Barracuda: MSP Revenue Accelerating in 2022, Increasing Demand Creating Challenges

Global services-related MSP revenue is set to increase by over a third in 2022 compared to last year. But that growth brings challenges for many MSPs.

That’s according to Barracuda Networks‘ latest MSP business report launched in conjunction with its fifth annual MSP Day. Barracuda surveyed 500 decision makers and knowledge workers from MSPs in countries across the North America, EMEA and ANZ regions with five to 250 employees.

Security remains the biggest concern for customers and the greatest revenue opportunity for MSPs.

Neal Bradbury is senior vice president of Barracuda MSP. He said recent world events have changed the business environment for many SMBs.

“The rapid rate of digital transformation was a welcome change for MSPs during the pandemic, but this has its consequences,” he said. “With cybercriminals increasing their attack rate and security often being an afterthought during digital transformation, MSPs are now playing catch up to secure their customers’ environments while defending them from the intensified threat landscape.”

Key Findings

Key findings from the Barracuda report include:

• Average MSP revenue should reach $12.12 million this year, compared with $8.93 million in 2021.
• Nearly one in five respondents believe the average employee is highly stressed. Fifty-six percent said stress levels could be defined as moderate. Further, 80% believed their customers are increasingly concerned about being breached by cybercriminals and are looking to them for help. This is creating more pressure on the MSP to deliver.
• Just 36% of respondents were confident of being fully up to date and compliant with regulations.

In 2021, 53% of MSP revenue came from services. This should reach 63% in 2022. On average in 2021, respondents’ service offerings increased by four services. In 2022, 94% expect their services portfolio to increase by an average of six services.

Nearly 100% of respondents admitted they had at least one area where they need additional vendor support. These include security incident response planning (44%), help with hybrid working best practices (50%) and marketing support (44%).

MSPs Are Not Alone

“When it comes to cybersecurity needs, it is important for MSPs to remember that they are not alone,” Bradbury said. “MSPs should consider partnering with vendors that can provide them with the ability to offer comprehensive security services that include prevention, detection and response, especially as cyberattacks are expected to continue to become more complex and cybersecurity talent [will] remain scarce. Further, it is more important than ever that MSPs select vendors and solutions they trust and can grow with.”

Many SMBs view their MSP as a trusted advisor, he said. This extends beyond IT and security requirements, to include general guidance for compliance.

“MSPs must build on this trust to ensure customer satisfaction,” Bradbury said. “They should also continue to educate themselves on the evolving cybersecurity regulations and compliance as the consequences of MSPs not being up to date can lead to non-compliance, which can be highly damaging to both their reputation, and that of their customers.”

Demand for cybersecurity services has been around since before the pandemic, he said. However, the pandemic created an overdrive for this need.

“MSPs who invested early and established the right mix of services will be able to achieve the economy of scale to meet this increased demand,” Bradbury said. “Those just getting into the game now will need to work smarter and partner with vendors who have a track record in security and IP to gain that competitive advantage they need. MSPs should remember that they don’t have to do it all themselves. A strong vendor can help them provide the best security services to their customers, while they focus on growing their business.”