By: Chris Weingartner

The Managed Services and IT Services landscape is undergoing rapid transformation, driven by rising customer expectations, evolving delivery models, and increasing demand for value-added solutions. These shifts are fueling a wave of consolidation across the industry.

MSPs Positioned as Strategic Partners

MSPs have evolved from reactive IT support providers to embedded strategic partners. Clients now rely on MSPs to lead modernization efforts, accelerate digital adoption, and shape long-term technology roadmaps. The relationship is increasingly consultative, with MSPs enabling competitive differentiation through IT-driven innovation. MSPs who act as strategic partners, rather than vendors, drive sticky client retention and stronger valuations.

Automation of MSP Service Delivery

To scale efficiently and protect margins, MSPs are investing heavily in automation. Tasks like provisioning, ticketing, billing, and patch management are being streamlined through integrated PSA and RMM platforms. Automation is now table stakes for differentiation, driving consistency and enabling smaller MSPs to compete more effectively. Doing so successfully is a strong strategy to growing gross margins and enabling your team shift focus to higher value services.

Cybersecurity Front and Center

Security has become the most critical service category. Leading MSPs are embedding cybersecurity into every engagement, offering advanced services like MDR, XDR, SASE, and Zero Trust frameworks. 24/7 SOC support and layered security bundles are now baseline expectations as clients prioritize cyber resilience and regulatory compliance. Bad actors continue to increase and get more creative, keeping clients secure and connected is the first-order priority.

Rising Compliance Complexity

Regulatory scrutiny continues to intensify, especially in healthcare, finance, and government. MSPs that provide turnkey compliance frameworks, governance support, and audit readiness are in high demand. Vertical specialization and repeatable toolkits are emerging as key differentiators. Industry specialization isn’t a must, but certain ones require specific subject matter expertise.

Talent Shortage

Labor constraints remain acute. MSPs are expanding delivery via global teams and investing in upskilling programs focused on cybersecurity, cloud, and AI. AI is also being leveraged to augment less experienced staff, driving efficiency while maintaining service quality. Investors view employee retention as a core proxy for company culture, and minimizing turnover of key employees remains a core theme.

Ecosystem Integration & Marketplaces

SaaS and hyperscaler marketplaces (e.g., AWS, Microsoft, Google) are becoming central to solution delivery. These platforms streamline procurement and enable bundling of third-party tools. Channel automation and distributor integration are also reshaping the MSP go-to-market model.

Conclusion

Following a quieter M&A environment in 2024, transaction activity is rebounding in 2025. MSPs are increasingly pursuing M&A as a faster, more scalable path to new capabilities. If you’re considering strategic alternatives for your MSP or IT Services business, please contact me or another member of Founders’ Technology team.