Generative AI Deployments Fuel Expected MSP Growth

Canalys projects MSP revenue to grow about 11% to $548 billion in 2024, and generative AI figures prominently in that forecast. Expected growth in generative AI deployments also shows up in Channel Futures research: Eighty-three percent of MSPs forecast revenue increases this year, most of them expecting at least 11% increases.

Canalys principal analyst Robin Ody’s 2024 predictions included “at least 33% of MSPs will use generative AI to build their own tools.” Channel Futures' recent channel partner survey found 62% of MSPs increased deployment of or consultation for AI solutions in the fourth quarter of 2023 from the previous year. Most of that growth was slow – only 9% said they increased deployments/consultations more than 50%, while 28% said they increased 10% or less.

MSPs, however, are using generative AI internally. The Channel Futures’ Q4 2023 survey found that 48% of MSPs have generative AI deployments in sales and marketing, 38% in social media posts, 32% use it for email and 32% for education/research.

We spoke to three MSPs this week for a live webinar, Gen AI: Take the Next Steps for Profit, Customer Outcomes about how they use generative AI now and their plans for the near future. While they are still “separating the signal from the noise,” as New Charter Technologies CEO Peter Melby put it, the MSPs expect a significant increase in usage and revenue.

Related:Gen AI: Take the Next Steps for Profit, Customer Outcomes

Pamela Diaz, CEO of Entara, said her cybersecurity MSP uses AI tools internally to automate processes, but those tools need to be closely vetted.

“A lot of tools now say ‘driven by AI,’” she said. “We’re being selective because not everything is ready for prime time. You have to make sure that you’re utilizing tools that have been vetted well. And when you’re using it internally for automation, make sure you are verifying all the steps that you’re taking.”

She said Entara (No. 49 on the 2023 Channel Futures MSP 501) uses a significant amount of AI to automate processes, and customers can benefit without even knowing that AI is being used.

Entara's Pamela Diaz

“Our clients may see more efficiency, more scalability, tickets being closed faster, security incidents being recognized, modified, and reviewed very quickly,” Diaz said. “Those are the types of things we’re using AI for on the back end, so it wouldn't be as clear to the clients that we're using AI.”

Mike Gray, CTO of Thrive (No. 21 on the 2023 Channel Futures MSP 501), said his company also uses AI to triage incidents, has enlisted generative AI to help developers generate code faster, and uses Microsoft Copilot. He also suggests taking a slower approach to widescale deployment of the technology.

Related:Gen AI Developments Captivate Data Center World Audience

“We’re trying a few things out, seeing how it works before we go wide scale, because we just need to be comfortable with how it works, and what the results are coming back,” Gray said.

Mixing Gen AI Deployments with Legacy IT

Melby said generative AI deployments can save time with some tasks and improve the customer experience. He said he expects generative AI to become much more useful in the future, but right now customers need to find a way to make it work with their existing environment.

New Charter's Peter Melby

“Our goal right now is to help customers separate the signal from the noise in a way that they can find some incremental test cases and incremental improvements rather than trying to reorient their entire business on day one,” Melby said.

“We look at this in terms of being able to do things that you haven't been able to do historically," he added. "If we were starting in business today, what would it look like in the IT services experience space? That lens for AI is a bit different. We've got a lot of legacy experience that tends to be the primary lens, and we’re trying to keep that in mind when we look at these changes. How do we how do we do a legacy business better, and how do we not be anchored by our legacy business?”

Gray said he sees the cybersecurity MSP’s customers taking a measured approach to generative AI that New Charter's (No. 47 on the 2023 Channel Futures MSP 501) Melby spoke about.

“We have hundreds of customers who have bought [fewer] than five licenses of Copilot from Microsoft 365,” he said. “What that tells me is, they're trying to learn, they're interested, [but] they really don't know what they want. And so they'll get it for people in the C-suite, or just a couple of users here and there. We do a lot of readiness assessments and preparedness for Copilot.

“But I think there's a lot of education that still needs to be happening," he said. "They see it with ChatGPT, they see it with other consumer areas, [but] they're still a little bit uneasy about using it in a business setting. But again, the curiosity is really there. And I think that's kind of the exciting part.”