With AI set to make an impact on the MSP business model, how can service providers stay profitable?
Kaseya’s 2026 report reveals that Managed Service Providers (MSPs) are struggling to acquire new customers and demonstrate value as IT spending drops. To remain profitable, MSPs must secure healthy margins before scaling. Instead of purely selling technology, they should become strategic partners by aligning services directly with their clients’ business goals. Additionally, MSPs are testing AI internally to better advise clients, while relying on peer groups as a “board of directors” to navigate market shifts.
For the MSPs who are questioning the path they are currently going down, market reports can often provide the guidance needed to ensure future success.
Certainly, once the financial year has come to an end, the message to the sales team will be to get selling before the summer holidays slow down any progress.
The 2026 State of the MSP Report from Kaseya is one such report where MSPs can get an overview of the market they operate in. Drawing on survey responses from more than 1,000 MSPs globally, the key finding, according to Dan Tomaszewski, Executive Vice President of Channel at Kaseya, is that “winning new customers is harder than ever before.”
“MSPs have talked for years about how hard it is to get customers, but it’s becoming clear in this year’s report that they’re struggling to demonstrate their value to close the business.”
According to the report, customers spending over $25 thousand, dropped from 75% to 41% year-on-year, with 24% of MSPs saying customers are reducing their IT spend. Nearly three-quarters of MSPs (71%) say acquiring new customers is their biggest challenge, with more and more finding it harder to demonstrate value.
“The advice I give to every MSP is that you can’t just look at the sales,” said Tomaszewski. “You also have to look at the profitability side. Is what you’re charging profitable?
“If your margins aren’t good, you have to start fixing the shop. Get the margins in line, get profitability in line so that, as the company grows, it can scale and grow with you. That’s a hard thing, it sounds easy, but it seems to be where a lot of MSPs get stuck.”
Try Before You Sell
Flicking through the report, the one technology that is expected to come up is AI. Without wanting to give away spoilers, AI is yet to become a consistent revenue generator, with only 15% of MSPs citing AI as a revenue source.
That’s not to say that the AI boat is being missed. Forty eight percent of MSPs recognise that AI is a need for clients, and are looking to implement it within their own businesses before rolling it out to customers.
“You can’t sell something if you don’t know how to do it yourself, right?” said Tomaszewski. “I think it’s important that MSPs understand how AI can play a role in the environment, how it is playing a role in the environment that we’re dealing with today.
“MSPs are currently trying to use AI in their help desk, within their tools. I talked to a lot of MSPs who said they weren’t trying to replace their employees, they are trying to make them more effective and more efficient, but I’ve also heard MSPs say they’re using AI to lower head count, so we’re hearing both worlds right now.”
While the solution providers are working out the best ways to introduce AI into their own businesses, clients are free to make mistakes with AI. Since the first wave of ChatGPT insanity, reports coming from all kinds of organisations have shown a fundamental lack of understanding of how each AI model works, which leads to personal and proprietary information being intentionally leaked onto the World Wide Web.
“The role of an MSP as a strategic advisor has never been bigger. They play such an integral role in advising customers on the best way to use the technology in a secure and compliant way to drive efficiency and effectiveness in a business.
“I think a year from now, we’re going to have a totally different answer as people figure AI out, but that’s kind of where everybody’s sitting right now. A lot of MSPs are trying AI internally, so they know how to go to their customers and deliver a proper service. But the MSPs that are already delivering AI are the ones taking business from those that aren’t.
“I do see that this is a big opportunity, because it is fresh for a lot of companies. It is a real problem for a lot of companies. As an MSP, you’ve got to be prepared to solve it and deal with it.”
Your place at the table
While keeping up with customer demand is a constant challenge, throwing AI into a package without being able to justify the added cost isn’t necessarily the answer.
In fact, Tomaszewski compared the recent AI boom to other new technologies that have hit the market and have been seen as an added expense when businesses initially hear about them.
“Customers are saying to MSPs, ‘it’s just ChatGPT, I’m fine, just like before when they said ‘I don’t need cyber insurance, I’m good’, or ‘I don’t need antivirus’. We’ve all heard that.
“That’s the reality of the world of the MSP spaces, we’re used to having people tell us, no, I don’t need it, I’m too small, I don’t have the budget.”
According to Tomaszewski, MSPs will naturally face this friction when selling into businesses, but can overcome this by “demonstrating the value they bring.
“So many MSPs struggle to demonstrate the value they bring, so when they have a conversation with an end customer or a prospect, they’re looked at as a cog. But the reality is MSPs that go into businesses and find what success looks like for their customers are then seen as an ROI.”
Flipping the script
With a fresh perspective instilled into the customer, the attitude towards new technologies and solutions “flips”. However, with larger contracts and average annual spend on the way down, according to The 2026 State of the MSP Report, getting an opportunity to get a foot in the door in the first place is a challenge.
Speaking from experience, Tomaszewski added that focusing on outcomes for the customer rather than the technology that is provided was a good way of standing out from the pack.
“I go back to my MSP days, I would go to a boardroom against three or four other MSPs who would go in and say, I can do security, compliance, backup, we’re going to be like your in-house IT department. If everyone says that they all sound the same, the customer will pick purely on price.
“I would ask one question: What does success look like? What are the KPIs, the goals, the metrics? What’s your vision this year? And they would look at me like, ‘Dude, we brought you here to do IT’.”
By aligning himself and his company to the goals of the customer, Tomaszewski said that the relationship becomes a partnership rather than just a cost for services provided on the balance sheet.
As a result, customers keep MSPs abreast of the overall goals and KPIs that it is pursuing, which then means that introducing new services is received as a helping hand or shortcut to success rather than just trying to fleece the customer for more monthly revenues.
While he was running an MSP himself, Tomaszewski says that this approach was one of the ideas he was able to share with people in peer groups. These groups, comprised of fellow MSPs targeting different industries, act as an area where MSPs can bounce ideas off each other.
“I’d encourage everybody as an MSP to be a part of a peer group, I think it’s vital today.” said Tomaszewski. “The world is changing in the MSP space. We’re about to make a major shift with AI and so many MSPs, before they get to a peer group, are spending a lot of time trying to figure out what to do.
“In our peer group, we have frameworks and we teach MSPs how to go to market, and how to run a successful, high performing MSP. So when you come into the group, you’re spending time on implementing rather than figuring it out.
“When you’re in a group of nine or 10 like-minded individuals in non competing markets, you can share and look at it like your board of directors who guide and support you through changes in your business.
“I looked at my peer group as my board of directors, and I know that a lot of our MSPs in our programme feel that same way now about their groups. It truly is about helping them consistently see the right levers to pull for their business.”
