Photo: (left to right) Dave Raffo, Channel Partners; Ross Artale, Spectrotel; Erik Braden, Braden Systems; Jay Johnson, Trace3; and Bryan Smith, Expedient.
We gathered four leaders of large IT service providers for a Channel Conference/MSP Summit panel last week to take the temperature of the MSP industry. Here are the key takeaways.
MSP Business is Booming
Despite economic headwinds such as gas prices, tariffs, inflation and uncertainty over the war in Iran, the MSPs reported fantastic first-quarter 2026 results.
Expedient CEO Bryan Smith said his company beat its first-quarter forecast and is tracking to increase sales by about 40% year-over-year. Jay Johnson, Trace3’s SVP of services, said his company had its best quarter in history, beating projections by about 20% and is on track for 20% year-over-year growth. Erik Braden, managing partner of Braden Business Systems, said his company also beat expectations and its pipelines are the largest he’s seen. Spectrotel CEO Ross Artale added his company also had double-digit growth.
“There’s a little bit of concern in the market on private credit markets and tariffs, but it hasn't really resonated into our customer base yet,” Artale said.
AI is Top of Mind
When asked what was behind the boom, all four leaders mentioned AI as playing a role. It certainly dominates conversations with customers.
“I'd say seven out of the 10 conversations we're having with the C-suite right now are definitely around the AI paradigm and their struggle with it,” Braden said. “We've really taken a hard stance on creating cultural adoption and AI, focusing on governance standards and education and training to get anywhere from six to 12 hours per office worker back for their team.”
“One of our flagship products is connectivity, and connectivity really enables the proliferation of cloud, and AI as the control plane moves from the edge to the cloud,” Artale said. “With AI, we ingest a lot of data on behalf of our customers, and we're moving from reactive and proactive to predictive and prescriptive. Roughly 90% of our network alarms are automated, 50% of those are enriched through AI. It's just the beginning. There's a lot of exciting use cases coming.”
Expedient’s Smith said there are three big drives for growth – what Expedia calls the "trilemma." That is, 80% of companies have to re-architecture hardware and infrastructure to leverage AI correctly, about 70% of companies are looking to reduce their hyperscale spending, and almost all companies re-evaluating their hypervisor strategy regarding VMware.
“All those things really come together for one decision, because they all really interplay with each other,” he said. “And the AI piece is a big driver.” So much so that Expedient doubled its new logos last year from what Smith calls “AI-as-a-service type clients.”
“With the rise of agentic AI, we're seeing a really strong need for governance,” Johnson said. “We see a need to really combine AI, governance, risk and compliance in a cybersecurity managed service, which really ties those things together. And then the other thing we see is just a lot of data projects, a lot of activity there around master data management that really get our clients where they need to take advantage of that. So we see those two things as really core tenets for our growth over the next couple of years.”
AI Still Feels Like ‘Wild West’
Still, the MSP chiefs say they face stiff challenges keeping up with the acceleration of AI.
“It’s little bit of a wild west out there with AI,” Artale said, adding his biggest concern now is “the pace of change. Every CIO is having conversations with their board about how to accelerate and drive efficiency. The sales cycle is so fast now — in AI, we're seeing cycles of one to two months from initial conversation to close.”
“The broad conversation is where the CEO starts with ‘give me some of that AI’ and then it's up to their team to implement,” Smith said. “And the biggest challenge we see is the adoption and usage of it, because just by rolling something out when you're not enabling the team, it just doesn't really work very well. I think a lot of what [MSPs] can help do is guide them through what good use cases are versus a bad use case.”
“The speed and rapidity of AI adoption is exciting, but don't fumble the ball,” Braden said. “It's rapidly evolving.”
AI Tools Dominance Remains in Play
When asked what AI tools they use, the service providers said they want to keep options open.
“One of the things that we want to do is not be prescriptive in the models and use cases,” Johnson said. “We want to listen to our clients, because certain models are going to do a little bit better depending on how you’re going to adopt it. We do see a lot of just momentum with Microsoft and where they're going, where they channel friendly. So we're seeing a lot of activity in that space. But again, we really try to have a consultative approach to say ‘What's the challenge we're trying to solve? What are the models that work? What are some use cases you can apply?’
“We try to remain agnostic for our clients, but we're currently pushing projects around Claude as well as Copilot,” Braden said. “We like to have a core adoption platform with a secondary option — for most Microsoft shops, that's the pattern we're seeing. Some of what you'd call AI is really automation — the terms are blurring — but we've been using those capabilities for the last four or five years.”
‘Move Fast, or Be Left Behind’
The four MSP leaders agreed that AI wins will come from companies that can best adapt to change.
“Even if you think you're in a great position, there are 30 companies that also thought they were leading in AI, and then one code release later, those companies aren't functional anymore. You just have to keep up with all the changes,” Artale said.
“I'm very optimistic,” Smith said. “There will be many successes and some failures, but the ones that make it through this will be the next Google, Amazon, or Facebook. The pace of AI change is accelerating, and I think that should be embraced. The companies that aren't moving fast now are going to be left behind.”
“Trace3 is a decent-sized company, so we need to stay agile while continuing to be a trusted advisor to our clients,” Johnson said. “We want to maintain that trusted advisor status and make sure we're continually delivering value. Staying nimble in this space is the key challenge.”
“This AI paradigm doesn't really give investors that warm and fuzzy feeling yet,” Braden said. “It's going to be interesting to see how we unlock that stability for the future, and marry it with the right talent — not just tech talent, but a business analyst-focused role, thinking about how the business is going to move forward.”