Top Trends That Changed The MSP Industry Landscape In 2020

joseph cole

Updated on May 2, 2023

It’s a new year and we are all excited about what it’s got for us. We are all hoping that this year will be better than the previous year. 2020 didn’t live up to our expectations. A lot of things happened in the previous year and there were some things that we cannot account for. Change and transformation were the terms that became common in 2020.

In this blog, we will talk about one such industry that got completely transformed during the previous year. And yes, as the title suggests, we will be talking about the changes in the Managed Service Providers (MSP) industry.

Jump into the action as we give you a detailed description of the various factors that drove the transformation in the MSP sector.

Let’s begin!

Top Trends that changed the MSP Industry in 2020

There were a lot of trends that paved the way for the MSP sector to become what it is today. Let’s count them down.

1. Rise of the gig economy

The rise of the gig economy compelled the MSP industry to take a more strategic approach towards contingent workforce management in 2020. During the period, the contingent workforce constituted around 40% of the total US workforce.

As the workforce became more infused with contingent workers, new technologies flooded the market.

  • Remote working platforms.
  • Contingent workforce management platforms.
  • Contractor compliance tools.
  • Administration tools.

This made the organizations call in for MSPs.

Organizations used non-permanent workers to handle fluctuations and manage cost efficiencies. Clients enlisted MSPs to fill all types of contingent workers. Moreover, this growth in the need for temp workers made MSPs fill more professional positions, rather than just support or project-based workers.

2. Need for more compliance and efficiency

There are a lot of benefits to using a contingent workforce. However, there are certain risks associated with the contingent workforce.


State or federal governments mostly issued lawsuits against organizations when any of the contingent workers were not only employees of the agency but also of the organizations where they were working. This negated the benefits and made the organization responsible for taxes and compensation claims.

This made the organizations incline towards MSPs to get more efficient and compliant management of the contingent workforce.

Apart from that, MSPs also helped the organizations address other issues related to compliance. Here is a complete rundown of them:

Screening issues

Most companies require proper vetting of candidates before employment. When the HR screens contingent workers through the same process as permanent employees, they get more vulnerable to co-employment concerns.

MSPs provided complete vetting of contingent workers to ensure compliance.

Employment issues

MSPs provided better management of contingent workers and made sure that the workers were employees of the agencies and everything regarding pays, compensations and other issues would be looked after by the agencies.

Scheduling and compensation issues

MSPs created processes to monitor rates, scheduling of contingent workers, and other compensatory issues. The MSPs signaled the agencies that the contingent workers were treated well in the organizations. The MSPs also verified worker’s compensation issues through regular audits and tracking.

3. Industry structure

In 2020, a lot of MSPs merged with other MSPs or VMS suppliers to increase the efficiency of management. Mergers and acquisitions (M&A) became the buzz word. Thriving MSPs wanted to integrate more services under single management.

Companies increasingly took the MSP / VMS mergers to manage staffing agencies based on a variety of benefits. Companies could receive multiple candidates from several staffing agencies as they didn’t have to depend on a single agency. The M&A also streamlined the recruitment processes, lowered the costs for companies, and increased the overall contingent management efficiency.

4. Changing customer demands

Companies needed to adapt to working from home due to the pandemic. They needed some external source to help manage the workforce and improve efficiency. MSPs became that source of management. MSPs made finding contingent workers and managing them faster and more efficient. Companies were guaranteed a streamlined pipeline of talent to choose from when the need arose.

With time, the role of MSPs shifted from tech adviser to major strategic business partner and workforce advisor. Companies needed MSPs to cope with the changes to increase efficiency and productivity. MSPs had to tailor their contingent staffing models based on the companies’ requirements.

In addition to recruitment, MSPs had to become more of a true partner, providing assistance with a future-proof strategy and planning, predicting efficient future job performances, and creating a diverse and inclusive workplace culture.

5. Focus on Total Workforce Solutions

Total Workforce Solutions allowed companies to think about talent as a whole. This phenomenon made companies integrate both part-time and full-time workers. The Total Workforce Solutions enabled:

  • Visibility into the total workforce culture
  • Ways to increase productivity
  • Cost savings from better management
  • Improved demand management
  • Better talent pipeline

2020 demanded a more holistic and strategic approach from the MSPs to improve the standards of talent management. The providers had to dig deep and find out ways that ensured better accountability of the workforce.

6. Increased reliance on technology

Technology advancements changed the staffing MSP industry in 2020. Companies needing staffing services wanted automation to be a part of the services. Various forms of workflow automation took place in the MSP sector, such as:

  • Operations
  • Security
  • Provisioning
  • Support
  • Billing

The outbreak of the virus also accelerated cloud adoption because of remote working. Cloud technologies provided services on demand without reserving unnecessary resources. Companies could use the services as and when needed without having the fear of it being overused. Most MSPs started providing their Cloud solutions to provide better technical assistance to the companies. Some MSPs even merged with popular cloud providers or resold previous cloud services.

Along with Cloud services, Internet-of-things technology (IoT) became one of the MSP market trends in 2020. IoT increased the interaction and data exchange within a single network. It merged with MSPs to provide better insights on the data, resulting in better business development.

An increase in cyber threats also created a big opportunity for MSPs to offer managed security solutions. Privacy and data security became huge concerns for the MSPs as well as the organizations. This growing concern compelled the federal and state governments to create data privacy laws to safeguard the data. Some of these laws are:

Complying with these laws, most MSPs started providing services such as:

  • Risk assessment tools
  • Business continuity and disaster recovery (BCDR) solutions
  • Compliance management
  • Robust patching

Also, some MSPs even specialized in security services. They became managed security service providers (MSSPs) to provide better data surveillance and firewall against incoming threats.

Future of MSPs

In today’s world, traditional ways are fading away to give way to new and innovative strategies. The MSP industry too must not only evolve but evolve successfully.

MSPs must listen to the client’s needs and determine the main concerns. To win and keep business, MSPs have to reposition themselves as trusted advisors and provide a streamlined approach towards contingent workforce management. They must incorporate new approaches such as:

  • Multichannel talent sourcing approach
  • Workforce risks identification
  • Data analytics tools integration

Besides that, MSPs need to continuously monitor active compliance and data protection laws to offer best-in-class services.

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