Microsoft Copilot and the Threat to MSP Margins: Ryan Morris on AI-Driven Channel Shifts

The dominant structural shift examined is the erosion of channel-driven value creation in AI offerings, marked by the rapid commoditization of resold AI technologies and a pivot toward consumption-based pricing models. Microsoft Copilot is cited as the most commonly resold AI product by MSPs, with market data showing that 84% of productized AI services among “AI forward” firms rely on this single vendor. The resulting model accelerates value capture at the vendor level, narrowing room for differentiated service or margin at the partner level. This consolidation pressures MSPs to shift from traditional product resale to enablement and operational integration or risk disintermediation.

The primary development highlighted is the widespread lack of substantive AI go-to-market offerings among MSPs. According to analyzed web positioning data, 61% of MSPs do not mention AI offerings on their sites, and among those that do, the majority use vague or unscoped “AI solutions” language without concrete services behind them. Only a small subset offers named, productized AI services. Of these, the overwhelming reliance on Microsoft Copilot underscores a lack of channel-developed solutions and points to a market structure where vendors, rather than partners, capture much of the economic value.

Supporting developments reinforce both the risk and inertia present within the channel. Ryan Morris outlines that true differentiation will require MSPs to develop packaged offerings around governance, financial controls, and vertical-specific business outcomes, yet early market activity shows little movement in these directions. The discussion emphasizes the potential for cost overrun through uncontrolled AI consumption, echoing past cycles from telecommunications to cloud. Efforts by large vendors to staff direct AI engineering resources are framed as a threat only to the top enterprise tier, with the bulk of SMB delivery left to service providers—albeit within a model now driven heavily by consumption volume and efficiency calculations.

Operational implications for MSPs and IT leaders include increased pricing pressure and possible margin erosion as customers optimize consumption and as vendors streamline direct monetization of AI. There is a growing need for internal and customer-facing governance structures to manage data use, financial exposure, and compliance. Channel partners that limit themselves to product resale risk commoditization, while those able to package and deliver business-integrated AI services may find more durable value. The episode underscores the urgency for MSPs to clarify and productize their AI engagement—not simply as a differentiator, but as a defensive strategy against margin compression and vendor dependency.

The whole channel says it’s living through an AI transformation. So why do roughly 6 in 10 MSPs not sell AI on their websites at all?

Dave Sobel sits down with channel strategist Ryan Morris to pull apart the gap between the AI story and the AI go-to-market. Using Business of Tech’s own Channel Chatter data, they dig into what MSPs have actually built — and the uncomfortable finding that where AI go-to-market does exist, it’s mostly AI-washing or reselling one vendor’s Copilot. From there: who inherits the liability when an AI automation makes a bad call, how consumption pricing quietly breaks flat-rate contracts, and the structural question underneath it all — if vendors capture AI’s value, does the indirect channel Ryan spent his career designing still survive?

ABOUT THE GUEST
Ryan Morris is Principal Consultant and Chief GTM Analyst at Morris Management Partners, with 25+ years designing go-to-market and channel strategy for vendors, distributors, and solution providers. He’s a featured voice in ScalePad’s 2026 MSP Trends Report and co-hosts The Killing IT Podcast.

IN THIS CONVERSATION
– The 61% silent majority: why most MSPs have no AI offer at all
– “Enable, don’t resell” a year later — is AI enablement a product, or unpaid glue work?
– Who owns the risk when an AI automation fails the client
– How consumption and seat-plus pricing blindside MSP contracts
– Does the channel survive AI — or become the vendors’ delivery layer?

Go deeper with BoT Plus — the analysis, numbers, and arguments we don’t have time for on air: https://businessof.tech/plusnessof.tech/plus

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