What is an MSP?
An MSP, or Managed Service Provider, is an external company that remotely handles a business's IT infrastructure and end-user systems or devices.
Established in the 1990s, Managed Service Providers (MSPs) deliver essential Managed IT services to sectors including IT, finance, healthcare, legal, payroll, and recruitment, by managing key business infrastructure, security, and network elements.
Within the IT sector, MSPs function as Managed Cloud Service Providers, enhancing and securing cloud infrastructures. In healthcare, MSPs ensure adherence to data protection regulations and handle electronic health records. In response to technological progression, MSPs have widened their scope to include network management, service-level agreements, and cloud computing.
Employing MSPs provides specialized expertise access and possible cost reductions. However, it can create dependencies on external providers and potential loss of IT operation control. To accommodate diverse business requirements, MSPs suggest various pricing models, like fixed and consumption-based.
Definition of an MSP
A Managed Service Provider (MSP) is a specialized firm adept at remotely managing a business's IT infrastructure and end-user systems. It provides managed services in diverse areas, including network management, system upgrades, cybersecurity, data backup, and recovery. The main objective of an MSP is to maintain continuous business operations by diligently overseeing and upkeeping the daily aspects of a company's operational fields. By leveraging an MSP's expertise, businesses can focus on their core functions, delegating complex and labor-intensive IT tasks to experienced professionals.
MSPs Market Size and Growth
The global Managed Services Market increased in value from USD 219.59 billion in 2020 to USD 243.33 billion in 2021, according to a Fortune Business Insights™ report. It is forecasted to reach USD 557.10 billion by 2028, with a Compound Annual Growth Rate (CAGR) of 12.6%.
In 2022, the Business Process Outsourcing (BPO) segment is predicted to hold a significant 37.4% share in the managed information services market. This segment includes processes like accounting, customer support, and supply chain management. By 2032, the global managed services market is anticipated to surge to approximately USD 834.7 billion from USD 278.9 billion in 2022, reflecting a notable CAGR of 11.9% over the decade.
Who Hire MSPs and Why
A diverse range of organizations, including non-profit organizations, government agencies, and small to medium-sized businesses (SMBs), enlist the expertise of Managed Service Providers (MSPs) to cater to their IT requirements.
- Non-profit organizations, often constrained by tight budgets, may not possess the means to sustain a comprehensive IT department. Hiring MSPs presents a cost-effective solution, granting them access to all-encompassing IT services, thereby enabling them to concentrate on their primary mission.
- Likewise, government agencies gain significant benefits from the services offered by MSPs. The burgeoning digitization of public services necessitates the absolute reliability, security, and efficiency of their IT systems. MSPs, with their specialized expertise and resources, are well-equipped to fulfill these requirements.
- SMBs might find it challenging to allocate resources for a full-time IT staff. MSPs serve as an efficient solution, offering an array of IT services ranging from network management to cybersecurity. This allows SMBs to redirect their focus toward core business operations.
MSPs perform various functions for organizations, such as managing and overseeing IT systems, ensuring data security, providing disaster recovery solutions, and offering IT consulting services. They also help mitigate common challenges like space limitations for IT infrastructure, the financial and logistical hurdles of recruiting and training IT personnel, and downtime resulting from IT-related issues.
The roster of IT Services typically offered by MSPs includes:
- Network monitoring and management
- Data backup and recovery
- Cybersecurity services
- IT consulting and strategy
- Cloud services and management
- Software and hardware installation and updates
- Helpdesk support
By employing MSPs, organizations can utilize the skills of seasoned IT professionals, stay updated with cutting-edge technology, trim operational costs, and boost the efficiency and reliability of their IT systems.
How Do MSPs Work
The Operational Methodology of Managed Service Providers typically involves the following steps:
- Assessment and Risk Analysis
- Strategy Development
- Strategy Implementation
- Continuous Monitoring
- Regular Maintenance and Updates
- Incident Management
- Reporting and Review
- Continuous Improvement and Adjustment
MSPs primarily operate remotely, managing and monitoring their clients' IT infrastructure from their own locations. This remote management offers rapid response times, enabling MSPs to identify and resolve issues without physical presence at the client's site. However, they also deliver onsite support for complex tasks, such as hardware installations or upgrades.
MSPs employ automated systems and tools, including Remote Monitoring and Management software, Professional Services Automation software, and Backup and Disaster Recovery solutions, to manage their clients' IT infrastructure. These tools empower MSPs to detect potential issues, automate regular tasks, manage tickets and billing, and recover data as required.
Assessment and Risk Analysis
The MSP commences by performing a comprehensive assessment of the client's existing IT infrastructure to identify potential risks or vulnerabilities, including an evaluation of the client's hardware, software, network configuration, and security measures.
Using the assessment insights, the MSP formulates an exhaustive IT strategy tailored to the client's business requirements and objectives. This strategy details the services the MSP will offer, as well as any suggested upgrades or alterations to the client's IT infrastructure.
The MSP puts the agreed-upon strategy into action, which may entail setting up new systems, modifying existing ones, or installing new software. The MSP ensures all systems are configured correctly and are fully operational.
The MSP constantly monitors the client's IT systems to identify any potential issues or threats. This proactive methodology enables the MSP to address problems before they can disrupt the client's business operations.
Regular Maintenance and Updates
The MSP undertakes regular maintenance of the client's IT systems to ensure their efficient functioning. This encompasses installing updates and patches, upgrading hardware and software as required, and carrying out routine system checks.
In the case of an IT issue, the MSP responds promptly to solve the problem. This could involve troubleshooting the issue remotely or, if necessary, providing onsite support.
Reporting and Review
The MSP furnishes regular reports to the client detailing the performance of their IT system, any issues or incidents that transpired, and the measures taken to resolve them. These reports enable the client to understand their IT infrastructure's state and the value provided by the MSP.
Continuous Improvement and Adjustment
The MSP continually reviews and adjusts their strategy in line with the client's evolving needs, advancements in technology, or changes in the IT industry. This ensures the client's IT infrastructure remains current and is capable of supporting their business objectives.
Types of MSPs
1. Categorization by Customer Base Size:
MSPs can be divided into three tiers based on the size and complexity of the customer base they cater to:
- Lower-Level MSPs: These providers usually offer specific services, serving smaller organizations with less complex IT needs. Their expertise might lie in areas such as reporting and alerting services, involving monitoring the client's IT systems, providing alerts when issues are detected, and generating performance reports.
- Mid-Level MSPs: Catering to mid-sized organizations, these MSPs offer a broader range of services, including system installation, upgrades, cybersecurity, data backup and recovery, and IT consulting. They possess the resources and expertise to manage more complex IT infrastructures.
- High-Level MSPs: These MSPs provide comprehensive IT management services to organizations of all sizes. Their service portfolio spans routine maintenance, disaster recovery, and IT strategy development.
Each tier of MSPs offers different service levels and expertise, allowing organizations to select a provider that aligns with their specific needs and budget.
2. Categorization by Service Offered
MSPs can also be classified based on their specific service offerings:
- Cloud Support MSPs: Specializing in cloud computing services, these MSPs assist organizations in planning, implementing, and managing their cloud infrastructure and applications. They help clients leverage the cloud's benefits while ensuring data security and optimal performance.
- Proactive Support MSPs: These MSPs focus on proactive IT support, employing advanced monitoring tools to detect potential issues before they disrupt operations.
- Monitoring MSPs: These MSPs concentrate on observing IT systems, diligently monitoring the health, performance, and availability of various components like servers, networks, apps, and databases, thereby playing a pivotal role in preserving uninterrupted system operation.
- Remote Support MSPs: These providers offer remote assistance and troubleshooting services, enabling quick problem resolution without the need for on-site visits.
- Centralized Management MSPs: These MSPs focus on streamlining the management of clients' IT infrastructure through centralized management platforms, simplifying IT management, and maintaining standardized operations.
- Backup and Recovery MSPs: These MSPs hold expertise in data backup and recovery strategies. They make sure that essential data is consistently backed up, securely stored, and can be rapidly retrieved in instances of data loss.
In providing specialized services in distinct areas, MSPs cater to the specific needs of organizations, enabling them to optimize their IT operations based on the services they require.
Benefits and Drawbacks of Hiring MSPs
Managed Service Providers (MSPs) present a wealth of advantages to businesses aiming to streamline their IT operations. However, as with all business decisions, it's vital to weigh these benefits against possible challenges.
The Benefits of Hiring MSPs
Among multiple benefits of hiring MSPs, here are 5 key benefits of MSPs:
- Proactive IT Support: By offering proactive monitoring and maintenance, MSPs can identify and resolve potential issues before they negatively impact your business.
- Access to Expertise: MSPs employ a team of skilled professionals with a wide range of technological expertise, allowing businesses to tap into specialized skills as needed.
- Cost Savings: By outsourcing IT functions to an MSP, businesses can achieve significant cost savings. They can avoid investing in expensive infrastructure and eliminate the need for hiring and training in-house IT personnel.
- Scalability: MSPs provide scalable solutions that can adapt to a business's changing needs. This adaptability is particularly advantageous for businesses with fluctuating IT requirements.
- Enhanced Security: With cybersecurity being a top priority, MSPs implement robust measures to protect business systems and sensitive data from potential threats.
The Drawbacks of Hiring MSPs
Despite the advantages, there are certain challenges associated with outsourcing to MSPs. Here are 5 probable drawbacks of MSPs:
- Dependency: Outsourcing critical IT functions to an MSP can create a level of dependency on an external service provider. If the MSP experiences technical issues or downtime, it can potentially disrupt your operations.
- Limited Control: When you outsource IT functions to an MSP, you relinquish some degree of control over the management of your systems and processes.
- Security Concerns: Entrusting sensitive data and granting remote access to external parties comes with inherent security risks.
- Communication Challenges: Communicating effectively with an external service provider can sometimes be challenging, impacting the responsiveness to issues and requirements.
- Cost Considerations: While hiring an MSP can bring about cost savings, businesses must carefully evaluate the pricing structure and contracts to avoid hidden costs or additional fees.
Due to their adaptability and cost-efficiency, MSPs often present significant benefits to SMBs. Yet, acknowledging and preparing for potential challenges is critical. These can be lessened through a combination of meticulous due diligence, transparent communication, and precisely drafted contract terms.
MSP Pricing Structures
- Tiered Pricing
- Per-User or Per-Device Pricing
- Project-Based Pricing
- Customized Pricing
Managed Service Providers (MSPs) cater to a wide variety of business needs by offering diverse pricing structures. It's crucial for businesses to select a pricing model that aligns with their size, IT requirements, budget, and specific needs. A thorough understanding of the pricing details through extensive discussions with MSPs will facilitate informed decision-making. Here are a few commonly adopted pricing models:
This pricing model allows MSPs to offer different service packages at varying price points. Each tier consists of a specific array of services and levels of support, enabling businesses to choose a package that best suits their requirements and budget. It's a scalable and customizable model designed to cater to businesses of all sizes.
Per-User or Per-Device Pricing
In this pricing model, MSPs charge based on the number of supported users or devices. Businesses pay a flat rate per user or device, irrespective of the specific services availed. This model simplifies cost calculations and is apt for businesses with a predictable number of users or devices.
This pricing structure is suitable for specific projects or one-time tasks. The cost is primarily determined by the scope, complexity, and duration of the project, allowing businesses to avail of tailored services for project-specific needs without the burden of long-term commitments. This model serves organizations with short-term IT projects or those requiring specialized expertise for specific tasks.
Customized pricing models offer solutions specifically tailored to each client's unique requirements. Such a model involves a comprehensive assessment of an organization's needs, after which an appropriate pricing structure is designed. Offering flexibility, customized pricing ensures businesses pay solely for the services they need. This model is particularly advantageous for organizations with specific IT needs or those functioning in niche industries.