The Managed Service Provider (MSP) sector saw robust activity in Q1 2025, with 107 transactions recorded, underscoring the continued interest and momentum in this dynamic space, as our MSP Report for Q1 2025 shows. M&A activity gained strong traction, with disclosed transaction values surpassing $1 billion – an increase from $927 million in the same period last year.
Strategic and financial buyers alike remained active, with strategic acquirers leading the charge: all of the top 10 players completed at least four acquisitions during the quarter.
IT consulting service providers were the primary targets, representing 77% of total M&A activity in Q1. This trend highlights a strategic push to broaden capabilities in a rapidly evolving tech landscape.
The global MSP market was valued at $305 billion in 2024 and is projected to nearly double, reaching $571 billion by 2033. This growth is being driven by increasing IT complexity and the imperative for businesses to operate more efficiently.
Among the top outcomes organizations seek from managed services are: 1) Improved operational efficiency through outsourcing IT functions; 2) enhanced ability to manage complex IT environments; and 3) the rapid deployment of new technologies.
3 ways AI is transforming Managed Service Providers
The Managed Service Provider (MSP) landscape is undergoing a seismic shift and AI is at the center of it. Once built on reactive support and labor-intensive operations, today’s top-performing MSPs are becoming proactive, data-driven, and highly automated. The results? Not just theoretical – they’re measurable and market-proven:
- AI-powered automation is radically improving how MSPs operate.
- AI isn’t just changing how MSPs work, it’s transforming how they serve clients.
- AI isn’t just about cutting costs, it’s also fueling growth.
Sam Levy, Partner at Drake Star notes: “The shift doesn’t come without challenges. Talent shortages in AI engineering and data science remain a hurdle, especially for smaller MSPs. Integrating AI across diverse platforms and ensuring explainability also adds complexity. But the firms that push through these barriers are not just improving margins – they’re building long-term competitive moats. AI isn’t an add-on. It’s the engine powering the next generation of MSPs. Those who embrace it early will lead the market in performance, profitability, and client loyalty.”
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