AI, ecosystems, and margin pressure have redefined MSP strategies in 2025

As the managed service provider (MSP) market shifts from aggressive expansion to cautious consolidation amid rising labor costs and margin pressures, AI and open ecosystem strategies are emerging as the critical framework powering the next phase of growth. In this blog, Omdia explores how vendors are pivoting to become indispensable partners for MSPs, delivering the AI-driven automation and integrated platforms needed to reshape the channel's value proposition from high-cost manual support to long-term operational efficiency and new revenue opportunities.

Eighty-four percent of MSPs entered 2025 expecting double-digit growth, but monthly sentiment surveys from Omdia over the course of the year have revealed a different reality by September. New Year optimism has given way to recalibrated expectations. This transformation from exuberance to caution reflects a broader market dynamic where MSPs are now prioritizing margin protection, customer retention, and selective investment over aggressive expansion.

The dichotomy was evident at the recent MSP Summit in Orlando, where the MSP 501 awards celebrated top-performing partners globally, but just as many have struggled throughout 2025. The result is a clear "haves and have-nots" scenario within the MSP ecosystem, prompting vendors to shift their messaging and strategy in response to mounting partner pressures.

Operational pressures drive strategic pivots

MSP-focused vendors at the Summit acknowledged the challenging landscape their partners face, including rising labor costs, cybersecurity resilience demands, and the urgent need to identify how AI and other strategies can reduce operational expenses. These pressures are affecting vendor positioning and product development priorities across the ecosystem.

Syncro CEO Michael George highlighted the severity of the cost challenge, estimating that MSPs spend up to 80% of their total costs on labor, at the higher end of Omdia’s cost analysis. Syncro is investing in AI as the solution, targeting a 30% reduction in Level 1 and Level 2 workloads by 2026 through automation of common tickets such as slow systems, offline printers, and password resets.

Syncro is also targeting revenue opportunities for MSPs through AI sales to end customers, leveraging vendor tools like Microsoft Copilot as the foundation. This dual approach, cost reduction through internal AI adoption and revenue growth through AI services, represents one vendor’s approach to helping MSPs meet current market pressures.

Syncro has aligned itself firmly with the Microsoft ecosystem, expanding its RMM/PSA platform to encompass Microsoft tools and rebranding the category as XMM (Extended Monitoring and Management). At the MSP Summit, the company unveiled Syncro Cloud Backup, integrated into Syncro XMM and providing protection for M365 and Entra ID data, building out its stack to help MSPs’ cyber resilience. This mirrors moves by competitors such as NinjaOne and ConnectWise when they acquired Dropsuite and Axcient, respectively, in 2024 to grow their addressable markets and become potential platform plays for MSPs.

Platform consolidation and ecosystem strategies emerge

Kaseya outlined a significant strategic shift at the event, moving from the company's long-held complete platform messaging toward promoting an open ecosystem model. This deeper integration of Kaseya's 42-product portfolio reflects market demands for flexibility rather than vendor lock-in approaches.

Kaseya's cybersecurity suite alone generates US$200 million annually, according to statements by the company at the event. Kaseya also discussed a digital AI platform that will offer MSPs opt-in capabilities across the entire Kaseya stack, potentially creating new operational efficiencies for partners struggling with resource constraints.

Microsoft channel restructuring creates SMB opportunities

Microsoft emphasized significant opportunity ahead at the event. While Microsoft's overall revenue grew 18% year-over-year in Q4, the SMB business is expanding faster than that rate, targeting approximately 8 million US businesses representing $250 billion in total addressable market.

Microsoft's strategy centers on capturing SMB market share for AI solutions by integrating Office 365 and Copilot offerings. However, significant channel partner program changes rolled out recently are reshaping the partner landscape. These include deauthorizing partners generating less than $1,000 and increasing direct bill partner requirements from $300,000 to $1 million. Microsoft plans to support affected partners through distributor relationships and additional designations and certifications.

AI adoption shows varied implementation success

Beyond vendor announcements, MSPs shared real-world AI experimentation experiences, revealing both challenges and opportunities in operational efficiency improvements. Jacci Robinson, VP of GTM and Growth at Anunta, described how the company's initial chatbot deployment for end-user self-service achieved limited adoption, prompting a strategic pivot toward automated issue resolution targeting an 80% ticket volume reduction. Robinson emphasized that clean data serves as the critical foundation for AI project success – a starting point every MSP must address.

The cybersecurity AI landscape presents both opportunities and saturation challenges. Chris Ichelson, founder and CEO of 360 SOC, noted that 25 new vendors have entered the AI SOAR (security orchestration, automation and response) market in the last 18 months, with an equivalent number joining the AI SOC market. This vendor proliferation occurs within a broader MDR market that includes over 400 providers, creating intense competitive pressure.

While MSPs are operating in a more challenging and competitive environment today, the MSP Summit again showcased a large group of successful managed service providers and provided insights into how they are achieving that success. Although AI is not yet a mainstream production technology for all MSPs, leading providers are already implementing it to improve operational efficiency and experimenting with assisting end customers on use cases. 

Vendors that can translate AI promises into measurable cost savings and revenue opportunities for partners will define the next phase of MSP platform leadership.