New report exposes the reality of Microsoft 365 Management for MSPs

Microsoft 365 may be cloud-based, but for many managed service providers, managing it still looks surprisingly manual.

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A new survey of 193 MSP professionals by Augmentt offers a behind-the-scenes look at how service providers are actually managing Microsoft 365 across their client environments. The findings reveal a messy combination of manual processes, security gaps, constant Microsoft changes and a growing AI governance problem.

The report, dubbed “The MSP Microsoft 365 Reality Report,” suggests that many MSPs are being asked to prepare clients for an AI-powered future while still struggling to standardize the fundamentals.

Most MSPs Are Still Doing It by Hand

The scale of some MSP operations makes that particularly striking. More than 43% of respondents manage over 50 client tenants, while 41% manage more than 1,000 Microsoft 365 seats. Yet 58% say they establish new clients' security baselines manually or through custom scripts rather than automatically.

The result is a lot of repetitive work.

Onboarding and offboarding are the biggest sources of daily repetition, cited by 33% of MSPs. MFA and security configuration followed at 23%, while license management accounted for another 17%.

Only 17% of MSPs describe their Microsoft 365 work as mostly proactive. The remaining 83% operate through a mixture of proactive and reactive work or are mostly reactive.

Among MSPs managing 251 or more tenants, the picture gets even worse. Only 8% say their Microsoft 365 operations are mostly proactive.

Widespread Gaps in Security and Compliance

The survey also exposes a gap between what MSPs want to achieve and what happens inside client environments.

Consistency and standardization are the top Microsoft 365 priority for 52% of respondents. But the most common security weaknesses include stale accounts after employee offboarding, over-permissioned users and guests, and configuration drift.

More than three-quarters of respondents, 77%, aren't fully confident that every client tenant meets their own security baseline.

There's also a significant time cost. 41% say a single technician spends at least three hours every week switching between client tenants and portals, with that number climbing to 56% among MSPs managing 251 or more tenants.

AI Readiness Lagging Behind Client Demand

AI and Copilot governance is now the fastest-growing client request, ranked No. 1 by 40% of MSPs, ahead of security and compliance at 24%. Yet only 10% say more than three-quarters of their client tenants are currently ready for Copilot. Just 3% say all of their clients are ready.

Meanwhile, 47% have already experienced an AI or Copilot-related data exposure or near miss in a client tenant during the past year.

The biggest barrier to offering AI services isn't a lack of interest. It's trust. Data security and oversharing risk were identified by 35% of respondents as the biggest obstacles.