Something structural has happened to the way small and medium businesses buy technology. It has not happened gradually or quietly — it has accelerated sharply over the past four years, driven by remote work, cloud normalisation, and an escalating threat environment that no SMB owner anticipated having to fund. The shift is this: SMBs are no longer shopping for technology products. They are buying outcomes. And the providers best positioned to deliver those outcomes are those who can wrap connectivity, software, security, and ongoing management into a single accountable relationship.
For telecom operators, this is not a product roadmap question. It is a strategic identity question. The XaaS model — everything delivered as a managed, subscription-based service — has become the dominant purchasing logic across the SMB segment. Analysys Mason forecasts global SMB IT spending will reach $1.62 trillion in 2024, growing at 6% year-on-year and accelerating to 8% annual growth by 2028, reaching $2.17 trillion. That capital is being directed toward the providers best positioned to deliver managed outcomes — and telcos are not automatically among them.
What SMBs Are Actually Spending On
The composition of SMB IT spending reveals the scale of the shift away from hardware and basic connectivity. The fastest-growing category in SMB IT spending is business applications, driven by SaaS, with 13% year-on-year growth projected between 2024 and 2025. Cloud-based infrastructure — including IaaS servers, platform-as-a-service, desktop-as-a-service, and recovery-as-a-service — is growing at 10% annually. These are not incremental purchases layered on top of a broadband contract. They are the primary operational infrastructure of the modern SMB.
Cybersecurity has followed a parallel trajectory. After sharp growth in the prior two years, spending on security solutions has stabilised at an elevated level as SMBs institutionalise protection rather than responding reactively to incidents. They are turning to managed security service providers precisely because the threat environment has outpaced what any small business can manage internally. The pattern across all of these categories is consistent: SMBs are buying services, not products. They are outsourcing management, not just procurement. And they are looking for a single provider who can absorb the complexity they cannot staff.
The Channel Shift Telcos Must Confront
The most commercially significant finding in Analysys Mason’s forecast is not the headline growth figure. It is the route-to-market shift embedded within it. MSPs and systems integrators are projected to grow at a 12% CAGR through 2028, generating a collective $603 billion in revenue by the end of that period. Meanwhile, telcos’ direct share of SMB IT spending is declining as MSPs take share from traditional resellers and operators alike.
This is the competitive threat that ARPU stagnation figures alone do not convey. Telcos are not just losing revenue growth to a commoditising broadband market. They are losing their strategic position in the SMB relationship to a class of providers — managed service firms, cloud distributors, and XaaS aggregators — who have built operating models purpose-designed for the outcome-based buying SMBs now demand. The shift is being driven by SMBs’ need for partners who can address skills and staffing gaps, identify operational efficiency opportunities, and provide services beyond simple procurement and repairs.
The operators who recognise this dynamic are moving. Those who do not are ceding ground that will be difficult to recover once an MSP has embedded itself as a customer’s primary technology partner.
The Managed Cloud Services Imperative
STL Partners’ June 2024 survey of 1,214 enterprises offers a clear view of where enterprise technology decisions are heading. Eighty-four percent of enterprises surveyed have already embarked on their cloud transformation journey, and 95% see value in managed services as part of that journey. Telcos already have a foothold — through secure connectivity, SD-WAN, and cloud interconnect — but that foothold is under pressure. The report is explicit on the risk: operators who do not evolve to managed cloud services risk enterprises bypassing them entirely and going direct to hyperscalers for both infrastructure and management.
For operators that engage at the ground floor of an enterprise’s cloud journey through a managed cloud service, the opportunity is to position themselves as a key enabler of that customer’s transformation — and to capture the long-term recurring revenues associated with it. That is the commercial logic of managed cloud services for telcos: it is not a product extension, it is a relationship deepening that converts a commodity connectivity account into a long-tenure managed services engagement.
The transition demands that telcos move beyond reselling cloud licences toward managing the full stack: migration, integration, ongoing maintenance, and optimisation. This requires either building internal capability or, more practically for most mid-size operators, partnering with execution specialists who already have the provisioning infrastructure, vendor relationships, and delivery capacity in place.
Automation Is the Operational Prerequisite
The XaaS delivery model does not tolerate manual operations at scale. This is where many operators who recognise the strategic opportunity fail at the execution level. CloudBlue, whose telco clients include América Móvil, Telefónica Tech, and A1 Digital, describes automation as mission-critical to the SMB XaaS business model — covering everything from customer onboarding and ordering to billing and subscription management across multi-vendor catalogues. When an SMB activates a new Microsoft 365 licence tier or provisions a security package through an operator portal, the fulfilment must happen in the background without generating manual intervention. The SMB’s expectation is consumer-grade speed applied to enterprise-grade infrastructure.
Pax8 research shows that 83% of B2B customers now prefer to purchase through a marketplace or digital sales platform — a figure that reflects not just a preference but a normalised expectation shaped by years of consumer digital commerce. Meeting that expectation requires operators to invest in subscription commerce infrastructure that can handle multi-vendor provisioning, automated billing, and self-service management at the pace SMBs now assume as standard.
Omdia Chief Analyst Jay McBain has described managed services as the centre of gravity in tech, with the most significant near-term growth areas being cybersecurity and agentic AI. The implication for operators is that the managed services opportunity is not static. The SMB tech stack is being extended in real time — from cloud and security today, to AI-assisted operations tomorrow. Operators who build the delivery infrastructure and customer relationships now will be positioned to expand wallet share as that stack continues to grow.
The Window Is Narrowing
The XaaS transition in the SMB segment is not a future scenario — it is the current operating reality. Spending is already flowing toward managed services providers. Channel share is already shifting. SMBs are already signing multi-year relationships with the firms prepared to manage their technology on their behalf.
For North American telecom, cable, and ISP operators, the question is not whether to participate in this transition. The question is whether to lead it or follow it. The operators who move now — with a credible managed services offer, automated subscription infrastructure, and a clear value proposition beyond connectivity — will accumulate the compounding advantages of higher revenue per account, deeper switching costs, and a customer relationship that is defined by outcomes rather than megabits. Those who wait are not standing still. They are actively falling behind, one churned SMB account at a time.