Navigating Complexity: The $595 Billion IT Managed Services Landscape in 2025

[00:00:02] It's Monday, January 27th, 2025, and I'm Dave Solt. Three things to know today. The 595 Billion dollar question, can MSPs keep up with complexity in 2025? Microsoft's AI price hike shocks users, Apple's fixing Siri but are either getting it right? And from security to strategy, why CISOs are juggling more without the pay bump? This is the Business of Tech.

[00:00:30] Start the week off with some new market data from Canalys. In 2025, the IT Managed Services industry is set to grow significantly, with revenues expected to reach approximately 595 billion dollars globally, marking a year-on-year increase of around 13 percent. The Asia-Pacific region is projected to lead this growth, with an increase of about 15 percent. As demand for cybersecurity services rises, the managed services provider model is shifting towards a security-first

[00:01:00] approach, driven by new buying behaviors from customers. A recent Canalys survey revealed that 61 percent of partners struggle to advance artificial intelligence projects beyond the proof-of-concept stage. Compliance and regulation will present key challenges for MSPs, particularly with the introduction of new regulations like the Digital Operational Resilience Act in the European Union. Meanwhile, mergers and acquisitions within the sector are expected to rebound in 2025,

[00:01:28] following a slowdown in 2024. Overall, the convergence of cloud marketplaces and distribution channels is reshaping the landscape, as over 70 percent of all IT revenue flows through these channels, emphasizing the need for partners to enhance their value proposition in delivering services. A recent study by TechAisle highlights that small and medium-sized businesses spend a staggering 77

[00:01:54] of their IT staff's time on PC maintenance and support. As artificial intelligence technology evolves, AI PCs are expected to account for up to 28 percent of all PC purchases in 2025. The survey of 2,000 businesses revealed that 64 percent believe performance optimization will be essential, while 56 percent emphasize the need for AI software deployment and management. Additionally, 49 percent

[00:02:21] identify on-device security as a critical requirement. The rise of AI PCs presents both challenges and opportunities, necessitating new skills and services from IT providers to meet the unique needs of these advanced devices. As businesses embrace AI, user training and energy efficiency will also become increasingly important, with 45 percent of respondents emphasizing the necessity of educating users on AI engagement.

[00:02:47] With these evolving demands, channel partners and PC manufacturers are encouraged to develop specialized support services and solutions to help businesses maximize the potential of AI technology. A recent survey by Rackspace reveals that over 90 percent of IT decision makers anticipate significant shifts in enterprise cloud strategies over the next two years. Nearly half of the enterprises surveyed plan to enhance their hybrid

[00:03:12] cloud capabilities, with one in five intending to invest in private cloud solutions. The rise of artificial intelligence is driving these changes, prompting IT leaders to rethink their workload management approaches. Security and compliance concerns, along with the rising costs of running artificial intelligence applications in the public cloud, have led two-thirds of respondents to consider moving workloads back to on-premises infrastructure.

[00:03:36] As hybrid strategies become more common, IT teams are finding it easier to transfer data between multiple cloud providers, with major cloud companies like Amazon Web Services, Microsoft, Google Cloud reducing their data transfer costs. Why do we care? The tech-out research highlights a thought I've been having a lot lately. Why is technology requiring so much maintenance and support? Lump cybersecurity into that bucket, too.

[00:04:02] Whether it's managed services providers grappling with compliance, businesses spending the majority of their IT team's time on PC management, or cloud strategies shifting due to operational costs, there's a common thread. The cost of managing technology is unsustainably high. The data underlies an ongoing trend. The technology ecosystem is increasingly complex, fragmented, and expensive to maintain, raising critical questions for IT service providers.

[00:04:31] Put on our customer hat for a moment. Customers aren't buying just because of better technology. They're buying because they're overwhelmed. Security, compliance, and cloud migrations are forcing businesses to outsource expertise. However, the model isn't infinitely scalable, particularly when providers themselves face hurdles in AI adoption and new regulatory burdens.

[00:04:53] If the trend of increasing IT complexity continues unchecked, both IT providers and their customers will struggle with diminishing returns. The MSP industry risks becoming a margin-squeezed middle layer. Providers need to focus on deep expertise in niche areas or risk being overshadowed by marketplace automation.

[00:05:15] MSPs could face growing resistance from clients unwilling to pay for what increasingly feels like a necessary evil rather than a strategic investment. This is a time for focused, strategic investments, not blind growth. With as many breaches and security concerns as I report in this show, it should be obvious that cybersecurity is not just about technology,

[00:05:41] but also the human expertise needed to interpret and respond to complex threats. Huntress is focused on elevating SMBs and MSPs around the world. Huntress has a suite of fully managed cybersecurity solutions powered by a 24x7 human-led SOC, dedicated to continuous monitoring, expert investigation, and rapid response. And the proof is the execution.

[00:06:07] Huntress is the number one rated EDR for SMBs on G2. Want to know more about the platform? Visit huntress.com slash MSP radio to learn more. And a pair of interesting Microsoft and Apple updates. The recent launch of Microsoft 365 Copilot has drawn intense criticism, with many users expressing dissatisfaction following a 30% price increase for the subscription.

[00:06:34] Microsoft, which boasts 84 million paid subscribers worldwide, faced backlash after failing to communicate effectively about the changes, leaving many customers unaware of the new pricing until they received pop-up notifications. Users are reported that the features of Copilot are still in early development, with many describing the results as subpar. Despite the backlash, the price hike is projected to generate an additional $1.7 billion annually, even if just 10% of subscribers decide to cancel their plans.

[00:07:04] Microsoft has yet to receive any praise for the implementation of Copilot, raising concerns about the company's direction and customer engagement strategies. Apple Intelligence 2 has gotten criticism. Apple has revealed its two main priorities for AI this year, as outlined in a leaked memo from the head of AI at the company. The focus will be on revamping the infrastructure behind Siri and enhancing existing AI models. A key executive, Kim Braff, has been moved to lead these efforts.

[00:07:32] While these improvements may not seem groundbreaking, they reflect Apple's commitment to iteration. The company is addressing recent challenges with its AI features, such as notification summaries, which have faced errors and are temporarily disabled in iOS 18.3 for certain applications. As Apple works to enhance its AI capabilities, the transformation of Siri into a more effective virtual assistant is anticipated to be a significant focus leading into next year. Why do we care?

[00:08:00] This is the highlight of a broader issue for the IT services industry, a gap between AI hype and real-world delivery. These developments show that even the biggest players are grappling with pricing backlash, communication missteps, and underwhelming execution. For IT providers, these are lessons in transparency, managing customer expectations, and ensuring AI offerings deliver actual value. I'm finding value in my workflows for AI, but know they're not immediately apparent and require focused efforts.

[00:08:29] It's why I'm intrigued by the space that hard work is valuable and resellable. But the big providers faltering on their launches to provide value and Microsoft forcing the product combined with a price hike is pretty unfriendly to customers, and concerning when coupled with the previous story. In a recent report by IANS Research, nearly 800 chief information security officers, or CISOs, revealed that their roles have expanded significantly

[00:08:58] beyond traditional cybersecurity duties to include broader business responsibilities. Despite this increase in workload, only 3% reported salary raises linked to these additional responsibilities. The research indicates that the average annual cash compensation for strategic CISOs, who interact regularly with CEOs and boards, is around $545,000, while functional and tactical CISOs

[00:09:23] earn approximately $385,000 and $291,000, respectively. Notably, those who oversee both security and IT functions, termed dual CISOs, can earn up to $1 million, highlighting the higher compensation linked to broader oversight. CISOs are increasingly gaining influence within boardrooms, according to new research from Splunk. The study reveals that over 80% of CISOs now report directly to the CEO,

[00:09:53] a significant rise from 47% in 2023. Additionally, 83% of CISOs participate in board meetings frequently. Despite this growing presence, only 29% of boards include a member with cybersecurity expertise, even though 60% of CISOs acknowledge that such members wield greater influence over security decisions. The research highlights that board members with security backgrounds foster stronger relationships with security teams, leading to more effective communication

[00:10:21] and strategic alignment on cybersecurity goals. However, there remains a disconnect, as only 15% of CISOs prioritize compliance status, in stark contrast to 45% of board members. This misalignment in priorities and budgetary support may pose challenges as CISOs navigate an increasingly complex regulatory landscape. Why do we care? The evolving role of the CISO represents both an opportunity and a challenge.

[00:10:48] While increased boardroom visibility reflects the growing importance of cybersecurity, compensation inequalities, and misaligned priorities risk undermining any progress. Variety providers and MSPs, the moment represents a chance to partner with CISOs and boards to address gaps in security, compliance, and alignment, or be that role in a virtual sense for customers that are not large enough to separate that out. Are you ready to get your brand in front of the tech leaders

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