How Consolidation and Cybersecurity Are Changing MSPs Now, and What’s in Store

The background is blurred, showing a man in a suit with his arm outstretched. His finger is touching a superimposed honeycombed image that has M&A in the center, with icons surrounding it. These icons represent a slice of the global business pie, the exchange of ideas, greater profits, better audience targeting, and compatibility.

iVenture CEO Gray Mabry Talks Talent, Vendor Consolidation, Cybersecurity, and the Future of Data Protection

Key Takeaways:

  • Most acquisitions are about talent, which is in short supply worldwide
  • Many smaller MSPs can’t or don’t want to keep up with emerging technology
  • Vendor consolidation often goes hand-in-hand with MSP acquisition
  • Why MSPs have to level up their cybersecurity protocols 
  • Addressing the number one concern of business leaders worldwide – security

We’ve seen a record-breaking pace of mergers and acquisitions in the tech sector during the past two years, and Managed Service Providers (MSPs) are no exception. But why are so many targeted for acquisition? And what does that mean not only for MSPs overall as well as their customers?

Answers may differ, but it really boils down to acquiring the necessary talent needed for growth across both vertical markets and specific solution areas. Merged MSPs may result in stronger offerings and customer acquisition with less investment, while customers profit from a broader range of expert services provided more effectively and efficiently.

The role of MSPs is changing in the modern business environment. Gray Mabry, CEO of iVenture Solutions, discusses his take on the consolidation and evolution of MSPs. Where do we go from here?

Q It’s a daunting task for any company to recruit seasoned IT professionals today. In-house IT teams are suffering, unable to hire the IT help they need – there are five open positions for each software developer, to mention just one statistic. Companies that need a cybersecurity expert are in even more trouble; there’s a worker shortage of 3.4 million globally. How does this affect MSPs?

Mabry – MSPs are thrown into this same mix, and those who can will jump at the chance to acquire the talent they need. For MSPs, having the right talent means they can increase their menu of services or enhance those they already offer. They’ll also be ready for evolving customer needs and expectations. 

But it’s not just about a skill fit – there must also be a cultural fit. When it comes to any acquisition, you have to think about talent retention. Culture is what will lead to long-term retention of employees, which I want more than anything.

QAnd cultural fit also matters to customers who value the culture of the acquired company so that synergy keeps client churn low. For MSPs, having the right talent means they can increase their menu of services or enhance those they already offer. They’ll also be ready for evolving customer needs and expectations. 

I’ve seen a statistic that says 20% of larger MSPs are considering buying another, and two-thirds of small MSPs feel they would like to be acquired. So, what’s causing this consolidation? What’s the root cause?

Mabry – The key driver of so many smaller MSPs selling their business is that now they can get a better return on their company. Ten years ago, they couldn’t exit the business because the values weren’t there, but the needle has moved enough that many owners are considering selling. 

Another driver is that there’s a huge growth opportunity in cybersecurity. Buying an MSP as an opportunity to sell cybersecurity services is really attractive. If you look at cybersecurity as an untapped market, and you buy an MSP, you may have a very stable customer base that presents a prime opportunity to sell security. 

That’s another reason you might consider selling your business. The world of cybersecurity is incredibly complex, and it’s incredibly expensive to do well. The talent and resources to do it well within your company for your clients are very hard to find. 

Some MSPs simply are choosing not to make the cyber security investments and transition and are opting to partner with a company that’s farther along.

Q – It seems as if the role of MSPs has also shifted as software has become more stable, user-friendly, and easier to set up. This basic service is less valuable today. I also read that 92% of respondents to a recent survey say they will shift all of their IT services to a company that best aligns with their overall business goals and risk profile. Their most significant concern is cybersecurity, especially in light of growing geopolitical uncertainty. What does that mean for the new, consolidated MSPs?

Mabry – This means MSPs have to level up. Our industry needs better, more operationally mature players in the market. The task of cybersecurity is increasing the risk of running an MSP. We have to raise the level of maturity in how we hire and train in our business and pay attention to our culture and the culture of our clients.

Acquisition and consolidation are raising the bar overall, facilitating sharper decision-making. Those who work the same way they have for the past 20 years will quickly find themselves out of the market.

Q – Let’s get back to cybersecurity. It’s top of mind for most business leaders, which makes an MSP with robust cybersecurity services especially valuable.  But human error plays a huge part in data breaches. One statistic I read from Stanford University is 88%. How do you solve for that? And how does vendor consolidation play a part?

Mabry – This ties back into talent acquisition. Let’s say you’re an MSP trying to get talent and they support firewalls from 10+ manufacturers. It’s difficult to hire staff for that. If you have people who work on products they’re unfamiliar with or technologies they aren’t accustomed to working with, you open yourself up for mistakes that lead to security vulnerabilities. 

When you are in a specific vendor ecosystem, you can build automation and training around that. So the idea of having all your clients on a smaller subset of technologies allows for more automation and training, and ultimately reduced error rates.

Q – That human error statistic includes employees who aren’t trained in cybersecurity. 

Mabry – This is a top request from clients – training. Companies want cybersecurity training, which isn’t expensive, but it is often poorly implemented. People like to talk about it like we talk about eating healthy, but how many people actually do it? 

It’s about adoption. Cybersecurity training is becoming mandated because of insurance – without it, companies can’t be insured for cybercrime. Without support from leadership within our client’s executive suite, though, they’re just checking a box and pushing everything down to their employees. The training never happens until there’s an incident – then you see quick acceptance.

QSo, when it comes to the future of cybersecurity and MSPs, I read that the next generation of cybersecurity will be automated data protection, looking beyond encryption to scalable, automated data protection platforms that encrypt data by automatically fragmenting and scattering it across multiple storage locations, protecting it from unauthorized use. 

Mabry – It makes sense. Right now, we’re just wrapping data, we’re putting solutions on top of data. It’s an old model. If we build cryptography into the native data itself, it doesn’t matter where it is – in transit or at rest, or on your computer or my computer. It’s built into that block. I think that’s the answer. 

There’s a real need to go back to basics and build cybersecurity from the ground up. How do we look at modern data, and how is security imagined so it’s always with the data? It’s not a wrapper – it’s the data itself. How we do that remains to be seen. 

It will be interesting to see how things shake out. MSP consolidation leads to expanded product and service offerings, which gives MSPs a source of brand differentiation. It can also lead to closer relationships with clients because the right new talent adds depth to those offerings. And all of this can lead to more robust revenue streams because your MSP is delivering what they want: innovative solutions by seasoned experts.

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