IT and Business Insights for SMB Solution Providers

5 Trends That Will Drive the MSP Market in 2023

The MSPs that succeed next year and beyond will adjust their models to take advantage of market-shaping trends. By Ahsan Siddiqui

MSPs are assembling their plans for 2023. The plans that work will tap into trends that are developing over the next 12 months. Here are five major ones that will shape the MSP market in 2023.

1. Consolidation will be top of mind

Last year saw increasing consolidation in the MSP market, with more prominent players swallowing up smaller rivals to accelerate growth. This consolidation trend will continue in 2023 as MSPs move away from organic growth and look to expand their footprint via acquisition. The skills shortage in the industry will further fuel this trend. As MSPs struggle to staff their operations adequately, they will embrace M&A to acquire the talent they need and propel their business forward.

Another type of consolidation—specialization—will also be a trend. It's challenging to be everything to everyone, so MSPs will continue consolidating their services. For instance, a generalist MSP may not be able to effectively offer cybersecurity services due to the complexity of the technology and the high levels of domain expertise required. As a result, MSPs will increasingly choose to become specialists in one area or industry where they can offer best-in-class services.

2. Inflation will cause a rethink of data center investments

If inflation continues, the pressure will be on MSPs to maintain profits in 2023. That means they'll have to reevaluate all aspects of their operations, including how their business model functions and how to achieve growth in an environment of unpredictable expenses. One of the most significant expenses for any MSP is data center costs, which include the ever-higher costs of storing data in public clouds.

Rising energy prices are forcing these large data centers to raise their charges significantly, putting into question the conventional wisdom that moving to the cloud is cheap. Indeed, public cloud prices are predicted to jump by more than 30% in Europe and about 20% in the U.S. due to spiking energy prices, according to research firm Canalys.

That's why MSPs will start to transition away from the big public clouds and seek more cost-effective, high-performance storage solutions closer to home. Rising energy prices could also spur some SMBs to rethink their cloud strategy altogether and cause them to start repatriating their data from the cloud to on-premises. This trend will present a new opportunity for MSPs to provide their customers with on-premises storage and data backup solutions.

3. Data recovery will be in demand

Any company can back up its data. But the real test is whether it can recover that data promptly after a cyberattack or other disruption. Too many MSPs and their customers believe that disaster preparedness begins and ends with backing up data—and forget that backup alone is not enough. In 2023, MSPs will start to direct more of their efforts toward helping customers quickly recover their data in an emergency. The first step will be advising customers to develop a solid recovery plan.

Backed-up data is like a jigsaw puzzle. Trying to restore it without a good recovery plan is like putting together the puzzle without the picture on the top of the box. A lot more time is required, and time is what companies don't have when disruption hits them. They need to restore their data immediately—not in days or weeks. A solid recovery plan guides them in putting all the pieces together again when hours are of the essence and quick, effective action is necessary.

4. CRaaS will present an enormous opportunity

A big market for MSPs in 2023 will be cyber recovery as a service (CRaaS). According to IDC, CRaaS’s time has come, especially as ransomware attacks continue unabated, forcing victims to pay a steep price to recover their data. IDC believes CRaaS can yield high-growth opportunities with solid margins for MSPs that can take advantage of it.

CRaaS is appealing to customers because it takes the arduous task of backing up data off their hands and provides them with data copies that are immutable and untouchable. Immutable storage protects data by taking snapshots every 90 seconds. These snapshots make it possible to go back to specific points before an attack and recover entire file systems in minutes. As a result, even if a ransomware attack is successful and a bad actor overwrites the current data state, a customer can quickly and easily recover their information to a very recent point.

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