The six big challenges facing Australian MSPs in 2024

Every year, Barracuda surveys managed service providers (MSPs) around the world to understand the challenges and opportunities they face and their hopes for the future. 

The results of the latest survey are in, and they reveal a landscape of change and opportunity for both MSPs and their customers. Competition for business is increasing and routes to market are evolving, regulatory demands cast a long shadow over IT, while emerging technologies and digital transformation are expanding the potential attack surface for cyberthreats. 

That's a lot for MSPs to keep on top of and the research shows that most Australian MSPs are confident but realistic, embracing new opportunities that will benefit customers as well as their own operations and business growth, while turning to outsourcing and vendors for support in addressing gaps.

There are six main challenge areas facing Australian MSPs in 2024:

1. Business growth 
For MSPs in Australia, growth in 2024 will be driven by recurring managed services and security offerings. 

Respondents expect 39% of this year's revenue to come from recurring managed services, up from 29% in 2023. This rise reflects evolving customer needs: 96% of respondents believe businesses are scaling back their in-house IT and relying more on MSPs. 

There is high demand for security products and services, and this is clearly an area where MSPs add value. The MSPs surveyed believe companies turn to them for support with cybersecurity due to the perceived cost, complexity, skills, and resource demands associated with trying to manage security products in-house.

The most widely offered services are network security (offered by 51%), security awareness training (50%), and a security operations centre (49%). These are also the most successful services sold to new customers, and among the services most likely to be outsourced to third party suppliers. This is probably because they require specialist expertise or infrastructure that MSPs are unlikely to have in house.

However, it's not all plain sailing. More than half (57%) say they find it hard to fully understand what customers need from them. Artificial intelligence (AI) presents both a challenge and an opportunity to MSPs and getting to grips with its use and application appears to be key for longer term business success.

2. AI pressures and potential
In 2024, AI is everywhere, and cybersecurity and the cyberthreat landscape are no exception. Attackers are looking at how they can leverage AI to boost the scale and success of cyberattacks, while security vendors are harnessing the power of AI and machine learning to enhance threat detection, prevention, response, and remediation.

MSPs are acutely aware that they need to ramp up their AI knowledge: 94% feel they need to know more about AI and its applications to meet customer needs, and 80% feel under pressure to offer AI insight and tools to customers.

Vendors can help with this challenge, both in terms of insight and by delivering advanced AI-powered security solutions that MSPs can offer their customers. This is not lost on MSPs, with 97% saying they would welcome increased support from vendors. Two thirds (66%) are looking for AI expertise and guidance and 60% say they'd appreciate help with security incident response planning. 

3. Keeping up with cyberthreat and technology trends
MSPs rarely have the time and opportunity to spend their days immersed in the evolving cyberthreat landscape. Vendors do and can use this to educate and support MSPs, helping them to build their understanding of prevalent, new, and emerging cyberthreats and the cybersecurity tools designed to defeat them.

This role is critical in 2024, because 30% of the Australian MSPs surveyed say they struggle to understand the evolving cyberthreat landscape and to keep up with technology trends (31%). In fact, everyone (99%) believes that their ability to keep up with security trends and capabilities needs significant or notable improvement. 

4. The challenge of compliance 
Like AI, regulations are everywhere. Regulations encourage and enforce robust security measures that help to keep companies, data, and customers safe. However, for many businesses, complying with regulations can be complicated and resource intensive. Many turn to their MSPs for help – but MSPs themselves are finding this a tough area to navigate. Three quarters (77%) find it hard to help their customers comply with government regulations, and 31% struggle with their own compliance obligations. 

Compliance is a significant and increasingly critical area of business risk as regulations are becoming more stringent and the penalties for non-compliance more severe.

5. Internal issues
Like many other organisations, MSPs face some internal issues. For Australian respondents, this includes their own security posture, with 86% saying that significant or notable improvements are needed in their own security hygiene. Most (97%) are worried about the quality of their customer support. 

Just under half (43%) are concerned about increased competition for business, and the same proportion says they find it difficult to attract and retain talent.
This may help to explain why 87% of Australian MSPs are outsourcing more of their activity than they did in 2023, with half of them saying they're outsourcing a lot more. 

6. Getting to grips with marketplaces
A new area the survey looked at this year was cloud marketplaces, such as AWS and Azure. We explored how they are perceived and used by MSPs as a route to market for customers and for their own security and IT purchases.

The overall impression is one of optimism. Almost everyone (97%) sees cloud marketplaces as a crucial tool for strengthening their organisation, and just under half (46%) already use marketplaces. Even though one in six (16%) struggles with marketplace transactions, half say they offer a better return on investment and increase sales. 

Conclusion
MSPs have become a strategic partner for their customers, supplementing in house teams and resources with tools, services and skills and helping them to better navigate their way through rapid advancements in technology, expanding digital attack surfaces, and evolving cybersecurity threats.

MSPs face their own challenges and they are looking to vendors and outsourcing partners to support them in turn. The partner/vendor relationships that deliver specialist experience in the field of security and AI-integration can help MSPs address some of the challenges and thrive in the competitive landscape of 2024 and beyond.

If you'd like to read the full report, The evolving landscape of the MSP business 2024, you can find it here: