Top 8 risks to the growth of Managed Service Providers (MSP)

With the global managed services market valued at USD 304.6 billion in 2024 and expected to reach USD 570.8 billion by 2033, according to IMARC Group, the opportunity is real – but so are the risks. As more organizations outsource IT management, MSPs should be thriving. After all, most companies would rather avoid the headache of handling complex technology. But in practice, it’s never that simple

Growth brings pressure. To scale successfully, MSPs must overcome a number of operational and strategic obstacles that can quietly erode margins, morale, and momentum.

Here are eight major risks threatening the progress of managed IT service providers – and how to tackle them head-on.

8 key challenges faced by managed service providers

1. Failure to match resource demand with capacity

Feeling swamped? You‘re not alone. When demand spikes and you don‘t have the people or bandwidth to keep up, things fall through the cracks. That‘s why you need to stay one step ahead. Use forecasting tools to spot busy periods before they hit, and shift your resources around accordingly. Don‘t wait for a fire to break out – plan your capacity like you‘d plan your week: with a clear view of what‘s coming.

💡Real-world scenario: One regional MSP landed several mid-market clients in a single quarter. But without resource forecasting, their techs were overloaded, SLAs were missed, and customer satisfaction took a hit. Two major clients churned within six months.

📍 How to fix it: Feeling swamped? You‘re not alone. When demand spikes and you don‘t have the people or bandwidth to keep up, things fall through the cracks. That‘s why you need to stay one step ahead. Use forecasting tools to spot busy periods before they hit, and shift your resources around accordingly. Don‘t wait for a fire to break out – plan your capacity like you‘d plan your week: with a clear view of what‘s coming.

2. Inability to quickly identify money-losing projects or clients

If you want to grow a sustainable MSP, you can‘t afford to say “yes” to every client or project that comes your way. Many providers lose margin – and momentum – because they haven‘t learned to say “no” to low-value work.

Some clients demand more time and attention than they‘re worth. Others start out profitable, but turn into margin-killers due to poor scoping, changing requirements, or slow approvals. If you‘re not tracking profitability in real time, you may not even realize where the leaks are – until it‘s too late.

The danger: Not all revenue is good revenue. A few unprofitable projects can quietly eat away at your bottom line and drain your team‘s energy.

💡Real-world example: Eric Gray of Convergence Networks once walked away from 90% of his customer base – and still grew revenue by 9% with just four clients. The reason? He focused only on accounts that matched his business model and profit goals.

📍 How to fix it:
Start by running the numbers. Know your ideal profit margin, set a realistic budget, and actively track your costs. Use project budgeting tools to monitor performance and flag when actuals start creeping past estimates. Define what makes a client or project worth your time – and stick to it. The sooner you can identify low-value work, the faster you can focus on clients that drive real growth.

3. Lack of effective collaboration between teams

As your MSP grows, the risk of things getting lost in translation gets real. One miscommunication and suddenly a ticket slips through the cracks or a client gets the wrong update. PSA tools help here – big time. They give your team shared spaces to chat, share files, leave feedback, and keep things moving without endless email chains or Slack overload. Everyone knows who‘s doing what and when. Simple as that.

The danger: Without seamless internal collaboration, handoffs get messy, project timelines slip, and clients grow frustrated.

💡 What it looks like: A technician resolves a ticket without logging it in the system. The account manager, unaware, follows up incorrectly. The client feels unheard – and starts questioning your professionalism.

📍 How to fix it: As your MSP grows, the risk of things getting lost in translation gets real. One miscommunication and suddenly a ticket slips through the cracks or a client gets the wrong update. PSA tools help here – big time. They give your team shared spaces to chat, share files, leave feedback, and keep things moving without endless email chains or Slack overload. Everyone knows who‘s doing what and when. Simple as that.

4. Absence of a single source of truth and real-time visibility into all ongoing projects

Have you ever found yourself answering “I‘m not exactly sure” when your customer asks for a status update? Maybe you also struggle with estimating when you are likely to complete a particular project. These are not situations any business wants to find themselves in.

Failing to give your client the answer they need, kills their confidence in your business and damages the likelihood of future business. This happens to be one of the most common risks facing managed IT service providers on their way to growth. The ability to view all project activity in real-time helps you provide answers and solutions when problems emerge – and fast.

💡 Why it matters: Real-time visibility isn‘t just about reporting – it‘s about control. If you can‘t see it, you can‘t fix it.

📍 How to fix it: If you find yourself saying, “Let me check and get back to you,” every time a client asks for a project update – it‘s time to fix that. You need one place where everyone can see what‘s going on – no guesswork, no outdated spreadsheets. A good PSA tool gives you dashboards, timelines, and real-time progress, so you (and your clients) are never in the dark.

5. Extended delivery-to-cash time

Billing shouldn’t be a monthly scavenger hunt. If you‘re chasing timesheets, piecing together expenses from emails, or waiting on approvals, you‘re just delaying your cash flow. Automate it. Let your software do the heavy lifting – pulling time logs, compiling reports, and sending out polished invoices faster. Your clients will appreciate the clarity, and your finance team will thank you for the consistency.

💡 What happens: Invoices go out late. Payments come in slower. You struggle to pay vendors and staff on time, creating stress and limiting reinvestment.

📍 How to fix it: Billing shouldn’t be a monthly scavenger hunt. If you‘re chasing timesheets, piecing together expenses from emails, or waiting on approvals, you‘re just delaying your cash flow. Automate it. Let your software do the heavy lifting – pulling time logs, compiling reports, and sending out polished invoices faster. Your clients will appreciate the clarity, and your finance team will thank you for the consistency.

6. Overdependence on legacy tools and manual work

Still managing projects in spreadsheets and sticky notes? That might have worked when you had five clients, but not anymore. Manual processes slow you down and introduce errors you can‘t afford. Move your operations into a centralized platform where everything connects – projects, billing, reporting, all in one place. Automate the stuff that eats your time, and let your team focus on what really matters.

💡 Why it‘s risky: Manual data entry increases errors. Siloed tools slow down teams. You miss deadlines, overlook issues, and lose insight.

📍 What to do: Still managing projects in spreadsheets and sticky notes? That might have worked when you had five clients, but not anymore. Manual processes slow you down and introduce errors you can‘t afford. Move your operations into a centralized platform where everything connects – projects, billing, reporting, all in one place. Automate the stuff that eats your time, and let your team focus on what really matters.

7. Reactive mindset instead of strategic planning

If you‘re always in “putting out fires” mode, it‘s tough to think big. But to grow, you‘ve got to lift your head up and start planning ahead. Set some time aside every quarter to check in on your goals, review your KPIs, and map out where you‘re going next. Treat your own business like you‘d treat a top client – with intention and direction.

💡 The cost: You fall behind competitors who are already offering cloud migrations, security consulting, or vCIO services. You miss market shifts, and your clients move on.

📍 How to fix it: If you‘re always in “putting out fires” mode, it‘s tough to think big. But to grow, you‘ve got to lift your head up and start planning ahead. Set some time aside every quarter to check in on your goals, review your KPIs, and map out where you‘re going next. Treat your own business like you‘d treat a top client – with intention and direction.

8. Cybersecurity gaps that can derail your growth

Let‘s be real – cybersecurity isn‘t optional anymore. As your MSP grows, so does the complexity of your systems, the number of endpoints you manage, and the expectations from your clients. That means even small security gaps can turn into big, business-threatening problems.

It could be something simple: a missed software update, a weak password policy, or a team member clicking on a sketchy email. But the fallout? Data loss, downtime, compliance issues, and a serious hit to your reputation. And let‘s not forget: one client breach can lead to losing ten others who no longer trust you to protect their business.

📍 How to fix it:
First off, make security everyone‘s job – not just something your tech team handles in the background. Train your staff, tighten up access controls, and stay on top of updates and patches. Use monitoring tools to catch unusual behavior early and automate where you can.

And don‘t treat cybersecurity like an afterthought. Bake it into your services. Offer security assessments, help your clients stay compliant, and use PSA software that integrates with your security tools. The more visibility you have, the faster you can act – and the fewer surprises you’ll face.

Overcoming growth risks for MSPs with PSA software

Managing a growing IT services business is anything but simple. On one hand, you need your team working efficiently. On the other, you‘re juggling multiple high-stakes projects, evolving client expectations, and tight delivery timelines. Staying profitable while keeping everything moving? That‘s where Professional Services Automation (PSA) software makes all the difference.

Growth doesn‘t happen just by working harder – it happens by working smarter.
For MSPs, that means having the right systems in place to manage complexity, maintain visibility, and make confident decisions as the business scales. That‘s exactly where PSA (Professional Services Automation) software comes in.

Here‘s how a strong PSA platform helps your MSP grow – without growing pains:

✅ Forecast demand and align resources before it‘s too late

When demand spikes, do you have the visibility to respond – or are you playing catch-up?

PSA software includes powerful resource capacity planning tools that help you forecast demand, identify future gaps, and proactively realign your team. You‘ll be able to plan ahead, avoid overload, and ensure no opportunity slips through the cracks

✅ Track profitability in real time

Profitability isn‘t just about revenue – it‘s about margins. Without a clear view of where your money is going, small losses can quietly add up.

PSA platforms track budget vs. actual costs across projects, clients, and entire portfolios. With built-in business intelligence and reporting tools, leadership can instantly see which clients are profitable, where you‘re overspending, and when to course-correct.

✅ Streamline collaboration across teams and clients

As your MSP grows, communication becomes more complex – not just within your team, but also with clients. Missed updates, scattered feedback, and back-and-forth emails can lead to confusion, delays, and frustration on both sides.

PSA software brings everyone onto the same page. Internally, your teams get a shared workspace for tasks, messages, files, and approvals – so nothing slips through the cracks. Externally, client portals give your customers a clear view of project progress, let them submit requests, and keep them looped in without chasing you down.

✅ Gain full visibility and establish a single source of truth

When your data is scattered across spreadsheets, inboxes, and disconnected tools, it‘s nearly impossible to get a clear picture of what‘s really happening. You end up making decisions based on assumptions – or worse, outdated information.

PSA software solves that by giving your entire team (and your clients) access to one centralized platform with real-time data. Budgets, timelines, workloads, task statuses – it‘s all there, up to date, and easy to understand. Managers know where projects stand, executives can see how the business is performing, and clients get the transparency they expect.

No more second-guessing. No more “let me check and get back to you.” With a single source of truth, you make faster, smarter decisions – and build more trust along the way.

With client portals, customers can track their project progress, submit requests, and get updates – boosting transparency and trust. Advanced platforms even use AI to forecast project timelines, helping you set realistic expectations.

✅ Speed up billing and cash flow

Billing delays are one of the most avoidable growth-killers. But if you‘re chasing timesheets or manually compiling data from multiple systems, it‘s no surprise that invoices go out late.

PSA software automates time and expense tracking, pulls everything into one unified billing report, and integrates directly with your invoicing system. The result? Quicker approvals, faster payments, and healthier cash flow.

✅ Standardize how you work

As you grow, consistency becomes key. PSA tools help you document and automate processes – from client onboarding to project delivery – so every team member follows the same playbook. That means fewer errors, faster delivery, and a more professional client experience.

✅ Support smarter, data-driven decisions

With real-time dashboards and built-in business intelligence, PSA software gives leadership a complete view of performance – not just what‘s happening now, but what‘s likely to happen next. It‘s the foundation for strategic planning that actually works.

Why Birdview PSA is the best solution for overcoming MSP challenges

Managed service providers face no shortage of challenges – from juggling limited resources and tracking profitability to meeting deadlines and delivering consistent client experiences. As your MSP grows, these issues only get more complex.

Birdview PSA is purpose-built to solve these problems.

With tools for real-time visibility, automated workflows, and accurate forecasting, Birdview helps MSPs:

• Make smarter, faster decisions

• Align teams around shared priorities

• Deliver projects on time and on budget

• Improve client communication and transparency

Whether you’re dealing with overloaded teams, scattered project data, or slow, manual billing, Birdview gives you the clarity and control you need to run a scalable, profitable MSP.

💡 Investing in PSA software isn‘t just about operational efficiency – it‘s about removing the very risks that limit your growth. When your business runs on real-time insights, automated processes, and smart planning, you’re not just surviving – you‘re gaining a competitive edge.

Birdview PSA has all the tools you need to help you run a profitable business and scale fast.

Ask for a guided tour of Birdview today and see how it can help you achieve faster growth for your business!

❓ FAQ: Overcoming MSP challenges

1. What are the biggest challenges managed service providers (MSPs) face today?

MSPs often struggle with resource overload, lack of project visibility, unprofitable clients, slow billing cycles, and growing cybersecurity risks. As demand rises, these issues can quickly scale out of control without the right systems in place.

2. Why is it difficult for MSPs to scale sustainably?

Many MSPs rely on manual processes, disconnected tools, or ad-hoc planning. This creates bottlenecks, reduces efficiency, and makes it harder to manage complex workloads as the business grows.

3. How can PSA software help MSPs overcome these challenges?

PSA (Professional Services Automation) software provides a centralized platform to manage projects, resources, budgets, billing, and reporting. It gives MSPs real-time visibility, automates repetitive tasks, and supports data-driven decision-making – all essential for sustainable growth.

4. How does Birdview PSA specifically address MSP pain points?

Birdview PSA is designed to help MSPs forecast demand, allocate resources efficiently, monitor profitability, and streamline collaboration with clients. It reduces delivery-to-cash time and helps teams stay aligned with powerful reporting and planning tools.

5. Can PSA software help with managing unprofitable projects or clients?

Yes. PSA tools allow you to track actual vs. planned costs, monitor margins in real time, and flag underperforming projects. This makes it easier to focus on high-value work and let go of engagements that hurt your bottom line.