Omdia Finds MSP Revenue Growth Is Outpacing Profitability

Key Takeaways

• Omdia values the global managed-services market at $595 billion in 2025, but nearly one-quarter of MSPs were not regularly profitable in its research.
• Labor costs, tool sprawl, rework, alert fatigue, and weak pricing discipline can consume the gains from rising demand.
• Standardized service delivery, automation, FinOps practices, and tighter product portfolios are becoming key margin levers.

Demand for managed services continues to climb, but the expanding market is not lifting every provider equally. Omdia research reported by Channel Dive projected global managed-services revenue of $595 billion in 2025, an increase of 13% year over year. Yet nearly one-quarter of MSPs were not regularly profitable in the 2025 research.

That gap highlights a delivery economics challenge for the channel. Revenue growth can coexist with weak profitability, especially when each new customer brings a different technology stack, contract structure, security posture, and support process. More accounts may mean more tickets, more exceptions, and more technician hours. Without operational discipline, scale can magnify inefficiency rather than reduce it.

Labor remains a central pressure point. Wage increases, hiring costs, large-contract ramp-ups, and investments in new capabilities can weigh on operating margins before associated revenue fully arrives. Providers also face less visible expenses, including duplicated applications, underused licenses, billing leakage, repeat site visits, and support work that falls outside the original service scope. These hidden operational costs directly degrade profit margins.

Many MSP contracts were priced around assumptions that no longer hold. A fixed monthly fee may have looked attractive when a customer's environment was relatively stable. Add cloud migrations, Microsoft 365 security reviews, compliance requests, and a larger volume of alerts, and that same contract can become difficult to serve profitably. Pricing must be regularly reviewed against actual technician time to maintain viability.

Security operations show how service complexity develops. A BrightTALK discussion on Microsoft 365 security identifies manual tenant reviews, alert fatigue, and configuration drift as factors that consume technicians' time and compress margins. Automating routine checks can help, but poorly designed workflows may simply produce more alerts, creating another queue for people to manage.

Platforms from ConnectWise, Datto, and Kaseya illustrate the operational response. Remote monitoring and management, professional services automation, backup, documentation, and workflow products can reduce repetitive work when they are integrated and consistently used. Conversely, overlapping tools, inconsistent configurations, and weak adoption raise costs while giving management a fragmented view of service performance.

Standardization matters as much as software. ITIL 4 practices help MSPs create repeatable processes for incidents, changes, requests, and service measurement. FinOps brings similar discipline to cloud spending by clarifying ownership, usage, and cost allocation. The practical goal is to reduce avoidable variation while making the cost of serving each account easier to track.

Providers can compare contract revenue with labor consumption, software costs, escalation frequency, and out-of-scope work. That analysis supports repricing, service-tier changes, or the retirement of contracts that consistently lose money. It also exposes customers whose support burden stems from outdated systems or repeated refusal to address known risks.

Artificial intelligence implementations present new delivery considerations. AI can summarize tickets, draft responses, classify incidents, and assist with remediation, potentially allowing technicians to handle more work. However, customers may expect those productivity savings to appear immediately in lower prices. MSPs will need to show that AI-assisted delivery improves response quality, consistency, and coverage, not merely headcount efficiency.

Growth expectations remain positive across the channel. MSP Success survey coverage indicates that providers entered 2026 expecting stronger expansion after navigating the previous year's headwinds. Converting that demand into durable earnings requires cleaner service catalogs, measured automation, disciplined pricing, and fewer operational exceptions.