IT Managed Service Providers: A Convergence of Capabilities

IT managed service providers (MSPs) are highly valuable partners to businesses of all sizes, bringing end-to-end technology solutions and the skillsets to navigate an ever-changing IT environment.

Meanwhile, the lines between IT services categories are blurring. Leading MSPs are now offering a broader array of capabilities beyond traditional IT support—from cybersecurity, application, and cloud services to an expanding focus on compliance and digital transformation—creating new opportunities for both business services and software investors.

Below, our senior professionals share what’s driving investor interest in MSPs, the key traits of leaders in the space, and how recent clients Omega Systems and CyberSheath demonstrate the segment’s M&A potential.

Small Cost, Big Impact

Several factors make it challenging for companies to personally manage their IT, including increasing security vulnerability, evolving device usage and environments, the need to update legacy technology infrastructure, and a lack of skilled in-house talent. And often, the cost of outsourcing IT services is small compared to the impact of a failure or security breach.

These factors underpin the need for a variety of IT categories. MSPs, for instance, are critical for a large host of companies without internal IT experience that operate in dynamic markets like healthcare, finance, legal, the government, and critical infrastructure, among others.

More frequent, sophisticated, and high-profile incidents across these areas shed light on the vital need for MSPs, such as last year’s cyberattack on CDK Global, which severely affected the auto industry, and a range of constant threats targeting schools, utilities, and the defense industrial base.

As IT becomes more complicated with increasing cyber threats and shifting compliance requirements, companies are seeking MSP partners that provide a more comprehensive set of solutions. “The most successful MSPs are listening to customer pain points and providing strategic advice on what technology to use, while offering ongoing support to protect, modernize, and improve operations,” says Derek Lewis, a managing director in our Business Services Group.

At the same time, MSPs with specialized vertical capabilities are also highly sought-after. “MSPs with differentiated industry knowledge can better manage sector-specific dynamics related to compliance needs, customer data, and digital infrastructure, enhancing customer relationships and driving incremental value for companies and their investors,” he adds.

Combined, these elements support substantial M&A potential across the MSP ecosystem. “IT managed services is a large, fragmented, and growing segment primed for continued consolidation,” says Priyanka Naithani, a managing director in our Technology Group. “We’re at the beginning of larger MSPs coming together to form scaled platforms with expertise in specific industries and a wider range of complementary IT services.”

To discuss actionable opportunities across MSPs and the broader IT services landscape, contact our senior professionals at ITServicesInsights@harriswilliams.com.

Omega Systems and CyberSheath: Illustrating the Opportunity

Our recent clients in the space highlight the traits of leading MSPs that investors should prioritize. 

For example, Harris Williams advised Omega Systems, a portfolio company of Pfingsten, on its strategic investment from Revelstoke Capital Partners. Omega provides managed IT solutions—including cybersecurity and compliance, cloud and connectivity, NOC/SOC support, disaster recovery, and network monitoring—to a variety of regulated industries. 

“Revelstoke will be an excellent partner for us as we solidify and extend our position as a leading MSP/MSSP for regulated customers,” says Mike Fuhrman, Omega Systems CEO. “We look forward to building upon existing infrastructure and capabilities with additional investments to accelerate our growth.

“Omega is recognized throughout the industry for its commitment to innovation and customer satisfaction, and we’re excited to see what the company accomplishes with Revelstoke’s partnership in its new phase of growth,” adds Lewis.

In addition, Harris Williams advised CyberSheath, a portfolio company of Lightview Capital, on its sale to BV Investment Partners. CyberSheath combines regulatory managed compliance, cybersecurity, and IT services into an end-to-end offering for companies throughout the defense industrial base. Its services are vital to these federal contractors, which must achieve and maintain full compliance with the Department of Defense’s Cybersecurity Maturity Model Certification (CMMC) regulations.

With a strong reputation as a thought leader and innovator across government cybersecurity initiatives, CyberSheath has become a trusted partner throughout the DoD supply chain.

“CyberSheath’s deep expertise with CMMC is key to its success,” says Naithani. “The company is well-positioned for long-term growth as it executes its compliance automation technology strategy, and further expands into additional compliance areas.”

An Evolving Buyer Landscape

MSPs will continue to be in demand as the IT environment evolves and becomes more complex. And with more IT services models coming together, the MSP buyer landscape is expanding to include both business services and software investors.

“MSPs that can bring more sought-after IT services under one roof have significant growth potential,” says Lewis. “These innovative companies will continue to garner substantial investor interest in the years to come.”

To further discuss IT services M&A, please contact our senior professionals.