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Canalys: Talent, Cybersecurity and Competition are MSPs’ Big Challenges

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It's not easy running a business, but when that business is a managed service provider (MSP) or a managed security service provider (MSSP), it can seem even trickier. A recent survey from research firm Canalys aimed to identify the biggest challenges MSPs and MSSPs faced in running their business.

The survey polled 135 respondents from May 2024 to June 2024, and asked participants which external challenges posed the greatest threat to their MSP's business operations. The top three answers were talent acquisition and retention, evolving cybersecurity threats and competition in the MSP market.

Recent analysis from CompTIA showed that while the technology industry experienced job growth in June 2024, it was offset by slowdowns in other key employment metrics. The CompTIA July 2024 Tech Jobs report showed that the tech industry added an estimated 7,540 net new workers in June, the biggest monthly increase in 2024, based on analysis of U.S. Bureau of Labor Statistics (BLS) data.

That positive result, however, was countered by the loss of 22,000 tech occupations throughout the economy as a whole, according to the report. The tech unemployment rate experienced an unexpected jump to 3.7%, moving directionally with the national unemployment rate increase for the month. 

"In some ways, the skills gap, cyber or otherwise, will never be 'solved,'" Robin Ody, principal analyst at Canalys, told ChannelE2E. He said that while MSPs and MSSPs are hiring to try and fill vacant roles and close skills gaps, often, technology and threats move faster than workers can be trained in them. That can make it harder to find talent with the required skills, but also opens up opportunities for training and upskilling, Ody said.

"I heard a great phrase from Raj Samani years ago; 'We don't have a skills gap as much as we have a courage gap.' Companies that aren't willing to train people cannot complain about the skills gap, especially if they are more willing to poach other people's trained individuals at higher wages," Ody said.

MSPs Investing in Training are Better Performers

Partners that are willing to train people to do the job will perform better, too, because each organization requires particular institutional knowledge that's just as important as technical and soft skills, he added. "While skills may be transferrable from a tech perspective, the skills in understanding the organization and its people and clients are specific. You can't just plug someone new in and have them do the job immediately; it takes time to embed oneself into systems and processes."

Evolving cybersecurity threats are also a challenge, and not just for MSPs and MSSPs. That means everyone must prepare for the inevitable, Ody said. That said, for MSPs who are trying to branch out from more 'traditional' services into cybersecurity, it may be a bigger challenge both to invest in their own cybersecurity and to deliver those services to customers.

"To some degree, the threat is larger for MSPs than for MSSPs, but everyone is a target and the key is not so much about your cybersecurity skills level as your willingness to prepare for the inevitable," Ody said. "It takes time and effort and isn't immediately revenue-relevant, so some struggle to invest in their own internal cybersecurity posture, but it is vital," he said.

Finally, there's growing competition in the MSP market, both from other MSPs and from larger platform MSPs, Ody said.

"We are seeing mostly competition among MSPs, but there are examples of roll-ups which are affecting the ability of smaller MSPs to retain or win clients, and even resellers that are offering specific managed services are becoming more and more a threat to the pure MSP," he said.

Other external threats respondents cited in the survey included compliance with regulations, economic fluctuations and inflation impacts, scaling operations for business growth, vendor management and partner relations, rising client demands for new services, the effects of global events (like pandemics and geopolitical tensions) on operations and integrating cloud and SaaS solutions.