AI is reshaping managed services as providers use automation to cut costs and boost efficiency.
The managed-service segment of the channel stands at the threshold of profound transformation. Artificial intelligence is the catalyst, but not the sole driver. Businesses need more than automation; they need guidance, orchestration, and managed intelligence that turns data into actionable insight and measurable business outcomes.
As outlined in “The State of MSP Capital in the Age of AI,” a new report by Top Down Ventures that I edited as an advisor, managed services are evolving into a global operating system for small and midsize businesses. The sector, valued at more than half a trillion dollars today, is on pace to surpass $950 billion by the end of the decade. The report identifies a clear shift from managing systems to orchestrating intelligence, with MSPs becoming the critical “system of action” in an economy increasingly defined by AI-driven productivity.
For years, MSPs have promised customers the ability to harness data as the new oil. The promise remains true, but only if that data is refined into usable intelligence. That intelligence, not raw data, is the real energy source of the digital economy. It enables better decisions, proactive management, and measurable improvements in efficiency and profitability.
MSPs must use next-generation AI and automation to optimize their own operations before delivering those same capabilities to customers. The most forward-looking providers are already seeing the payoff — faster service resolution, lower operational costs, and higher margins. This is driving a broader industry trend in which investors value operational efficiency and automation as much as traditional measures like revenue and scale.
According to the most recent Partner Confidence Index survey by Channelnomics, 38% of solution providers and MSPs are adopting AI specifically as a means of cutting operating costs — a reflection that providers view AI as essential to achieving efficiency and margin expansion.
In another survey conducted by Channelnomics with Pax8, end customers revealed that they’re moving rapidly from curiosity to expectation when it comes to AI. Most business leaders view AI not as a stand-alone technology but as a strategic capability to improve decision-making, accelerate execution, and drive measurable performance gains. However, two-thirds of those same customers say they lack the expertise to identify use cases or integrate AI effectively into their operations.
The demand is clear: Customers need partners that can translate AI’s potential into business outcomes. A majority of buyers say they expect to rely on MSPs, integrators, and resellers to guide implementation, manage data readiness, and mitigate risk. This reinforces the finding that MSPs are becoming the operational backbone of AI for end-user organizations, helping them move from experimentation to execution.
In a separate Channelnomics survey of MSPs and solution providers around the world, 93% of partners rated the AI opportunity as good to strong, and nearly seven in 10 said they’re already selling AI-related products and services. More than 90% said they’ll be ready to deliver and support AI solutions within a year, signaling that the channel is rapidly aligning with customer demand.
Partners see the strongest opportunities in infrastructure modernization and professional services — two areas that directly address customer pain points around data readiness, deployment, and operationalization. The study also highlighted a widening capability gap: While most partners consider themselves proficient or expert in AI, only one-third of customers say the same. This gap positions MSPs as indispensable guides in the AI journey.
Further Channelnomics research finds that investment momentum is accelerating. AI-related spending among partners has increased by 38% year over year, while end-customer investments in AI-led projects have risen by 42%. By late 2026, more than one-half of MSPs expect to have fully operationalized AI within their service delivery models — both to improve internal productivity and to offer new, intelligence-based value propositions.
Taken together, these findings validate the central premise of the Top Down Ventures report: The defining metric of success for MSPs is no longer scale; it’s capital efficiency. The winners in this new era will be those who can turn automation, data, and analytics into sustained profitability.
But technology alone won’t determine success. Governance and trust are becoming equally important. As automation expands and decision-making systems become more autonomous, customers and investors will demand transparency, explainability, and compliance. Providers that integrate these principles into their AI models will enjoy stronger brand equity, premium valuations, and long-term stability.
For investors, the opportunity emerging around managed intelligence is both clear and compelling. Historically, MSPs’ labor-intensive models have allowed them to enjoy predictable cash flows with only modest margins. AI is changing that reality. The new generation of MSPs will be more automated, more efficient, and far more profitable.
Managed intelligence won’t just create new revenue opportunities; it will redefine the economics of the MSP business. Highly optimized AI-enabled providers can maintain leaner cost structures while increasing output and delivering greater value. With AI performing routine administrative and technical tasks, human capital can be redeployed to focus on innovation, customer engagement, and strategic growth. This dynamic produces measurable improvements in EBITDA, margin expansion, and valuation multiples.
As noted in “The State of MSP Capital in the Age of AI,” the age of “capital efficiency” has arrived. Investors are now drawn to MSPs that demonstrate measurable productivity gains per dollar of investment — proof that relying on automation and leveraging data translate directly into superior returns. These same efficiencies also make intelligent MSPs more resilient in downturns, as their operating costs scale more predictably with demand.
Managed intelligence offers benefits beyond near-term profitability. It also represents a long-term growth engine. As enterprises and SMBs embed AI deeper into daily operations, the demand for intelligent management will scale exponentially. The MSPs best equipped to deliver that intelligence will not only capture recurring-revenue streams but also compound their enterprise value. For investors seeking durable, technology-backed growth assets, the intelligent MSP represents a new class of capital-efficient infrastructure play.
The opportunity for MSPs — and those who invest in them — has never been greater or more urgent. The convergence of AI, automation, and data intelligence is producing a trillion-dollar service economy in which managed intelligence will be the foundation of growth. Customers are ready. Partners are mobilizing. Capital is accelerating into the ecosystem.
Legacy service models remain profitable for now, but complacency is dangerous. The ability to reinvest money earned from current operations into next-generation capabilities will separate the leaders from the laggards. The future belongs to the progressive, intelligent MSP — one that treats AI not as a product but as an operating principle.
Those who act now — whether as providers or investors — will not just participate in the future of managed services. They’ll define it.
Larry Walsh is the CEO, chief analyst, and founder of Channelnomics. He’s an expert on the development and execution of channel programs, disruptive sales models, and growth strategies for companies worldwide.
