What is a managed service provider, or MSP?
The simplest short definition of MSP is that an MSP provides outsourced IT solutions.
The types of IT solutions that MSPs offer can vary widely. Not all MSPs offer the same list of solutions, and there are no specific solutions that you must provide in order to qualify as an MSP.
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That said, some common IT solutions that MSPs address include:
- General IT support services (for fixing hardware and software issues when something goes wrong).
- Data backup and disaster recovery.
- Networking infrastructure setup and management.
- Managed communications, which means providing services like email, telephone networks, and so on.
- Cybersecurity, or Security-as-a-Service.
- Auditing and compliance (for instance, HIPAA or ITAR compliance).
- Data analysis and reporting.
- Cloud computing setup and management.
The Many Names of MSP
MSPs have several different ways to describe themselves, including:
- MSP - managed services providers
- Managed IT providers
- IT consultants
- IT shops
What Does an MSP Do?
An important part of what defines an MSP is that MSPs offer the solutions described above in the form of “managed services” (hence the term Managed Service Provider).
A managed service is a solution that is provided on an ongoing basis, with the MSP taking full responsibility for delivering whichever outcomes are guaranteed as part of the managed service.
For example, an MSP who delivers backup as a managed service would take full responsibility for planning and executing a business’s backup needs on an ongoing basis. Likewise, an MSP who offers Security-as-a-Service would fully manage and monitor a client’s cybersecurity needs.
The value of managed services is that they provide clients with completely hands-off, outsourced IT solutions. In most cases, all a client needs to do to consume a certain managed service is to sign a contract with an MSP who provides it. There is no need on the client’s part to purchase, set up, or manage hardware or software.
A second key benefit of the managed services that MSPs provide is that they are offered on an ongoing basis. In this respect, managed services are often compared to what is known as a break-fix model, where companies seek outsourced IT help only when something goes wrong. Under a managed service model, an MSP is always providing a service, rather than simply responding when something fails.
Why Do I Need an MSP?
The fast-growing MSP market caters first and foremost to the needs of small and medium businesses, or SMBs, which are typically defined as businesses with fewer than 1,000 employees. These types of companies are typically too small to be able to maintain internal IT departments in a cost-efficient way. Or, they may be large enough to employ one or two full-time IT staff, but lack the capacity to run a complete IT team that is large enough, and diverse enough in its skill sets, to support all of the company’s IT needs.
Instead of trying to meet IT needs in-house, SMBs can outsource to MSPs. MSPs can also provide value by offering guidance about IT management and growth plans to business owners who lack backgrounds in technology.
Further reading Top 5 SMB Pain Points Solved by MSPs
Although SMBs are the most common users of MSP services, there are situations where large enterprises work with MSPs, too. An MSP may be able to provide a certain type of expertise that an enterprise’s in-house IT team lacks, for instance, or they can help supplement a company’s internal IT resources at times when the company’s IT infrastructure or needs are growing too fast for its own employees to manage on their own.
The Industries MSPs Work With
MSPs operate across a wide array of industries, ranging from manufacturing and distribution to healthcare, education, and beyond. People sometimes assume that MSPs only provide support to companies within the IT industry, but that is not true. Today, virtually every company requires IT services, no matter which type of work it does, and MSPs help fill that need.
Further reading 5 Tips for Choosing Your Vertical
Benefits of Using Managed IT Services
By providing outsourced IT solutions via a managed services model, MSPs offer a range of benefits to companies of all types:
- IT cost savings since MSPs can typically deliver IT services at a lower cost than companies could achieve through an in-house approach.
- Freeing up a company’s internal resources for tasks other than IT management.
- Delivering cutting-edge cybersecurity expertise, which can be hard to achieve through an in-house solution (since cybersecurity experts are hard to find, and command premium salaries if they work for a company full-time).
- Guidance on the latest regulatory requirements (for MSPs who provide compliance services).
- 24/7 support services (if these are guaranteed as part of the managed service contract).
- Clear definition of IT management tasks and responsibilities via service contracts.
- MSPs can help address in-house IT staff shortages.
- MSPs can provide data recovery services quickly following a disaster, even if a company’s internal team is in disarray and not prepared to react speedily.
- MSPs provide scalability options for adding extra IT resources incrementally or temporarily, depending on a company’s needs.
- The problem of companies competing for scarce IT experts is reduced. MSPs allow IT expertise to be shared with multiple clients at once.
- Companies based in high-cost areas can work remotely with MSPs who are located in lower-cost regions, and therefore offer lower prices.
- Companies based in regions without a large number of qualified IT workers can work with MSPs remotely to meet their IT needs despite local workforce limitations.
- An MSP can replace a company’s IT department entirely, or provide a single niche service.
How to Set Up an MSP
If you have IT skills and a professional mindset, launching your own MSP business is easier than you may think. It starts with planning your service offerings, pricing, and software stack. Once you have laid that out, the only remaining barrier to running your own MSP is finding your first MSP clients, which is also a challenge that can be overcome with the right approach.
How MSPs Set Prices
Setting prices for managed services is one of the most challenging, but also most critical, aspects of running an MSP business. There are several pricing models that MSPs adopt, each with their pros and cons.
In general, the most common approach to MSP pricing is the model known as “All You Can Eat”, which involves offering a flat monthly fee for managed services, based on the number of users or devices supported. However, depending on the types of clients an MSP works with and the services it offers, other pricing strategies may be a better fit.
Contracts and SLAs
Because MSPs guarantee managed services to clients through contractual agreements, understanding how contracts work is an important part of running an MSP business. So is the concept of Service Level Agreements, or SLAs, which define minimum levels of service (such as computer uptime guarantees, or data recovery timelines) that customers can expect as part of a managed services agreement.
Inexperienced MSPs sometimes make the mistake of failing to take contracts and SLAs as seriously as they should. They are legal documents, and lawyers should always review the contracts that govern a managed service before they are used to offer the service to clients. MSPs must also be realistic about the SLAs they set. They need to find the right middle ground between guaranteeing a higher level of service than they can comfortably provide on the one hand, and offering a less complete package than competitors on the other.
Another important consideration for MSP contracts is to make sure that they specify when a managed service ends so that both the MSP and the client know what to expect regarding service renewal and termination terms.
The MSP’s Software Stack
MSPs rely on a range of tools to do their work. These tools naturally vary, depending on which managed services an MSP offers, although professional services automation (PSA) and remote management and monitoring (RMM) tools are essential to most MSP businesses.
Other common MSP software tools include:
- Data backup and recovery software.
- Antivirus and endpoint protection tools.
- Finance software (for managing the finances of an MSP business).
- Documentation databases, for documenting the processes and tools that an MSP uses.
- Ticketing portals, for identifying and tracking the progress of IT issues.
- Monitoring software for keeping track of the status of systems managed by MSPs and generating alerts when something goes wrong.
- Essential steps of establishing business
- Building the software stack
- Сreating an onboarding structure, and more
In most cases, MSPs don’t write their own software tools from scratch. Instead, they build their toolsets from existing software. They tend to turn especially to software that supports the process known as white-labeling, which allows MSPs to take third-party tools and brand them as their own when they interface with customers. In this way, MSPs can build a unified business brand and image, while also providing consistency for customers.
Managed Services Alternatives
The MSP model is not the only one that companies can use to manage their IT needs. The two other common approaches include:
- Break-fix: As noted above, the break-fix model involves paying for IT services only when they are specifically needed (such as when a server fails, or new workstations have to be set up). The break-fix approach may cost less upfront because clients pay only when they need individual services; however, in the long run, break-fix is likely to cost more, due to repeated service calls for the same issues, as well as the lack of expertise in day-to-day IT management that companies suffer when they don’t have an MSP to help manage their IT needs.
- In-house IT: Companies can also form and run their own IT departments. In-house IT teams offer total dedication to the companies they work for and will respond faster when crises arise because they have only one company to support. However, internal IT teams take time to hire, may not be able to provide all of the skill sets that companies require, and generally cost more money. For all but the largest companies, MSPs usually offer better value than in-house IT (and, as noted above, even large enterprises can benefit from MSPs, too).
There are many aspects to the work that MSPs do. Although at a basic level, MSPs can be defined as IT experts who provided outsourced IT solutions via a managed services model, there is a broad range of services that MSPs can offer, and a wide array of companies that they can serve. There is also great diversity in the tools and methodologies that MSPs use to run their businesses.