Do you know how many users your best engineer is managing? You should, because it’s directly related to your revenue.
We commissioned a market survey of MSPs in the United States to find out the state of their business, the pain points they face, and the factors that help some get ahead. Ask a managed service provider how their last year went, and you’ll often hear two answers: revenue is up, but the team is exhausted.
Nothing in your financial reports will explain the latter, yet your senior engineers are back to doing tier-two work they handed off years ago, and even the director has started answering tickets over the weekend. Most MSPs are pressed against a combination of market factors that put pressure on growth and on their team. We’re calling them The Paper Ceiling.
Most MSPs have experienced some measure of growth in the last 12 months, but less than 1 in 5 MSPs added headcount in proportion to the amount of work they’re taking on. Nobody decides this deliberately, and one incremental account doesn’t make that much of a difference on its own. But after a year, your client portfolio accumulates and the whole time you’ve been borrowing against limited capacity. Of course, realistically, hiring every time you onboard a new client can’t be the only solution. One chief technology officer named the constraint when we interviewed him: "You can't just keep adding heads. You've got to figure out how to automate or optimize management…which is proving difficult."
The second factor is the rate of technological change. As anyone who manages Microsoft environments knows, Microsoft ships new capabilities at a pace that is advantageous for customers but demanding for the people operationalizing all of it in every tenant. Indeed, 60% of MSPs said that Microsoft complexity is growing faster than they can scale their services to support it, and that pressure grows to 78% among MSPs supporting more than 100 customer accounts. So, the problem gets worse as you get bigger, and the native portals lack support for multi-tenancy. One director of technical services told us "They build a new tool into [M365], but how does a managed service provider manage that for 50, 60, 100 clients? That new feature in Microsoft is not easily manageable just by Microsoft alone."
The larger the engineer-to-users ratio becomes, the more these factors are exacerbated. In our survey, we found that burnout risk jumped from 34% to 54% when the span of control crosses 200 users per technical engineer. Some of our respondents even cited this threshold before we found it ourselves: “We try to keep it somewhere between 100 to 200 users per engineer. If it gets above 200, things can get a little taxing and stressful for my team. Once we get to that number, we start looking for a new person.”
So, what happens when you grow beyond that threshold without adding headcount? For 29% of MSPs, the unfortunate answer was attrition due to work-related burnout, which is where it affects your bottom line. The growth you absorbed in the beginning of the year risks showing up as resignations by the end of the year, and the accounts you took on are now covered by a team that’s a few engineers smaller, so the cycle continues. Not to mention, interviewing, hiring, and training a new employee costs time and resources that could have been saved.
No MSP is immune to these market conditions, but some weather them better than others. It all comes down to how MSPs manage Microsoft across customers, and we’ll get to those differences in part three.
In the meantime, while most MSPs cannot realistically afford to hire every time they add a new account, growth without incremental headcount will hurt margins. Next, in part two: the 3 myths we believed about MSP margin, and the two factors that actually move it.
Watch the on-demand webinar for the full findings, or download the market intelligence report.
About the research: findings come from a survey of 153 MSP decision-makers responsible for managing Microsoft 365 and Azure across customer accounts, fielded June 22 to July 7, 2026 by Thrive Analytics for Thirdside and commissioned by Nerdio. Results were analyzed across seven firmographic cross-breaks, including how MSPs manage Microsoft: native tools, community and open-source tooling, or a commercial multi-tenant platform. Segment differences are significance-tested at 95% confidence. Operator quotes come from in-depth interviews conducted in April and May 2026, lightly edited for readability.
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