What is an MSP or a Managed Services Provider?

Managed services providers are becoming the preferred partner for companies without internal resources to support their business technology needs. MSPs are like IT teams on demand that provide third-party technical support based to suit particular needs and budgets. This sector is only expected to grow. The managed services provider industry was valued at $161.37 billion in 2021 and is expected to grow to $311.31 billion by 2027, according to Research and Markets.

What are MSPs Used For?

MSPs are used as information technology-related support for companies who lack the in-house resources needed to maintain their systems. MSPs offer support to businesses in all verticals, from healthcare to retail to B2B, and provide services offerings of all shapes and sizes. Businesses look to bring in outside help if they don’t have the budget for a full-scale team or the consistent need for full-time help on their team.

What Functions Does an MSP Perform?

MSPs function as an external IT department for companies who have a lack of internal support. Most MSPs will have IT professionals with multiple skillsets on hand to help foster successful relationships with clients and to ensure their technology needs are fully supported. Here are some functions you can expect from an MSP.

Project Management: A good MSP will not only know how to support your technology, but also how to drive a project to ensure success. This may involve resource identification and allocation along with providing processes and best practices and ensuring that projects stay on schedule and within budget. Many MSPs use remote monitoring and management (RMM) solutions to keep companies on track.

Auditing: Many MSPs will audit your current IT systems to better understand your capabilities and gaps. This may be done onsite or through a discovery process and the purpose is to help them best implement and/or support a particular solution.

Integration with other critical systems: Part of your MSP’s support profile involves knowing how technology interacts with and impacts other critical systems. Your MSP should be able to consult and advise on best practices and impact of different support activities.

Strategic guidance: MSPs will go beyond task execution and can help you better understand how to strategize to reach your specific business goals.

Ensures compliance: Depending on your industry, you may have to meet certain compliance standards. Your MSP should be able to help with solution design or management in a way that ensures that you will remain compliant.

Process improvement: MSPs should be able to assess your current environment and provide process improvement ideas and automation capabilities.

Enable other successful business initiatives: Part of ongoing support from your MSP should involve helping to meet business objectives. They should understand those goals and support your advancement toward those initiatives by leveraging technology solutions to do so.

How Do MSPs Work?

MSPs operate mainly on a third-party business model and tend to be most prevalent for small and medium-sized businesses. MSPs staff their teams with a variety of specialized skills so that they can attend to general or specialized IT needs, while providing consultative and support services on an ongoing basis. Here are the categories for MSPs.

• Pure Play: MSPs that generate 75% or more of their revenue from recurring activities, often through a subscription model for their services and solutions.
• Hybrid: MSPs that derive revenue from a combination of managed services and other non-recurring streams of work, such as selling hardware and software or providing project-based services.

According to CompTIA research, 63% of MSPs are structured as hybrid, with 37% falling under the pure play category in 2022.

MSPs maintain a relationship with other technology vendor companies. Vendors will provide service level agreements (SLAs) that help you adhere to certain performance standards. SLAs will outline your vendor’s obligations and metrics for what constitutes a violation of the agreement.

Often, service providers can be found through procurement departments or a vendor management system (VMS). MSPs and businesses agree on a service plan that suits their technology needs and the provider supplies ongoing support to fill the skills or hiring gap.

What are the Types of MSPs?

MSPs can be used to help you augment your services or be utilized as a comprehensive resource outside of your organization.

MSPs can be structured in many different ways. They may specialize in a particular subset of technology, such as security, or offer general support services. Here are the types of MSPs you might expect to encounter.

• Managed IT services focus on broad support to provide general maintenance of hardware and software components for companies that need non-specialized skills.
• Manager security service providers (MSSPs) focus on securing your systems, while helping to protect your company’s data, personally identifiable information and ensuring you are protected from data breaches and general malware attacks.
• Managed networks involve the setup and/or maintenance of IT infrastructure, helping to secure firewalls and your company’s network.
• Managed help desk provides general troubleshooting, issue resolution, and general IT support to end users, dealing with everyday breaks/fixes for companies that don’t have the skills or budget for their own help desk.
• Managed desktop/remote services assist with setting up and maintaining end-user devices, such as laptops and tablets. These providers usually offer remote monitoring services for those devices too.
• Managed backup and recovery providers focus o keeping your data accessible during or after a breach or disaster situation. This service primarily involves secure storage of company data.
• Managed telecom/video conferencing services kept many of us connected during the pandemic, helping to set up and maintain communications through video and audio calls.
• Managed cloud services involve support services for migrating and maintaining a company’s cloud platforms.
• Managed SaaS providers specifically help to implement and provide ongoing user support for software-as-a-service applications and platforms.
• Managed IoT providers help to maintain internet-of-things platforms and/or connected sensors for businesses.
• Managed print services help with physical printing solutions for businesses, including solutions around payments, marketing initiatives or employee communications.
• Managed data analytics providers help gather, cleanse and make sense of data insights for companies for use in their various business initiatives.

What are the Benefits of Managed Services Providers?

Sourcing your IT services to an external provider can be very beneficial for your business. MSPs can offer significant cost savings for businesses with skills gaps and limited IT staff, helping to ensure business continuity. Managed services are also scalable, allowing your relationship to grow or shrink alongside your business needs. MSPs can also help to make your IT services more productive.

Providers can also help you better anticipate your IT needs and stay ahead of problems before they get out of hand. Accessibility to IT expertise helps you to stay on the cutting edge without the need for internal staffing.

Challenges of Managed Services Providers

While MSPs can provide some real benefits, there are some hurdles to overcome.

MSPs may struggle in the following areas:

• Difficulty understanding your business needs. Your technology needs are typically tied to business goals. As an external vendor, it can be difficult to get an MSP to connect the functionality of your technology to those objectives.
• Limited visibility and control of activities. By their very nature, MSPs are not a part of your organization. As such, you won’t always have the same visibility into their activities or the amount of control and managerial oversight into their tasks as you might like.
• Lack of physical presence. Sometimes your issue needs a trained eye and that expert needs to be onsite. The lack of a localized presence can sometimes be difficult to manage and might make issue resolution difficult.

What is the Pricing Model for Managed Services Providers?

Managed services providers can operate under various pricing models and invoicing structures. Outsourcing your IT can range from subscription-based models based on usage, number of users or tiered coverage, to ad hoc pricing for dedicated projects.

• Per-user pricing. This pricing model is similar to licensing where you are charged by the number of users, often in the form of a monthly or quarterly fee.
• Per-device pricing. Similarly, under this pricing structure your cost is determined by the number of connected devices. This structure is often chosen for its straightforward approach but can become difficult to manage when users add multiple computing devices.
• Tiered pricing models. Tiered models allow you to choose from models that typically start with basic coverage and allow you to add more comprehensive coverage plans as your business needs change. This allows for some flexibility so that you can scale up and modify your packages to meet your needs.
• Ad hoc pricing. This pricing structure is reserved for one-off projects that your house IT are unable to manage or initiatives they don’t have the time to complete.

Want to learn more about managed services providers?

Check out CompTIA’s MSP resources.

Explore More Resources