scale. Fleet says it wants partners to handle implementation, deployment, support, and managed services around its cross-platform device management technology.
That is important because device management is no longer just about inventories and patching. It is about compliance, endpoint visibility, automation, and operational consistency across mixed environments. MSPs that already support diverse device fleets can turn that complexity into a recurring service rather than treating it as a support burden.

Device Management as a Service​

The appeal of Fleet’s model is that it maps well to the MSP business model. Partners can combine deployment, support, automation, and ongoing administration into a service bundle that customers pay for monthly or annually. That is much closer to the way modern buyers want to procure IT operations support.
It also reflects a larger reality in the channel: vendors increasingly need service providers to operationalize their products. A strong product can create demand, but a partner can create stickiness, adoption, and lifecycle revenue. That is why channel programs are becoming less about resale and more about operational enablement.

• Mixed endpoint environments create recurring service demand.
• Compliance and automation are natural upsell paths.
• Implementation and support can be packaged into premium tiers.
• Channel-only models help vendors scale without direct-sales overhead.
• MSPs gain a route to recurring revenue beyond commodity device work.

For MSPs, the strategic opportunity is to own the daily operating layer. If they can do that, they become much harder to replace than a product-only vendor.

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Strengths and Opportunities​

The encouraging part of this week’s news is that it shows a channel still capable of inventing new service layers, even as core deal economics get tougher. The common thread across AI infrastructure, DRaaS, secure access monitoring, Copilot adoption, and device management is that MSPs have more opportunities to sell outcomes than ever before, provided they can package them clearly. That is a real advantage.

• Recurring revenue is still expanding in security, recovery, and managed operations.
• AI services can become sticky if MSPs attach them to concrete use cases.
• Predictable pricing helps close deals in cautious buying environments.
• Operational monitoring creates higher-value, harder-to-replace services.
• Partner-led adoption gives vendors a scalable route to market.
• Standardized packaging can improve margins and simplify delivery.
• Cross-sell potential remains strong across security, backup, and productivity.

The firms best positioned to benefit are the ones treating services as a portfolio, not a set of disconnected products. That kind of thinking turns market fragmentation into an opportunity rather than a drag.

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Risks and Concerns​

The risk is that the market’s shift toward smaller, more specialized deals could trap MSPs in a volume game they are not operationally ready to win. If every service requires heavy customization, the business can become more complex faster than it becomes more profitable. That is the danger underneath the growth narrative.

• Margin compression can follow smaller deal sizes if delivery is not automated.
• AI hype may outrun customer willingness to pay for implementation.
• Tool sprawl can make managed services harder to standardize.
• Services complexity can raise support costs and onboarding burden.
• Vendor dependency can create pricing and roadmap risk.
• Security commoditization may force providers into price competition.
• Execution gaps can undermine otherwise strong strategic positioning.

There is also a subtle risk that providers mistake promotion-driven adoption for durable demand. Discounts can accelerate trials, but only services with clear outcomes will survive budget scrutiny after the promotion ends.

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Looking Ahead​

The next phase of the MSP market will likely reward operational maturity more than product breadth. That means the strongest providers will be the ones that can show customers exactly how they reduce risk, save time, and simplify technology operations, while also proving they can do it at scale. The commercial winners will not necessarily have the most tools. They will have the most repeatable service designs.
We should expect more announcements like the ones from TD SYNNEX, N-able, NWN, Microsoft, and Fleet, because each one addresses the same structural need: helping partners convert technology into a managed service that a buyer can understand and finance. The market has moved beyond feature comparisons. It is now comparing operational outcomes, adoption support, and lifecycle value.

• AI infrastructure will keep moving from pilot to production packaging.
• Cybersecurity will remain the most reliable anchor for growth.
• DRaaS will keep shifting toward hosted, co-managed models.
• Copilot adoption will increasingly depend on partner services.
• Secure access will be sold as monitoring plus response, not just deployment.
• Device management will stay attractive where mixed environments are the norm.

The broader lesson is that the channel is not suffering from a lack of opportunity. It is suffering from a lack of easy opportunity. That is a very different problem, and for disciplined MSPs, it may be a better one to have. As the market gets harder to win, the firms that can operationalize value fastest will likely own the next wave of growth.

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Source: Channel Brief: MSP Growth Is Getting Harder to Win