.webp)
Managed services providers face new competitive pressures as artificial intelligence adoption reshapes revenue models and customer expectations.
According to Kaseya's State of the MSP Report 2026, the managed service provider industry is facing a paradigm shift. Although AI demand is increasing, the business model faces challenges due to shrinking customer contract value and difficulties acquiring new customers in the market.
Kaseya's detailed research among more than 1,000 MSPs finds that 71% identify new client acquisition as the leading challenge facing their business. Increased competition is evident in 1 out of 3 new customers choosing to switch to a competitor rather than remain an independent outsourcing company. Moreover, the share of clients who spend more than $25,000 a year is estimated to be 41%, compared to 75% last year.
Despite high AI demands, there is no revenue generated from its usage. Almost half (48%) of the surveyed companies state the need for automation and AI technologies by their clients for 2026. On the other hand, merely 13% of surveyed firms manage to earn revenue from offering such services.
According to Greg Jones, Senior Vice President of MSP Success at Kaseya, service quality alone does not guarantee customer retention. "The most significant reason why SMBs are leaving MSPs is due to their lack of skills, tools, or technology needed to help progress the business," said Greg Jones.
As Dermot McCann, EVP EMEA/APAC, mentioned, "providers are responding with specialized services including co-managed IT and compliance as a service." This marks a major change in approach and shows the importance of adding value continuously.
Business Honor notes that the current challenge of finding enough talent has overtaken issues of software. The problem of recruitment grew by 9% to 16% on a year-on-year basis, making automation and outsourced SOC more attractive options.
- Sandra Kelembeth
.webp)
