Identity: The New Perimeter MSPs Can’t Ignore

COMMENTARY: Identity has become the new perimeter in cybersecurity, and MSPs are already seeing that most breaches now start with stolen credentials or compromised accounts, not network flaws. Small and midsize businesses are most affected since they often lack the tools and people to manage identity security on their own. This renders MSPs a strong position to close that gap, but also consider that identity protection is now core to the job, not a nice-to-have service.

Identity is the new frontline of cybersecurity. From stolen credentials to sophisticated email scams, attackers are exploiting weaknesses in how organizations authenticate and manage the digital identities of their employees and external partners.

This risk is especially acute for small and medium businesses (SMBs), which tend to lack the expertise and budget to properly defend against identity-related threats.

But it also creates an opportunity for third-party security solutions – especially managed services providers (MSPs) – to step up as trusted advisors, helping SMBs stay safer while strengthening the MSP’s own role as a critical link between businesses and the broader digital security ecosystem.

Identity-Based Threats

Most organizations experienced at least one identity-related incident in the past year. Among Guardz’s own customers, for example, the number of identity and credential-based attacks had the greatest upsurge of any attack tactic in the past year, comprising over 80% of SMB breach attempts.

Why are these attacks so prevalent? Unlike traditional perimeter breaches, identity attacks allow hackers to move laterally across systems, escalate privileges, and launch further exploits without raising immediate red flags due in large part to their ability to be disguised as legitimate user behavior.

Key Risks

While identity attacks take many forms, five primary threats stand out:

Impersonation: In one common email compromise (BEC) attack, fraudsters impersonate executives or partners to trick employees into wiring funds or sharing sensitive data. These scams surged by 60% in early 2025 alone.
Credential Theft and Stuffing: Attackers buy stolen credentials on the dark web, then reuse them across multiple accounts. “Infostealer malware” has already compromised billions of credentials.
Account Takeover (ATO): With valid credentials in hand, adversaries hijack user accounts to exfiltrate data, encrypt files, or impersonate employees. 45% of organizations report multiple ATO incidents annually.
Weak Authentication: Failing to enforce multi-factor authentication (MFA) leaves systems wide open. Alarmingly, 85% of SMBs don’t require MFA for customers or suppliers.
Unsecured Wi-Fi: Employees working remotely over unsecured Wi-Fi are especially vulnerable to interception tactics, where attackers silently monitor or alter communications.

Why MSPs are Critical

SMBs turn to MSPs to help them build and maintain IT infrastructure, consult on GRC & insurance, and plan for business continuity. MSPs can close critical gaps in security expertise that these businesses can’t handle on their own.

Identity-based threats strike at the heart of security postures – and if an SMB client falls victim to a BEC scam or account takeover, it is often an MSP they turn to first. Accordingly, MSPs must be proactive and do more than merely manage endpoints or patch servers after the fact.

A Winning Strategy

So how can MSPs best strengthen their SMB clients’ defenses?

Identity Threat Detection and Response (ITDR): By continuously monitoring authentication events, user behavior, and access patterns, ITDR can flag anomalies that traditional tools may miss. For MSPs managing multiple SMBs, this allows them to focus on the riskiest users across client environments, without getting bogged down on less sensitive accounts. Integrating AI-augmented monitoring, automated alerts, and behavioral analysis can further enhance detection and response capabilities.

Enforce Strong Authentication Practices: MFA should be non-negotiable. So should regular password hygiene, least-privilege access policies, and timely cancellation of credentials when employees depart. MSPs must standardize these practices across their client base; enacting strict access controls and regular audits to ensure that compromised accounts cannot cascade into larger breaches.

Conduct Employee Training: Identity threats often begin with human error; accidentally clicking on a phishing email or reusing a weak password. Regular phishing simulations, employee awareness training, and real-time monitoring are essential to mitigate these mistakes.

Embedding these practices into MSPs’ service offerings rather than treating them as optional add-ons will provide clients with a holistic, seamless security experience that protects them from today’s evolving identity threats.

The Role of AI and Automation

Today’s cyber-threats are evolving at a rapid pace, thanks in great part to AI. The sheer speed and scale of identity attacks demand more than traditional defenses.

Fortunately, AI security tools are also evolving swiftly to best defend against such attacks.

AI security systems can spot subtle anomalies across massive data sets, automatically flag and respond to suspicious activity, and even predict likely attack paths before they’re exploited. For MSPs, integrating AI into their security stack isn’t just about keeping pace with sophisticated AI threats, it’s about maintaining efficiency, avoiding unwieldy costs, and mitigating burnout.

No More Identity Crisis

Identity-based threats will only become more sophisticated. But with the right strategies, MSPs can turn this challenge into an opportunity to develop trust with their clients.

By bolstering ITDR, enforcing strong authentication, and harnessing the power of AI, MSPs can protect SMBs from today’s most pressing identity risks and position themselves as indispensable partners for a safer digital future.

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