What Is a Managed Service Provider (MSP)?

In today’s fast-paced business environment, companies face many challenges – from keeping up with changing technologies to dealing with regulatory compliance. With so much on their plate apart from the fierce competition and volatile economic climate, it’s no wonder that more businesses are turning to managed service providers (MSPs) for help.

According to Gartner, the cloud-managed service market alone is expected to reach $80 billion by 2024, driven by the need for organizations to be agile and adapt to the complexity of digital environments.

But what exactly are MSPs, and how can they benefit your business?

In this article, we’ll take a closer look at everything you need to know about MSPs, including what they do, how they work, and why they’re becoming an increasingly popular choice for businesses of all sizes.

What Is a Managed Service Provider (MSP)?

A managed service provider or MSP can be defined as a third-party vendor that helps organizations manage and maintain their operations. MSPs offer various services, including inventory management, supply chain management, software updates, marketing, and customer service.

How Does a Managed Service Provider (MSP) Work?

MSPs offer businesses a way to outsource their needs to a team of experts, allowing them to focus on their core business operations while still ensuring that their outsourced function is secure and functioning optimally.

They take on the responsibility of managing and maintaining different areas of a business, such as HR, finance, or customer service. They work remotely and use specialized software tools to monitor and manage the different areas of a business proactively, preventing issues before they occur and quickly resolving any problems that do arise.

This approach helps:

• ensure the smooth operation of a business
• reduce downtime
• increase efficiency

Types of Managed Services Providers

By Services Offered

There are different types of Managed Service Providers (MSPs), each with its own specialization and focus. Some of the most common types of MSPs include Consulting, Security, Cloud Services and more. Let’s explore these in detail:

Consulting

These MSPs provide consulting services to help clients make informed decisions about their business operations, such as business strategy development, project management, and vendor selection.
By leveraging their expertise in various industries and business functions, consulting MSPs can help clients optimize their operations and improve their overall performance.

Customer Support

These MSPs offer customer support services such as handling service requests, incident management, and providing technical assistance to end-users through various channels such as phone, email, or chat.

Customer Support MSPs may also offer training to help end-users better understand the technology they’re using and how to troubleshoot common issues.

Security

These MSPs specialize in providing security services such as surveillance, risk assessments, and incident response. Security MSPs can help companies meet industry-specific regulatory requirements, such as HIPAA or PCI-DSS, and maintain compliance with data protection laws and regulations.

They also provide guidance on best security practices and help implement security solutions like Firewalls, Antivirus, Intrusion Detection and Network Security Monitoring to safeguard a client’s systems and data against cyber threats.

On-site

On-site MSPs offer physical support to clients by having a team of experts available to travel to the client’s location for any necessary work. They are responsible for installing, repairing, and maintaining equipment on the client’s premises.

Additionally, they offer troubleshooting services and can provide solutions to any technical issues that may arise. Their goal is to ensure that their clients’ technology is running smoothly at all times, and they do so by providing reliable and efficient on-site support.

Infrastructure

These MSPs focus on ensuring the reliability, performance, and security of a client’s infrastructure, which can include physical structures, utilities, networks, and other assets. Their services include monitoring and managing servers, storage, backup and recovery systems, virtualization platforms, and other critical components. Some MSPs are even expanding into providing physical security services to SMB owners. These services include installing and maintaining physical security systems like key card solutions, surveillance cameras, photo ID systems, etc.

They work with clients to identify potential risks and provide recommendations for improvements so that the client’s infrastructure is always up to date and ready to meet the demands of their business.

Cloud

These MSPs specialize in managing and optimizing cloud-based resources for clients, such as migrating data to the cloud, monitoring cloud performance, and providing cloud-based backup and disaster recovery solutions.

Cloud MSPs may also offer expertise in choosing the right cloud platforms and optimizing cloud costs to ensure that clients are getting the most value from their cloud investments.

Business Applications

These MSPs focus on managing and optimizing specific business applications for clients, such as customer relationship management (CRM) software, enterprise resource planning (ERP) systems, and other mission-critical applications.

They work closely with clients to understand their unique business requirements and help them achieve their goals by implementing and customizing the applications to meet their specific needs.

Software-as-a-Service (SaaS)

SaaS MSPs are a type of managed service provider that specializes in providing management and support for software that is hosted and delivered over the internet. They are responsible for ensuring that the software is up-to-date, secure, and accessible to users. They may also offer services such as training and support to help users make the most of the software.

SaaS MSPs typically work with a variety of software vendors and provide their services on a subscription basis, making it easy for businesses to access the software and the support they need without having to invest in their own IT infrastructure. These MSPs are especially popular among small and medium-sized businesses that may not have the resources or expertise to manage their own software and IT systems.

Communications Services

Communications Services MSPs specialize in managing and optimizing communication channels for clients, such as voice, video, and data communication systems. They help businesses set up and maintain communication networks, manage telecommunications vendors, and troubleshoot issues that arise with communication systems.

These MSPs may also offer unified communications solutions that integrate various communication channels and applications, such as email, instant messaging, and video conferencing, into a single platform. This can help businesses improve communication and collaboration among employees and streamline communication processes.

Data Analytics

Data analytics MSPs are specialized service providers that help clients manage, analyze and interpret data to make informed business decisions. They work with clients to gather and organize data from various sources, such as social media, web traffic, sales, and customer behavior.

The data is then analyzed using sophisticated tools and techniques to derive insights, trends, and patterns that can help the client optimize their business operations, increase revenue, and reduce costs.

Data analytics MSPs may offer a range of services, including data visualization, predictive modeling, data warehousing, and reporting. They can also help clients with data governance, compliance, and security to ensure that data is managed effectively and used ethically. By leveraging the power of data, data analytics MSPs can help clients achieve a competitive advantage in their respective industries.

By Size & Responsibility

MSPs can also be categorized into three different types based on their size and responsibility:

Niche MSPs

These are smaller MSPs that focus on monitoring and reporting for a specific application or service. Think of them as a specialized service provider that can keep an eye on one particular area of your business. For example, a pure-play MSP may focus on managing your company’s social media presence or email marketing campaigns.

Full-Service MSPs

A full-service MSP is a company that provides comprehensive services to manage and maintain various business operations that are customized to the specific needs of the business, including monitoring and managing various systems, software installations and upgrades, security management, network infrastructure maintenance, and more.

For example, a full-service MSP may help a retail company manage its supply chain and inventory by ensuring the smooth operation of software used to track shipments, manage stock levels, and reorder products as needed. This would allow the retailer to focus on the core of their business, which is selling products to customers, while the MSP handles the day-to-day management of their inventory and supply chain systems.

Enterprise MSPs

Rather than just providing one specific service, like monitoring or reporting, an enterprise MSP can handle a variety of needs and take full responsibility for ensuring that a business’ technology runs smoothly. This might include things like managing software, setting up new equipment, and providing technical support to employees.

Essentially, an enterprise MSP is like having an entire department available to a business without the business having to manage and pay for its own team of professionals. This can be especially valuable for larger businesses that have complex technology needs and require a high level of support to ensure that everything runs smoothly.

Business Model of an MSP

Managed service providers (MSPs) offer a business model that lets organizations outsource their needs to a third-party vendor that assumes responsibility for managing and maintaining their operations.

The MSP business model focuses on these key features:

Cost Savings

MSPs are often able to provide their services at a lower cost than an organization would be able to do on its own due to efficiencies of scale and the ability to spread costs across multiple clients.

Expertise and Specialization

MSPs hire experts in various fields, allowing them to provide a higher level of quality and expertise than an organization may be able to achieve on its own.

Scalability and Flexibility

MSPs are able to quickly scale their services up or down based on the needs of their clients, providing greater flexibility and agility to respond to changing business needs.

Access to Cutting-Edge Technology

MSPs often have the expertise and resources to implement the latest technology, such as automation, artificial intelligence, and machine learning, which may be a limitation for an organization’s in-house staff.

Proactive Approach

MSPs typically take a proactive approach to managing and maintaining operations, identifying, and addressing potential issues before they become major problems.

Focus on Outcomes

MSPs focus on delivering outcomes rather than specific tasks or projects, allowing them to tailor their services to meet their clients’ specific needs and goals.

MSP Pricing Models

Managed service providers (MSPs) typically offer a variety of pricing models, each with its own advantages and disadvantages. The most common pricing models used by MSPs include:

Per-Item Pricing

The MSP charges a fixed fee for each item that it manages, such as a piece of equipment, a tool, or a vehicle.

Per-Person Pricing

The MSP charges a fixed fee for each person accessing its services.

Tiered Pricing

The MSP offers different levels of service with different prices, allowing businesses to choose the level that best meets their needs and budget.

Value-Based Pricing

The MSP charges the client based on the value of the services provided. The aim of value-based pricing is to align the cost of the service with the value it provides to the customer.

Monitoring-Only

The MSP will monitor the client’s systems and alert them if any issues are detected, but they will not perform any remediation or maintenance tasks.

Flat-Rate Pricing

This model offers a fixed monthly fee for a set of services, regardless of the number of items or people.

Menu Pricing

MSPs provide a list of services with their corresponding prices, and the customer can select the services they need and pay only for those services.

Examples of MSPs

There are numerous managed services providers (MSPs) around the world, offering various solutions and services to different industries.

Some of the prominent players in the global managed services market include Accenture PLC, Alcatel-Lucent Enterprise, AT&T Inc., Avaya Inc., Ericsson, Fujitsu Limited, Hewlett Packard Enterprise Development LP, International Business Machines Corporation (IBM), Lenovo Group Limited, BMC Software, Inc., CA Technologies, Cisco Systems, Inc., and DXC Technology Company.

These MSPs offer a wide range of solutions and services, such as managing data centers, networks, infrastructure, mobility, backup and recovery, communication, information, and security. They cater to industries such as healthcare, government, finance, manufacturing, retail, media, and more.

MSPs offer different deployment models, including on-premises and hosted services. They may also provide additional services like business process outsourcing (BPO), project and portfolio management, and business support systems.

Pros and Cons of Using an MSP

Although working with a managed services provider (MSP) can have many advantages, you should be aware of some of the potential downsides. In this section, we’ll look at the advantages and disadvantages of using an MSP to help you make an informed decision on whether outsourcing your organizational requirements is suitable for your business.

Benefits of Using a Managed Service Provider (MSP)

Using a Managed Service Provider (MSP) can offer many benefits for businesses. These include:

• Continuous Improvement

MSPs focus on continuously improving business and operational processes to enhance their efficiency and effectiveness.

• Access to Market-Leading Technologies and Platforms

MSPs offer access to market-leading technologies and platforms that may be too expensive for businesses to build in-house. This allows businesses to leverage state-of-the-art tools and stay ahead of the competition.

• Advisory Expertise

Advisory expertise is available at all times to help businesses solve complex problems that require a deep understanding of the industry and sector.

• Flexibility and Scalability

MSPs offer flexibility and scalability in service models and infrastructure, making it easy for businesses to adapt to change as needed.

• Time and Resource Efficiencies

By outsourcing certain business functions, businesses can achieve time and resource efficiencies, which allows them to focus on activities that add more value.

• Deep Industry and Sector Knowledge

MSPs bring deep industry and sector knowledge to develop solutions that can help businesses improve their operations.

• Specialized Resources

MSPs have specialized resources that are available to deliver high-quality, long-term services to businesses.

• Cost Savings and Better Financial Planning

SPs can offer cost savings and better financial planning through predictable pricing, reduced exposure to financial risk, outcome-based pricing, and reduced headcount and third-party fees.

• Access to Global Talent and Expertise

MSPs can offer access to global talent and expertise with solutions, which enables businesses to operate across a global network.

Risks and Challenges of Outsourcing to MSPs

While using a Managed Service Provider (MSP) can have numerous benefits, there are also several potential drawbacks to consider. Some of the challenges of using an MSP are:

• Supply Chain Risk

Outsourcing to MSPs can introduce additional supply chain risks that organizations need to be aware of and address.

• Shared Responsibility

It can be challenging to define the roles and responsibilities of both the MSP and the customer in a vendor agreement, which can lead to confusion and overlap.

• Cybersecurity Risk Management

Outsourcing to MSPs can create additional cybersecurity vulnerabilities, which organizations need to address through careful risk management planning.

• Incident Response

Organizations should be prepared to respond to incidents, which may be more complex when outsourcing to MSPs.

• Performance-Related Service Level Agreements

It can be difficult to ensure that MSPs are meeting agreed-upon standards without specific performance-related service level agreements.

• Employee Vetting

MSPs should have appropriate safeguards in place to prevent intellectual property theft, manipulations, or operational disruptions.

• Privilege and Access Levels

MSPs may have access to sensitive data and systems, so their expected privilege and access levels should be defined, and the Zero Trust security model should be applied to minimize the risk of unauthorized access.

Is an MSP Right for Your Business?

When deciding whether to work with a managed service provider (MSP) for your business, take a close look at the potential return on investment (ROI).

This analysis should not only consider the fees charged by MSPs but also the potential savings from reduced maintenance costs associated with different services. Moreover, the business value provided by MSPs, such as improved efficiency in processes, faster turnaround times, better security, and access to specialized expertise, should also be evaluated.

By partnering with an MSP, your staff can focus on more strategic solutions and innovation instead of routine tasks. Additionally, MSPs can help simplify compliance reporting and enable you to meet regulatory requirements.

With the rapidly evolving technology landscape, it can be challenging to keep up on your own. Partnering with the right MSP can provide your business with the expertise and resources needed to succeed.

How to Choose the Right MSP for Your Business

When businesses outsource tasks to managed service providers, they may be hesitant to give up control over critical operations. However, by considering various factors, companies can ease these concerns and choose a provider that’s a good fit for their organization.

Compatibility

To begin with, assess whether the MSP’s offerings align with your business needs and goals. This includes evaluating their range of services, technologies, and solutions to ensure they can meet your specific requirements. A good fit ensures seamless integration and collaboration between your business and the MSP.

Expertise and Experience

Look for an MSP that demonstrates deep knowledge and experience in your industry or specific technological requirements. They should have a track record of successfully managing similar systems or projects, which ensures they understand your unique challenges and can provide tailored solutions.

Affordability

While cost should not be the sole determining factor, it is essential to consider the MSP’s pricing structure and value for money. Assess their pricing models, contract terms, and the overall return on investment (ROI) you can expect from their services. An affordable MSP offers competitive pricing without compromising on the quality and reliability of their services.

Worldwide Presence

If your business operates globally or has international expansion plans, consider an MSP with a widespread presence. A global footprint indicates that the MSP has the infrastructure, resources, and expertise to support your business across different geographical locations. This ensures consistent service delivery and support, regardless of your business’s global reach.

Organizational Robustness

Evaluate the MSP’s organizational strength and stability. Consider factors such as their financial health, years of operation, and team expertise. An MSP with institutional strength is more likely to provide long-term support, invest in technological advancements, and adapt to evolving business needs.

Service Excellence

Evaluate the MSP’s commitment to delivering high-quality services. Consider factors such as their responsiveness, proactive monitoring and support, and their ability to meet agreed-upon service level agreements (SLAs). A reliable MSP should have robust processes in place to consistently deliver exceptional service and address any issues promptly.

Reputation and Trustworthiness

Research the MSP’s reputation and credibility in the market. Look for testimonials, case studies, and customer reviews to gauge the experiences of other businesses that have worked with them. A reliable MSP should have a positive reputation, a strong track record, and references that can vouch for their professionalism and integrity.

Best Practices for Working With MSPs

When businesses outsource important tasks to a managed service provider, they need to be very careful and follow regulations closely. These are the best practices that are especially significant for success in this regard:

Choosing the Right Provider

Cost is important, but it’s more important to look for a provider who fits well with your business strategy and is invested in their work. They should also be experienced and knowledgeable about the industry rules and regulations.

Transitioning Well

You must have a good plan when moving operations to an MSP for the first time. This might involve doing a trial run or moving gradually to make sure everything goes smoothly and there’s enough oversight.

Managing Vendors

When you have a long-term partnership with an MSP, you need to make sure they’re meeting your standards for quality and outcomes. This involves having clear procedures for choosing vendors and managing disputes.

Managing Stakeholders

When you’re changing how your business operates, you need to make sure that everyone involved, like regulators, investors, and employees, is comfortable with the changes. This will help you achieve your goals smoothly and on time.

Establishing Clear Communication Channels

Effective communication is key to a successful MSP partnership. Establish clear lines of communication and define the preferred methods for regular updates, issue resolution, and collaboration. This ensures that both parties are aligned, can address concerns promptly, and maintain transparency throughout the engagement.

Defining Roles and Responsibilities

Clearly define the roles and responsibilities of both your internal team and the MSP. Establishing a clear understanding of who is responsible for what helps avoid confusion, ensures accountability, and promotes effective collaboration. Document these roles and responsibilities in a Service Level Agreement (SLA) or similar agreement to set expectations and provide a reference point.

Regular Performance Reviews and Feedback

Conduct regular performance reviews with the MSP to assess their service delivery and overall performance. Provide constructive feedback and discuss any areas for improvement. Likewise, encourage the MSP to provide feedback on your organization’s processes, responsiveness, and requirements. This iterative feedback loop helps enhance the partnership and drive continuous improvement.

Ensuring Cybersecurity Measures

Cybersecurity is crucial when working with an MSP. Collaborate closely with the MSP to ensure that appropriate security measures are in place to protect your sensitive data, networks, and systems. This includes implementing robust access controls, encryption, regular security assessments, and adherence to industry best practices and compliance standards.

Future of Managed Service Providers

The future of Managed Service Providers (MSPs) looks promising, as the global managed services market is expected to grow substantially from 2020 to 2030 at a healthy CAGR of around 9.76%.

The growth of the MSP market is being driven by the following factors:

• The need to reduce maintenance and administration costs
• The increasing demand for online and remote work
• The incorporation of cutting-edge technologies like artificial intelligence and automation into present and new corporate infrastructures.

For instance, MSPs are leveraging AI-powered Professional Services Automation (PSA) software to streamline resource allocation, enhance project management, and improve overall operational efficiency.

These technological advancements enable MSPs to deliver proactive monitoring, smart resource allocation & task management, accurate expense management, intelligent insights, and predictive maintenance, ensuring seamless and optimized operations for their clients.

The managed data center segment is projected to secure the leading position in the global market for managed services between 2020 and 2030. The increasing reliance of large businesses on MSPs to address challenges like talent shortages, market dynamics, and technological advancements further emphasizes the significance of these service providers.

In conclusion, as companies across the globe adopt cloud-based solutions and strengthen their investments in data security, the MSP market is expected to experience significant growth in the coming years. This solidifies the role of MSPs as vital partners in modern business operations

Frequently Asked Questions (FAQs)

1. Why choose a Managed IT Service Provider?

Choosing a Managed IT Service Provider brings specialized expertise, support, and cost-effective IT management to your business. By leveraging their knowledge, you can enhance productivity, streamline operations, and stay competitive, while leaving the complexities of technology management to the experts.

2. What does a Managed Service Provider do?

A Managed Service Provider (MSP) offers outsourced services to businesses, handling various operational tasks and responsibilities. They provide expertise, support, and streamlined management in areas such as human resources, finance, procurement, or facility management. MSPs help businesses optimize processes, reduce costs, and focus on core activities.