Service Leadership highlights a concerning trend among Managed Service Providers (MSPs) regarding Total Annual Expense (TAE) increases. Historical data reveals that while 34% of MSPs experienced increases over 6% in 2022, actual increases for 2023, 2024, and 2025 have consistently surpassed planned figures, indicating a disconnect between budgeting and reality. In 2025, for instance, bottom-quartile MSPs recorded 27.7% of their increases exceeding 6%, nearly double the 14.5% seen in Best-in-Class firms. As MSPs project fewer significant increases for 2026, skepticism remains about their ability to accurately forecast expenses based on past performance. Experts stress that these TAE trends should be monitored closely, as they impact not only wage stability but also overall profitability and pricing strategy in the industry.
Techaisle predicts that the small and medium-sized business (SMB) and midmarket channels will experience significant transformations driven by artificial intelligence from 2026 to 2028. The company emphasizes a shift towards efficiency, with partners focusing on service model automation and packaged intellectual property rather than traditional billable hours. The report outlines ten key predictions organized into three major trends. The first trend, “The Autonomous Service Model,” suggests that managed service providers will transition to a “Zero-Touch” service model, where artificial intelligence manages a substantial portion of service tasks. The second trend, “The Packaged Value Pivot,” indicates a move away from hourly billing toward fixed-fee, packaged services that offer higher profit margins. Finally, the “New Go-To-Market and Stack Mandate” highlights the necessity for partners to adopt AI-driven marketing and technologies to remain competitive.
While I’m on global markets, the Japanese IT services market is projected to grow from a valuation of 93.72 billion US dollars in 2025 to 231.93 billion US dollars by 2035, reflecting a compound annual growth rate of 9.48% from 2026 to 2035. This growth is largely driven by significant labor shortages, with the Ministry of Economy, Trade and Industry forecasting a shortfall of 790,000 professionals by December 2024. To address this gap, approximately 14,500 foreign engineers are entering Japan monthly under specialized visa programs, highlighting a shift towards automation-led service delivery models.
Why do we care?
TAE isn’t drifting up because people are bad at math. It’s drifting up because the cost structure is changing faster than the mental model. Vendors raise prices. Labor gets scarcer. Cloud bills fluctuate. Then we talk ourselves into believing automation will flatten all of that.
It won’t—unless you can prove where the cost actually leaves the system.
Now layer on fixed-fee, packaged services. That sounds mature. It sounds scalable. But if your expenses routinely blow past plan, you’re not ready for that model. You’re just moving risk from the customer to yourself and hoping AI covers the gap.
Japan shows where this goes when labor disappears entirely. Automation becomes mandatory. But it only works for operators who know their numbers cold and can amortize investment across scale. Everyone else gets squeezed.
This matters now because MSPs are making long-term pricing and service-design decisions under the assumption that costs will “normalize.” The data says they won’t. If providers don’t slow down, instrument their economics, and price for uncertainty, they won’t be disrupted by AI—they’ll be undone by it.