Because every MSP in the market is essentially waving the same services brochure, the power has shifted squarely to the buyer. They have plenty of options — and they’re using it to press on price, drag out decisions and demand proof of value before they even agree to a discovery call.
The market has matured. Differentiating based solely on your service stack no longer produces the same returns it once did.
We surveyed over 1,000 MSPs for our 2026 State of the MSP Report to understand where the industry is feeling the pressure and where it’s gaining momentum. Here are five findings that give you a clear view of where the market is headed, so you can make your winning move.
1. Winning new customers is harder than ever
71% of MSPs say acquiring new customers is their biggest challenge
More MSPs are also finding it harder to show value early in the sales process. That number has almost doubled, rising from 10% to 19% in 2026. At the same time, most new clients are not new to IT services. They’re switching from another MSP, which means providers are competing for the same accounts.
What this calls for: Winning new business is now less about the volume of outreach and more about the quality of evidence. Prospects don’t care how many services you offer, but want verifiable proof that you can reduce risk, keep their systems running and drive their business forward.
If your sales motion still relies on broad capability claims, it’s time to build a tighter value story. Clear examples, real client outcomes, and simple proof points can help you build trust and close deals faster. Having access to the right data insights in an easy to digest format is key.
2. Smaller deal sizes are compressing revenue
The share of MSPs reporting customer spending of more than $25,000 per year fell from 75% to 41%
MSPs are facing a double constraint. New clients are harder to win, and existing clients are committing to smaller contracts. More clients are starting with lower monthly spend and scaling slowly, spreading growth over time rather than delivering big wins upfront. This isn’t a signal to chase volume but to engineer your unit economics differently.
What this calls for: When average contract values fall, your margin depends on how efficiently you deliver. MSPs that automate more of their routine workload will be in a much stronger position to absorb smaller deal sizes without eroding profits. If your delivery model still requires significant technician time for lower-revenue accounts, the math starts to work against you. Audit to find out where your hours are going and then automate what’s eating them.
3. AI and automation are your next differentiators, if you package them right
48% of MSPs say AI and automation will be the top client need
Clients are asking for automation and AI-driven capabilities, even more than security (42%) and backup (36%), but many MSPs are still figuring out how to package and price them. Only 13% of MSPs have turned automation and AI into a meaningful revenue stream. Most adoption is focused internally on tasks like monitoring, ticketing and security operations. The next step is to take what’s working internally and offer it to clients as a defined, outcome-driven service.
What this calls for: Think about what you can call “AI-as-a-Service” in your client conversations, not as a technology buzzword, but as a concrete set of outcomes — faster incident response, automated compliance reporting, proactive threat detection. If you can describe it in terms of time saved, risk reduced or revenue protected, you can charge for it. The MSPs who formalize this first will have a meaningful edge in competitive bids over the next 12 months.
4. Cybersecurity and backup are still the most reliable growth areas
71% of MSPs report growth in cybersecurity revenue, with 50% seeing growth in backup services
Even as deal sizes compress and growth slows in other categories, security and backup remain the standout revenue anchors. Clients continue to invest in protection and recovery, and they rely on MSPs to guide those decisions. About 61% of MSPs say their clients depend on them for cybersecurity advice. Security also ranks as the second-largest revenue source behind endpoint and network management, with 52% of MSPs citing it as a top contributor.
What this calls for: If you’ve been treating security as a bolt-on or leaving it to a single specialist on your team, it’s worth rethinking. Offering holistic security service with backup and recovery should be a foundational layer of every engagement, not an upsell. At the same time, the barriers to scaling security are real: product complexity is rising (cited by 50% of respondents), and finding skilled cybersecurity talent is getting harder. The practical answer is platform consolidation. MSPs that can deliver a strong security posture through fewer, better-integrated tools will spend less time on tool management and more time on client outcomes.
5. Your next growth constraint isn’t your tools — it’s your talent
MSPs citing difficulty finding and hiring skilled technicians jumped from 9% to 16% in 2026
A year ago, tool fragmentation was the biggest operational challenge. This year, staffing issues are in the spotlight. Along with the difficulty of finding and hiring skilled technicians, training and upskilling also emerged as a major concern.
At the same time, 83% of MSPs who responded to the survey say their IT management tools now significantly boost operational efficiency, suggesting that while tools are improving, staffing issues are worsening. This matters because, as service portfolios expand and client expectations rise, teams get stretched thin. It’s a structural constraint that automation can meaningfully soften.
What this calls for: First, use automation to protect the capacity you already have. Every hour a skilled technician spends on a routine, automatable task is an hour not spent on work that actually requires their expertise. Second, treat hiring and training as strategic investments, not backfill exercises. Build internal development programs, create pathways for technicians to grow into specialized roles in security, compliance or AI services. The MSPs that retain talent well will compound that advantage over time, while everyone else stays in a perpetual hiring loop.
How to move forward from here
The 2026 MSP market is the most demanding so far. The providers that will lead the next cycle aren’t the ones adding the most services or running the biggest teams, but the ones making sharper decisions, cleaner service packaging, tighter operations, stronger value proof and smarter investment in security, automation and AI.
The data is telling you where to look. The question is whether you act on it before your competitors do.
