MSP – a definitive guide

For a clear understanding of how intelligently your IT services can be improved at reduced costs with the help of an MSP, read this definitive guide for better insights.

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Managed Service Provider(MSP) – The definition

MSP (Managed Service Provider) is an individual or a company that remotely manages a customer’s IT infrastructure on an active basis or a subscription model. To help you understand better, any entity or body which provides shared access to resources can be considered a managed service provider. For a clear understanding of how intelligently your IT services can be improved at reduced costs with the help of an MSP, read this definitive guide for better insights.

How MSPs came to be

The progression of MSPs began in the 1990s with the arrival of application service providers (ASPs), which presented remote application hosting services. ASPs paved the way for cloud computing companies that offer remote support for the IT infrastructure of customers. Managed Service Providers or MSPs initially focused on remote management and monitoring (RMM) of networks and servers. Today, MSPs have extended the scope of their services in an effort to set themselves apart from other providers.
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While some Managed Service Providers may focus on definite segments of information technology such as data storage, others may focus on explicit vertical markets such as legal services, financial services, manufacturing, and healthcare.

Managed security services providers (MSSPs) provide specified services such as remote firewall administration and additional security-as-a-service offerings. Managed service providers (MSPs), on the other hand, essentially identify problems before they occur, keeping the systems up and running.

MSP vs. MSSP

An MSSP focuses on the flow of data in a client’s network and delivering security solutions based on what is happening in the IT environment. This evidence is then shaped into actionable intelligence that can be fixed by the MSSP or a third party. The key here is the capability to provide the discernment necessary to proactively make changes to policies and procedures. This helps prevent a security breach, data loss, or any other incident that could destructively influence a business.

Why are Managed service providers important?

The more problems that an organization deals with, the more time and resources the organization needs to counter them. This leads to reduced profit, pushing the organization to take more preemptive measures to lessen the number of glitches faced. This is when IT MSPs become important for an organization. In simple terms, managed service providers put the focus of business back on the IT firm, aligning it with the outcomes of the organization.

Proactive support

Instead of the IT firm frequently troubleshooting issues, the associated IT MSP will essentially try to identify problems before they occur, keeping the systems up and running.

Strategic IT planning

Managed service providers help businesses think ahead and advice on what planning for the IT department. This associates with proactive support and guarantees that an organization’s IT infrastructure and software are upgraded or updated to curtail risks such as viruses, downtime, or crashes.

Complete outsourced IT

Managed services provide an organization with access to a comprehensive IT department. MSP experience is not just about day-to-day IT support; often, an IT manager and a virtual CIO are exclusively designated to help strategically fit IT into an organization.

How to become a managed service provider?

Becoming a Managed Service Provider (MSP) makes sense in today’s IT landscape as it can provide a value-added reseller (VAR) an instant path to an extensive range of higher-value services that logically complement the services they previously offer.

Business leaders and IT decision-makers have started to comprehend the value that MSPs and MSP consulting brings to the table. More and more VARs today are making the transition to seek the help of the managed services industry.

To explain in simple terms, just as a fast food joint makes a new burger out of practically the same ingredients used in other burgers, MSP can do something similar – mix and match product offerings to draw new customers with specific needs. Crafting a new MSP support plan essentially involves three points:

Unit pricing

What’s included in the price

The SLA

Here are some core aspects to focus on, before offering MSP services or MSP support:

Your audience

Are you looking to deliver MSP Services to an existing customer base or are you targeting a new market? If you’re looking to offer managed services to an existing customer base, it is important to understand whether managed services will complement your current business offering. If you’re targeting a new market, understanding the buying behaviors of users is the key.

Your offering

It is crucial to make the MSP sales teams understand what exactly they should be selling without any room for assumptions. Along with utilizing the best MSP software, it is recommended to keep managed service offering very simple, categorizing them into convenient buckets – one that lists all services, including hardware and replacement of parts, another which includes services done remotely, and so on.

Your process

Recurring sales are very different than project sales. It wouldn’t suffice if you ask a few generic questions, and send a quote focused on line items, equipment costs, and hourly rates. The Managed Services sales process needs to be much more elaborate, where salespeople have to set clear expectations, include realistic quotes and commission structures.

Training program

Along with product and technical training on managed services provider software, sales teams have to be trained on the process, helping them get accustomed to recurring sales from project sales. It is important to provide MSP training with access to MSP resources, MSP books, MSP conferences, and MSP forums to help them with a holistic understanding of MSP services and MSP support.

Try it yourself

It is an ideal tactic to operate your internal organizational environment as one of your own Managed Service clients - ensuring that your own team’s input tickets, stick to stringent SLAs, and measure the profitability of an “agreement”.

MSP tools

MSP tools like RMM (remote monitoring and management) and a PSA (professional services automation) are critical to the success of an MSP. RMM helps organizations implement an automated service offering right from the start, while PSA ensures an organized environment with respect to ticketing, project, and tracking sales.

Service Structure

It is important to ascertain whether existing team members run the new MSP division, or new resources are on-boarded to deliver Managed Services. Irrespective of the plan, the best-managed service provider ensures clear job descriptions and standard operating procedures, creating a foundation for service excellence, accountability, and productivity.

Spread the word

It is imperative to make marketing announcements, visiting prospective clients, seeking referrals, media publications, and hosting events.

Cost-saving

One of the ultimate incentives of partnering with a managed service provider is the extreme cost-effectiveness it offers. With managed services, establishments can shrink operational costs, preserve capital budget and reduce IT operating expenditures.

Mainstream MSPs function on a subscription-based model where customers pay for services on an annual or monthly basis, empowering them to anticipate if it is viable to endure within their budget. Clients receive a service level agreement (SLA) that is tailored to their company’s specific needs, allowing them to resourcefully manage hardware and software, surge productivity and decrease the total cost of application ownership. MSP clients characteristically pay for the services they need, instead of costly packages with peripheral services that they don’t require.

Core business focus

As a business grows, employees might be called on to take up expanding IT responsibilities beyond their original roles. As IT accountabilities rise, it becomes more and more difficult for teams to concentrate on their prime job responsibilities. Additionally, it may sooner or later become obligatory for them to prioritize those IT tasks to evade downtime.

To empower both technical and non-technical teams to manage their time better and develop work efficacy, it makes sense to let a dedicated specialist handle IT management. Outsourcing can help an organization focus on revenue-generating undertakings and innovation. The MSP can handle commonplace errands, and the customer can get their work accomplished more professionally without the interference of technical troubleshooting.

Better vendor management

A managed services provider can act as a crossing point between vendors and a company, making sure that any concerns the business comes across are resolved at the appointed time. The MSP, often the subject matter expert, will work as the key point of contact for third parties, and escalate issues to the right vendor, keeping track of the process through to completion.

Vendor management can be a complex juggling act, and employees lacking substantial experience working with every kind of vendor involved can be simply overwhelmed or come across as unprepared. Outsourcing vendor management to an MSP eliminates the discomfort of working with manifold vendors, and having a sole, reliable partner as a controller simplifies operations and avoids unreasonable employee burden.

Greater scalability

With the rapid rate of technological advancements and the need to scale resources on-demand, scalability is crucial to supporting business progress and expansion. As a company progresses, it should be able to forecast unforeseen obstacles, one being when technology necessities grow too big for existing resources. MSPs offer the necessary support and services as necessary to handle growth spurts or emergent IT difficulties.

Scalable solutions from an MSP provider embrace rapid changes, enabling businesses to stay productive, develop system readiness and reduce damaging downtime. Furthermore, MSPs will address the technical pain points of clients and continue to be responsive to their short term and long term needs. The best MSP business providers proactively explore and pinpoint areas for improvement, and upkeep the client’s core business objectives.

Managed service providers pricing model

In each of these pricing lines, the client pays the flat fee on a recurrently scheduled basis, often month on month. Such pricing approaches allow MSPs to sell services on a subscription model. This approach provides the MSP with a monthly recurring revenue (MRR) flow, in contrast to IT projects that have a tendency to be one-time businesses.

MRR is one feature of managed services work that varies from other business models in the space of IT solutions providers and channel partners. Solutions providers following the break/fix model, for instance, typically price their services on a time and materials (T&M) basis, charging an hourly rate for fixing a customer's IT equipment and charging for replacement of parts.

Companies carrying out IT project work, such as installation and integration of computer systems, may charge a fixed price for services and products. One or the other way, the solutions providers make revenue on a one-time basis from every project. An exemption would be bulky projects with manifold milestones and supplementary payments. But, overall, the orthodox solutions provider business is largely transactional. An MSP's recurring revenue stream, on the other hand, possibly provides a more steady and foreseeable base of business.

In pricing models that are based per-device, the MSP typically charges clients a flat fee for each device that is managed. On the other hand, in pricing models based per-user, the MSP charges a flat fee for a single user, obliging users who use manifold devices. In the all-inclusive pricing model, also called as the all-you-can-eat model, the MSP charges a flat fee for all the included IT infrastructure support and management services handled by the MSP.

Why choose managed IT services?

While ‘one-size-fits-all’ is not applicable to managed service providers, they do present a clear-cut solution to several important business challenges faced by establishments of all shapes and sizes. Some of the challenges include:

Higher hardware costs

Technology architectures are extremely expensive to buy, with no assurances they won’t be archaic in the next few years.

Increasingly specialized technologies

Conventionally, companies would employ a few IT staff to build, manage, and troubleshoot technical snags across the whole IT enterprise. On the contrary, today, to ensure high performance and availability, IT teams are built for each IT function (eg. data center, security, etc.)

Cost of qualified employees

IT personnel are highly in demand. Demand naturally increases the cost of hiring qualified and capable resources.

The opportunity cost of continuous maintenance

If agile by maintenance, employees in an IT team could focus on business augmenting projects such as updating the CRM or building new lead generation analytics, etc.

Traditional managed services

As the go-to reactive service model, Traditional Managed services can straightforwardly help with break/fix support such as network disruptions or catastrophes.

Incident & Problem Management

This is the fundamental framework for reinstating normal service as rapidly as possible. Traditional MSPs commonly do not comprise of more time-consuming services like root cause analysis, which is vital to conclude why things did not go right in the first place. Root Cause Analysis is a part of the offering of most NextGen managed service providers.

System Administration

System Administration is the comprehensive management and optimization of a customer’s chosen technology infrastructure. When engaged appropriately, System Administration allows IT staff to emphasize on key strategic spaces within their business.

Patch Management

Widespread planning and execution of updates to the software to make sure patches are tested, scheduled and rolled-out in a well-timed manner, devoid of unpleasantly impacting customers.

Advanced managed services

Outside Traditional Managed Services, Advanced Managed Services offer proactive services to foresee difficulties before they occur and keep the IT network from going down in the first place.

Enhanced Monitoring

Enhanced Monitoring is all about finding impending issues before they escalate into full-scale incidents. Most of the time an application is inserted into the network to support the system to dynamically listen and report the status every second.

Service Management

Service Management offers a robust reporting, notification and communication platform to guarantee real-time visibility into the company’s covered systems and comprehensive lifecycle tracking of each incident and service ticket.

High-touch consultative services

High-touch consultative services are a more involved human-to-human partnership. Next-gen MSPs offer an array of industry connoisseurs who can impeccably blend themselves into the client’s team. By working hand-in-hand with the company staff, next-gen MSPs gather a clear, common understanding of the client’s business goals, strategies, and resources to outline optimal standard operating measures.

Client success advocate

The Client Success Advocate (CSA) is an essential role in every next-gen MSP. The CSA is eventually accountable for MSP-Client success. The CSA effusively participates with the Client’s IT and business teams to make sure communications are ongoing and the workflow is collaborative.

Enterprise Lifecycle Management (Lifecycle)

A Lifecycle Program is how the NextGen MSP makes the technology roadmap of a business come to life. In essence, a Lifecycle program helps the client understand new and prevailing technologies and platforms, and how they can best assist the organization. In due course, it’s about empowering the business through technology.

Enterprise Adoption Management

Adoption Management is the practice of ensuring that an organization is getting the best out of the technologies they have invested in. Be it training the staff on the competences of a new Contact Center solution, warranting MSP best practices, monitoring or reporting, Adoption Management ensures that the client gets the most out of the resources.

Enterprise security audit

With a growing number of intimidations, enterprise security is supreme. Security Audit sanctions an industry expert to take a universal view of the client’s security infrastructure. If there are any gaps or organizational blind spots, the audit can pinpoint risks and define the necessary steps to be taken.

MSPs then previously offered a server, computer, patching, network monitoring, audiovisual, local, cloud backup, virtual CIOs, IaaS, DaaS, hosted Microsoft Exchange and more. The future of MSP is a TSP: a total service provider, a provider that not only brings about functionality but also offers valued information to facilitate better business decisions.

To evolve into a TSP, MSPs need to develop their portfolio by delivering services that touch traditional IT, but go way beyond the existing state of affairs, capture surplus revenue and deliver more value. Instead of just requesting referrals, managed service providers need to begin asking clients to buy services they need or previously use from their technology providers. The growth of the MSP industry has paved the way for abundant partner programs, making it easier than ever to provide added technology.

MSPs by now are managing the fundamental infrastructure essential to use many solutions. By leveraging the right partnerships, they can control the all-inclusive technology experience better, while enabling a partner to manage the majority of the implementation and support. Delivering these services empowers an MSP to be something beyond a line item cost center by offering the wide-ranging technology supervision that SMBs want from their IT department.

Looking back at the MSP industry can possibly demonstrate a lot about what the future holds. The shift from VAR to offering professional services and managed services has been a transition over many years. Apart from some progress in toolsets, more connected devices and growing security needs, the MSP today does not look vastly different from the MSP in the early 2000s.

Even great MSPs can be regarded as a cost center at times. The value proposition categorically changes when providing precise examples of how an MSP not only keeps everything up and running, safeguarded and backed up but has a bigger number of new clients. The next progression might be less dramatic than shifting from chunks of hours to all-you-can-eat pricing, but the total service provider will bear a larger impact on how clients conduct business and the relationships they build with their outsourced IT department.

MSP metrics or sales metrics for MSPs

Today’s digital business landscape is growing rapidly where everything can be measured. Be it marketing ROI, the effectiveness of sales teams, or the average cost of acquiring a new customer, there’s a significant aspect that determines success: businesses with a strong analytics program always have the edge over those that don’t.

If an MSP is unable to track the performance of various business facets, how is it possible to determine the right and wrong? How can business leaders know with conviction that they’re making veracious investments?

Organizations across diverse industries have very different analytics necessities and best practices. Understanding the metrics and key performance indicators (KPIs) that are most important to your business is critical for long-term success.

Understanding where the profit is being generated and how much it costs to essentially deliver services are vital sales KPIs. For an MSP, gathering metrics to monitor the sales is as important as gathering metrics to monitor networks or servers. Here’s an overview of the sales metrics that every MSP should track in order to keep revenue in the upward path and maintain visibility into the financial well-being of the company.

Monthly Recurring Revenue

Monthly Recurring Revenue, or MRR, is the revenue expected every month from recurring services. It is the single most critical metric that an MSP should track - MRR directly reflects the general financial performance of a business.

FTAs

First-time appointments, or FTAs, as the name suggests are the number of first sales calls a business makes. They're one of the first steps toward revenue generation.

Close-ratio

Close-ratio is the percentage of FTAs that lead to gaining a new customer. Close-ratio is calculated by dividing the FTA rate by the number of customers. Close ratios are determined by the value proposition of the business, quality of leads and sales process effectiveness.

Average MRR per client

When a client brings in more monthly revenue, the overall MRR increases, resulting in the need for fewer FTAs to maintain the current MRR.

Minimum MRR per client

MSPs set a minimum MRR amount, depending on the size of the MSP business. This means that the MSP will choose not to sign service agreements for prices less than what they have fixed. (Exceptions can arise, for instance, when a small deal has the potential to land a larger deal down the road.)

Average Deal Size

The average deal size is the average price of contracts closed in a given period. Tracking average deal size helps measure how the value of contracts changes over time. It helps interpret the types of prospects that can deliver the highest revenue for the business.

For instance, if the average deal size for networking contracts surpasses the total average deal size, MSPs can take it as a cue and focus on the networking niche to drive sustained revenue growth.

Time is taken to close deals

MSPs strive to reduce the time between submitting a proposal to a prospect and close the deal -- a key performance metric referred to as time to close.

Time taken to close deals is affected by several factors

The effectiveness of proposals

Offering the right prices for the services

The typical buying cycle of clients in a given industry

Regardless of how much control an MSP has over these factors, it is important to track this KPI as it helps predict income. It also helps understand how far in advance the MSP should start looking for other clients, revenue growth.

Recurring Revenue Rate (R3)

Recurring revenue signifies the value a business is making through subscription services, renewals and recurring contracted services. This KPI can be measured weekly, monthly, quarterly or annually. R3 makes it much easier to scale the business as it helps predict monthly revenue more accurately. It is a key metric for MSPs to comprehend the prevailing revenue stream as well as map out future progress.

Cost of Goods and Services Sold (COGS)

COGS include human resources, material, service and delivery expenses; this KPI influences MSP pricing strategies and provides useful insight on delivery costs. In the services business, this can be a difficult metric to measure, as it involves tracking the employee’s time closely for more accurate COGS calculation.

Value Proposition

More than a KPI, value proposition is a viewpoint to be considered while tracking the overall performance of the MSP business. There are two profoundly different ways for an MSP and its customers to think about how an MSP business adds value. In turn, there are two different approaches to the pricing too

Technology-based pricing

Value is built on the tools, features, and services offered.

Value-based pricing

Value is built on the impact that the services provided can make on the clients' businesses.

First-time appointments, or FTAs, as the name suggests are the number of first sales calls a business makes. They're one of the first steps toward revenue generation.

A value-based approach gives an MSP the ability to stand apart from the competition. Every MSP in the market offers managed technology services. Adding value to clients over and beyond delivering services is an important aspect to be considered along with the other KPIs that are measured.

For instance, the value proposition can be as simple as a conversation on the kind platforms that businesses should implement or integrate, how to navigate public vs. private clouds, security, mobility, and so on. Advice on documentation, technology alignment, standardization, business strategy, in addition to delivering managed services, all fall under value proposition. MPS that track value proposition as one of the sales KPIs tend to have better business associations with clients.

To keep an MSP business running smoothly, it is important to track a variety of metrics. As you assess your business metrics, keep in mind that the all-encompassing goal should be to deliver value for clients by refining their business operations - Value is the ultimate objective, for you and your customers alike.

MSP Best Practices

MSPs face challenges every day, like believing how to start out, how to operate, choosing the right MSP software or tools, deciding on a pricing strategy, how to handle quotes, how to offer cloud MSP – the list is indeed long

Here is a list of MSP Best Practices followed by seasoned pros to sail across these diverse issues.

Plan the way of operation

To begin offering MSP services or MSP consulting, it is important to put in place the internal stack, the client stack, network, and backup equipment. Additionally, choosing the right MSP Software is extremely crucial for long-term success.

Value-based pricing

Value is built on the impact that the services provided can make on the clients' businesses.

Handle quotes for small parts and equipment faster

Small parts, equipment or cables are often trivial when looking at the larger scale of things. However, it is important to have a process to quote prices. This process can be very useful when quoting for large-scale projects and installations. Verbal quotes or credit card billing for smaller items reduces a lot of time, making the billing process as friction-less as possible.

Ensure an audit trail with professional services automation (PSA)

MSPs need to utilize a PSA or at least some kind of MSP CRM where all data related to clients are fed and tracked. This helps automate the process of billing directly from the system and ensures that billing is done quickly and accurately.

Deliver better value with cloud services

Everything is on the cloud today. Packaging cloud offerings with other MSP services acts as a great value-add for clients.

Build a knowledge base

Although MSPs need not spend too much time building a knowledge base at the very beginning, it makes sense to build one in due course. The knowledge base comes to use when the MSP help desk is swamped with similar requests or queries repeatedly. It is important to keep it updated. Auto-responders also come in very handy.

MSP FAQs

What is an MSP or Managed Service Provider?

MSP or Managed Service Providers are third-party companies that manage and maintain enterprise networks, procure and manage computer and network infrastructure so that businesses are able to focus on their services without worrying about break-downs or interruptions. Mostly, a Managed Service Provider (MSP) is responsible for the entire physical back-end infrastructure offering remote support, helping clients cut costs and enhance operational efficiency. Managed services are considered to be a break-fix or on-demand outsourcing model where services are offered on-demand, charging clients for these services.

How to become a Managed Service Provider (MSP)?

A Managed Service Provider (MSP) in today’s IT landscape acts as a Value-Added Reseller (VAR) offering an extensive range of higher-value services. In simple words, MSPs mix and match product offerings related to computers, network and security infrastructure can be mended as per the client’s requirement. Crafting a new MSP support plan essentially involves three points:
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- Unit pricing
- What’s included in the price
- The SLA

Why choose Managed Service Providers?

Today, businesses across the world understand that it is worthwhile to outsource IT service and maintenance so that they can focus on their core functions. Some of the benefits from opting for a managed services model include:
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- Improved efficiency of IT operations
- Better security and compliance
- Proactive approach to maintenance
- Cost-effectiveness and good ROI
- Better access to new technologies
- Shifting capital expenses to operational expenses
- Anticipated pricing and manageable costs.

Difference between MSP and MSSP

Managed security services providers (MSSPs) offer specific services such as remote firewall administration and security-as-a-service offerings. Managed service providers (MSPs), on the other hand, essentially identify problems before they occur, keeping the systems up and running. An MSSP focuses on the flow of data in a client’s network and delivers security solutions based on the current state of the IT environment. This offers the capability to provide the judgment to proactively make changes to policies and procedures, prevent a security breach, data loss, or other incidents that negatively influence the business.

What are MSP best practices?

Here is a list of MSP Best Practices followed by seasoned pros to sail across these diverse issues.

- Plan the way of operation
- Do not under quote
- Handle quotes for small parts and equipment faster
- Ensure an audit trail with Professional Services Automation (PSA)
- Deliver better value with cloud services
- Build a knowledge base .

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Featured Resource

MSP – a definitive guide

Managed Service Provider(MSP) – The definition

How MSPs came to be

MSP vs. MSSP

Why are Managed service providers important?

Proactive support

Strategic IT planning

Complete outsourced IT

How to become a managed service provider?

Here are some core aspects to focus on, before offering MSP services or MSP support:

Your audience

Your offering

Your process

Training program

Try it yourself

MSP tools

Service Structure

Spread the word

MSP benefits

Cost-saving

Core business focus

Better vendor management

Greater scalability

Managed service providers pricing model

Service-level agreements

Why choose managed IT services?

Higher hardware costs

Increasingly specialized technologies

Cost of qualified employees

The opportunity cost of continuous maintenance

Types of MSPs

Traditional managed services

Incident & Problem Management

System Administration

Patch Management

Advanced managed services

Enhanced Monitoring

Service Management

Next-genmanaged services

High-touch consultative services

Client success advocate

Enterprise Lifecycle Management (Lifecycle)

Enterprise Adoption Management

Enterprise security audit

The future of MSPs

MSP metrics or sales metrics for MSPs

Monthly Recurring Revenue

FTAs

Close-ratio

Average MRR per client

Minimum MRR per client

Average Deal Size

Next-gen
managed services