MSP Attrition, Not Consolidation

Instead, look at the profession not as going through consolidation but experiencing natural attrition of companies who are not maturing at a sufficient rate. This attrition is can both explain MSPs failing to advance at a rapid enough rate, (this includes MSPs who are doing well but just not doing well enough fast enough!) or not able to break through the all too familiar growth barriers, either due to lack of funding or other resources.

Attrition would explain much of the M&A activity in the last several decades and still allow for the tremendous demand for and growth in managed services spending.

Why do we have MSP attrition?

Even with the attrition rate as it stands today, we have more MSPs being created (both from scratch and existing companies) which is outpacing the attrition rate. The net result is we are seeing more MSPs being established, even with the attrition of MSPs through M&A and natural business dissolution.

I got to thinking about whether our profession was unique in seeing this type of attrition, and I have borrowed another theory I've held to explain this. MSPs have no formal regulatory or licensing path. What this means is there is no educational, regulatory, licensing, or governmental oversight of MSPs like there is with medical doctors, lawyers, accountants, etc. What these other professions experience is natural attrition before the individual (or organization) becoming licensed.

For example, a lawyer must go through law school and experience a brutal educational and stress-inducing path to achieve access to that profession. The same is true for doctors.

MSPs experience a more traditional apprentice model of learning on the job, which does require competition with other MSPs as a requirement for advancing along with professional path called managed services.

So, call it consolidation all you want. The point is, the managed services profession is not shrinking, it is expanding. The attrition of MSPs is a natural and necessary element of the growth of our industry. That's my story, and I'm sticking to it.