the switch to that style of MSP , versus the one that just kind of [ puts ] the Band-Aid on it ,” says Tomaszewski .
Regarding their stack , about 74 % of respondents said they ’ d prefer to use fewer vendors to meet their technology needs , up from 65 % last year .
Competition Is A Major Sleep Disruptor
The increase in competition is keeping MSPs up at night . For the third year in row , survey respondents said it was their biggest challenge , and that response increased from 29 % in 2022 to 35 % in 2023 .
Tomaszewski says that pressure likely stems from an influx of startups spurred by the COVID pandemic . Some of those companies have fallen by the wayside , but the ongoing need to cater to hybrid workplaces and ever-expanding security requirements create some highly competitive pockets . End customers are actively looking for more comprehensive offerings .
Louissaint , however , says some MSPs are using competition as an excuse when the real problem lies elsewhere . He believes too many are trying to break into large enterprises , ignoring abundant opportunities among the SMBs with 10 employees or less . Moreover , he adds that in today ’ s globalized world , MSPs aren ’ t confined to their local markets and can take on clients from different countries .
Even as financing became more costly and the economy fluctuated last year , demand for IT services remains robust at the smaller end of the market , says Louissaint , who was on track to repeat 2022 ’ s banner year revenues in 2023 .
Instead , Louissaint says finding available talent is the main challenge he faces . The shortage of skilled cybersecurity talent was particularly acute for everyone , with 43 % of survey respondents citing it as a barrier .
For Louissaint ’ s part , he ’ s had to delay client onboarding and pause new business development at times . He says some of his peers have even pulled back on marketing , afraid they can ’ t currently handle any additional business .
Customer Experience Is A Strategic Priority
Regardless of where they ’ re fishing for business , MSPs are finding they must prioritize customer experience to stand out . Indeed , customer experience is now tied with revenue growth as the top overall strategic priority for MSPs ( 47 %); 44 % of respondents said it was their No . 1 priority .
Other strategic priorities going forward include new client acquisition ( 43 %), improving technology solutions ( 42 %), and boosting profitability ( 42 %).
Continue To Innovate
One way to both combat competition and boost customer experience is with innovation , and while Datto ’ s report didn ’ t cover AI adoption , its impact last year and going forward is undeniable . For the most part , MSPs are adopting AI to optimize their internal processes , says Tomaszewski .
Others , like Timm , are exploring ways to incorporate AI into their service offerings and strategically selecting clients for proof of concept .
MSPs who continue to innovate , the Datto survey concludes , will be better able to differentiate and thrive in today ’ s competitive landscape .
Tomaszewski sums up : “ Spend more time being strategic . Run your business with more intention . Be self-aware . These are key steps that make a dramatic impact on the success of the business .”
Your Action Steps
The Datto report recommends taking some steps to prepare for success based on the research findings :
1 . Combat competition by continuing to innovate and by incorporating some services identified as high growth , such as collaboration software , storage design and implementation , and self-service capabilities .
2 . Make it a strategic priority to enhance customer experience ; it will differentiate you from the competition .
3 . Be prepared to meet customers ’ complex and growing cybersecurity needs , possibly intensifying the search for skilled talent if needed .
4 . That should go hand-inhand with staying vigilant about compliance to ensure customers ’ data security .
5 . Finally , look for opportunities to boost efficiency by consolidating the number of vendors you use , focusing on the most beneficial relationships .
Jennifer Oladipo is an award-winning business journalist . She ’ s written for national and international publications focused on science and technology sectors and has held communications positions in multiple organizations , including a Fortune 200 technology company .
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