AI+Automation Systems for MSP

Your Client Just Bought AI At Lunch, Now What?

• Growth Right Solutions, llc

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We challenge MSPs with a stark data point—88% of clients adopt AI without consulting their MSP—and test whether it signals a true relevance crisis or a shift to specialization. We map two winning roles for providers and outline how governance-led integration protects margins and trust.

• 88% DIY AI as a signal of lost advisory status
• application layer purchases versus core operational services
• commoditisation risk from losing the strategic conversation
• complexity and governance as differentiation for MSPs
• margins shifting to strategy, integration, and assurance
• concrete offerings for AI readiness, policy, and compliance
• deciding between an AI strategy leader or an operational fortress
• urgency to clarify role, message, and value


MSPs are guaranteed to miss out on every opportunity they do not take.

SPEAKER_03:

Welcome to the debate. Our focus today is on a pretty significant shift shaking up the world of managed service providers or MSPs. It's really being driven by how clients themselves are adopting artificial intelligence.

SPEAKER_00:

And there's one piece of data, uh, a core statistic from the material we looked at that's really ignited this whole conversation. It's quite stark, actually. 88% of clients are doing DIY AI. Exactly.

SPEAKER_03:

They're finding and you know implementing specialized AI solutions without even consulting their IT provider first. That number, 88%, it forces us to ask some frankly difficult questions about the MSP business model itself.

SPEAKER_00:

Right. So the central question for us today is is this trend, this bypassing of the MSP for strategic tech like AI, does it really signal a full-blown relevance crisis? Does it demand a complete, you know, radical overhaul of how MSPs operate?

SPEAKER_03:

And I'll be arguing that yes, it absolutely does. I think this bypass confirms MSPs have fundamentally lost their strategic position. They're sliding and sliding fast towards becoming low-margin utility providers.

SPEAKER_00:

And I'll be taking a, let's say, slightly different perspective. While I absolutely acknowledge that 88% is a, well, a serious number, a real indicator of change, I think framing this as an existential relevance crisis might be going a bit too far. My argument is that this bypass is more of a um a predictable outcome of technological specialization and just how easy it is to access these tools now. And importantly, I don't think it invalidates the core, you know, the absolutely essential value that operational MSPs still provide.

SPEAKER_03:

Okay. Well, let me start then by laying out just how severe I think this threat really is. The material we reviewed, it really emphasizes that the core problem here isn't just the security risk that comes with, you know, unmanaged AI, although that's huge, obviously.

SPEAKER_00:

Mm-hmm. Definitely a concern.

SPEAKER_03:

But the definitive proof, the real erosion, is the, let's call it, the emotional and strategic reality that clients didn't ask you first. That single failure right there, that's the signal that the whole perception of the MSP as the trusted advisor, something built up over decades, is fundamentally expiring. Okay. The strategic failure is, I think, pretty clear. Clients still mostly see their MSP through this uh restrictive lens of being a technician. You know, the professional who handles the operational stuff, email configuration, network stability, maybe fixing the printer.

SPEAKER_00:

The keeping the lights on role.

SPEAKER_03:

Straight to Google or signing up directly with some specialized SaaS solution. Maybe it's an AI copywriter or market analysis tool. They're not consulting their provider and losing that chance, losing the opportunity to be in that strategic conversation right at the start. That's the unavoidable path to becoming a commodity. The crisis is really fueled by this assumption of inability. Clients skip the conversation because fundamentally they don't think you can do it. And that's a failure of trust, a failure of perceived expertise, not just, you know, convenience.

SPEAKER_00:

That's that's a very compelling argument. And I do agree that the erosion of that advisory status, well, it's real. It absolutely has to be addressed. However, jumping to the conclusion that this automatically means a universal relevance crisis that leads to, you know, business extinction, that feels perhaps a bit too dramatic for me. The 88% statistic is high. Yes, definitely alarming. But let's think about what they're actually adopting. The data seems to show clients are often grabbing niche, quite specialized AI tools, specific SaaS products designed for, you know, narrow, maybe vertical functions. And these tools, they often exist outside the traditional and still absolutely essential scope of core MSP services. Things like foundational network defense, robust business continuity, desktop management, basic infrastructure stability.

SPEAKER_01:

But isn't that the point? They're adopting the strategic tools elsewhere.

SPEAKER_00:

Well, hold on. The MSP's core value, things like operational resilience, security governance, keeping things up and running, that remains absolutely essential. And crucially, I'd argue these services actually resist mass commoditization because they require local know-how, custom integration, a client facing, say, a critical ransomware threat, or needing guaranteed business uptime, they will still rely on their MSP for that, even if they bypass them for a, you know, a highly specialized AI strategy chat. This bypass, I think it's often driven by just how incredibly accessible and aggressively marketed these specialized SaaS solutions are. You know, a non-IT person can sign up instantly. It reflects an easy entry point for the application layer, maybe, but not necessarily a fundamental rejection of the MSP's capabilities and infrastructure and security. The MSP is still the expert keeping that complex IT engine running smoothly and securely. And that responsibility? That accounts for the vast majority of ongoing operational risk for the client.

SPEAKER_03:

See, I understand why you're leaning so heavily on that distinction, but I think you might be falling into the very trap I just described. If we let the definition of an MSP's core value shrink down to only keeping the lights on and patching the firewall, well then we're basically volunteering for relegation. If the MSP is bypassed on strategic technology, the tech that unlocks new revenue, cuts costs, drives the business forward, then the MSP is permanently pushed into doing simple maintenance. And that is precisely the definition of becoming a commodity utility provider.

SPEAKER_00:

I'm just not convinced that managing the infrastructure in, say, 2024 qualifies as simple maintenance. I mean, the sheer complexity of modern IT environments, that itself resists commoditization, doesn't it?

SPEAKER_03:

But if you lose the strategic conversation, you lose the chance to truly differentiate what you offer.

SPEAKER_00:

Failure to capture that strategic seat, it means the MSP isn't seen as a true proactive partner who's invested in the client's growth. The client is now setting the strategic direction entirely on their own. They decide they need AI for this purpose, and the MSP is just reduced to, you know, plugging in the tactical wires afterwards. And that's fundamentally a less valuable, lower margin role. Okay, I have to push back a bit on the scope of that strategic seat at the table. Does that seat really have to cover every single niche technology purchase the client makes? I mean, if a mid-sized law firm decides to buy a very specific specialized AI tool just for analyzing legal documents, well, that seems like an application layer decision tied heavily to their domain expertise, right? The MSP still has the essential role of governing the platform, making sure the network is robust enough, ensuring security protocols cover the new application, managing the compliance headaches from new data storage. That oversight, the governance, the security, the stability, that's complex work. It's highly valuable, and it's unique to that client's specific environment. The client's quick, tactical purchase of some isolated SaaS tool doesn't just erase the fundamental critical need for the MSP's foundational expertise in security integration and platform management.

SPEAKER_02:

That's a crucial distinction you're making, but it immediately brings up another question, doesn't it? About the nature of the failure itself. You're sort of suggesting this is just a role definition issue, that AI strategy falls outside the historical scope. But I'm arguing that the historical scope is precisely what's no longer viable.

SPEAKER_00:

So I guess the question then is, is this a genuine skill deficit? Like do MSPs just lack the technical chops to integrate AI effectively? Or does it simply reflect a massive market shift in how specialized tools are well distributed now? The fact that clients are going straight to search engines and niche vendors, it suggests that the line between general operational IT and highly specific application strategy is blurring, maybe even breaking down. It seems almost natural, in a way, for clients to seek out specialized solutions built by companies who focus only on one narrow AI function. MSPs weren't historically set up to be universal experts or data scientists. Asking them to master every single vertical AI solution that pops up seems, well, unreasonable.

SPEAKER_03:

But the definition of the modern strategic partner has to evolve and it has to evolve rapidly just to justify their position. The material we're discussing highlights what I think is the scariest part. Clients didn't even pause to ask the MSP. This isn't about whether the MSP has a data science PhD on staff. It points directly to a profound failure of perception where the client just assumes inability. They see the MSP through that restrictive, outdated, maintenance-focused lens. And that assumption of inadequacy, that's a strategic failure by the MSP's leadership by their marketing. They failed to communicate their expanded relevance in this modern tech era.

SPEAKER_00:

I agree that the failure to communicate that evolving relevance is a, yeah, a significant tactical error. But we have to be extremely careful not to confuse a marketing failure with some inherent existential crisis for their core, you know, non-negotiable service offering. Look, if a client needs their entire network protected against some new zero-day vulnerability, who do they call? They call the MSP. Sure, for that, yes. Right. But if that same client wants, I don't know, an AI-driven expense reporting tool that plugs straight into QuickBooks, they might just Google it and sign up for$50 a month. The first scenario is a critical complex business dependency. The second is essentially a niche application layer purchase. The core business of providing secure, localized, operational IT management, that's a service that a Google search or a$50 SaaS tool simply cannot replace.

SPEAKER_03:

But that niche purchase today, it defines the strategic conversation tomorrow. And this bypass, it directly feeds the third and I think most dangerous element, commodization. Because the MSP isn't involved in the strategic decision making, their services, their patching, backups, network monitoring, they start to look like non-differentiating utility functions. If the client determines their own strategic direction, the MSP gets reduced to just executing standardized setup and maintenance tasks. And when services become standardized, well, they become subject to price wars. It forces MSPs into a race to the bottom for basic services.

SPEAKER_00:

I'm sorry, I just don't buy that inevitable commoditization for infrastructure management. While maybe the operational services look routine from, you know, a 30,000-foot view, managing today's complex, decentralized IT systems, systems that involve clients doing DIY AI, integrating multi-cloud stuff, dealing with supply chain attacks, meeting tougher compliance rules, that requires increasingly nuanced, local, and customized security and integration skills. This sheer complexity and the need for personalized resilience, I think it actively resists simple commoditization.

SPEAKER_03:

Okay, tell me where the margin is then. Because the value captured, it ships. The high margin, sticky, differentiated work is now in the strategic guidance, the integration planning, the governance framework for all these new technologies. If 88% of clients are getting that strategic guidance somewhere else, the MSP is effectively giving up the high margin revenue streams and just keeping the low margin operational work. That is the definition of a shrinking relevance footprint in margin compression. Let's make this concrete. The profit margin on, say, a monthly AI integration consulting retainer is exponentially higher than the margin on just managing Microsoft Exchange updates. By being bypassed, MSPs are losing that high-value retainer work.

SPEAKER_00:

That is true, they are potentially losing the specialized AI consulting margin. I grant you that. But let's look at the complexity inherent in what's left. When a client buys a new specialized AI tool on their own, the MSP's workload doesn't suddenly get simpler. Often it becomes more difficult and arguably more valuable. They're now responsible for integrating some perhaps unsanctioned application into the existing security stack, managing new data governance challenges, ensuring compliance across a frankly fragmented and often hostile infrastructure. That integration and governance work, that's neither simple nor easily outsourced. For example, who makes sure that the data being fed into that DIY AI marketing tool actually adheres to GDPR or HIPAA standards? It's not the SaaS vendor, right? It's the local IT expert, the MSP, who understands the client's specific regulatory environment. That expertise, managing risk in a decentralized world, is robust, it's necessary, and it commands a price premium. You seem to be defining relevance only by capturing the revenue from the new shiny thing, whereas I'm arguing that relevance is maintained by securing and governing the entire increasingly complex platform. And that platform represents a massive and growing liability for clients if it's not managed correctly.

SPEAKER_03:

I understand the governance role, I do, but the risk remains that clients, having sourced their own strategic applications, will eventually start to question why they're paying a premium for operational services when the strategic value as they see it has been proven to exist outside the MSP relationship. Perception is king here. And if the client sees their MSP primarily as an execution arm rather than a strategic partner, that pricing pressure becomes inevitable. The competition isn't just other MSPs anymore. It's the client's internal assumption that IT operations are now somehow generic.

SPEAKER_00:

It is definitely a significant challenge to justify pricing when the client feels like they're driving the innovation. I absolutely agree. But I still insist that the specialized skills needed to manage and secure modern infrastructures, things like advanced vulnerability management, persistent threat detection, even localized physical network management, these are not easily replaceable by some generic utility. MSPs have to shift their value proposition. They need to be seen as the indispensable, sophisticated operational expert who secures, integrates, and manages the entire platform, even if the client chooses the specialized application on top. That's a shift in role, yes, but it's a continuation of critical relevance, not an extinction event.

SPEAKER_03:

So to summarize my position, that 88% statistic, it's far more than just a warning sign. I see it as a measurable declaration of a fundamental shift in client trust and a clear signal that the strategic high ground has been lost. The failure to be consulted on adopting strategic technologies like AI demonstrates, I think undeniably, an erosion of that trusted advisor status. This trend puts MSPs on a clear, slippery slope towards becoming generic utility providers who compete solely on price unless they can fundamentally and very rapidly change their market perception and really expand the definition of their strategic contribution.

SPEAKER_00:

And while I agree that vigilance is absolutely necessary, I continue to argue that framing this situation as an inevitable existential crisis is perhaps an overstatement. The data reflects, I believe, a necessary market specialization where application layer strategy is now instantly accessible via SaaS and other means. However, the core operational services, the localized specialized security expertise of the MSP, these remain absolutely critical to the client's stability and security posture. This perceived relevance crisis might be better framed as a major challenge. MSPs must evolve, yes, but evolve to successfully integrate and govern these specialized strategic tools without sacrificing the foundational strength and operational delivery that clients still fundamentally rely upon and, frankly, cannot easily replace.

SPEAKER_03:

Ultimately, what the source material really compels us all to do is critically examine client perception. We need to recognize that the definition of what even constitutes a strategic technology problem in this rapidly changing landscape, well, it's shifting much faster than many MSPs seem willing to acknowledge right now.

SPEAKER_00:

Absolutely. And that examination has to determine, and with some urgency, whether an MSP is going to prioritize the fight to become the AI strategic expert, or if they'll focus their energy, perhaps more realistically for many, on being the truly indispensable operational expert. The one who secures, integrates, and governs the highly complex, often messy, decentralized platform that all these specialized AI tools have to run on. Both paths hold immense value, but ambiguity about which role they intend to play? I think that's no longer an option for survival.