What is MSP (Managed Service Provider)?

An MSP, or Managed Service Provider, is an external company that remotely handles a business’s IT infrastructure and end-user systems or devices. This specialized company provides essential network management, cybersecurity, and cloud computing services to the IT, healthcare, and finance sectors. For example, MSPs ensure data protection regulation and legal compliance for the health sector while they help to enhance cloud infrastructure security for an IT company.

Since the 1990s, MSPs have delivered necessary managed IT services to all kinds of businesses, from large enterprises to small and medium-sized businesses (SMBs). Through the help of an MSP, businesses can streamline their core tasks and outsource critical IT functions. 

MSPs also deliver Service Level Agreements (SLAs) that define the expected service quality and performance metrics. These agreements guarantee that businesses, especially SMBs, government agencies, and non-profit organizations, will receive ongoing and effective service customized to their unique situation. Some significant benefits of partnering with an MSP include access to specialized skills, cost savings, and scalability.

Since MSPs offer their service to their clients in a subscription format, whether fixed or consumption-based, it is up to businesses to select the suitable pricing model that aligns with their business needs.

Who Hires MSPs and Why?

Non-profit organizations, government agencies, and small and medium-sized businesses (SMBs) hire managed service providers to meet IT needs. These entities engage with MSPs for several key reasons:

• Non-profits primarily work with slim budgets, so they outsource their IT needs to an MSP that provides extensive yet more cost-effective services.
• Government agencies today, with the growing pressures to have digitalized public services, depend on MSPs to secure and make their IT systems flawless.
• An MSP can provide services such as network management and cybersecurity that an SMB might have difficulty allocating resources for full-time IT staff.

What does Managed Service Provider offer?

MSPs offer a wide range of IT services for businesses, from management to the support and optimization process for their technological infrastructure. Its core offerings include managing IT systems, ensuring data security, providing disaster recovery solutions, and IT consultation services.

Here are the core IT services offered by MSPs:

1. Network Monitoring and Management: Working 24/7 on your organization’s IT network to maintain its performance and good health of the system operation, preventing potential nuisance. Proactive network monitoring helps prevent issues before they escalate. A Gartner study shows that daily monitoring work may reduce downtime by up to 80% on networks.
2. Data Backup and Recovery: MSPs offer strong backup and recovery solutions to maintain business availability. Ponemon Institute reported that companies suffer an average loss of $9,000 per every minute during downtime if they do not have a disaster recovery plan.
3. Cybersecurity Services: MSPs protect organizations from cyber threats and offer the most modern cybersecurity solutions. They implement security measures to safeguard sensitive information and help protect the organization’s information from potential breaches. According to IBM, the global average price of a data breach was $4.88 million, which saw a significant increase of 10% from the previous year.
4. IT Consulting and Strategy: MSPs provide guidance on IT solutions so businesses can align their infrastructure with growth strategies. According to research, an ROI of 400% is possible for large corporations investing in IT consulting.
5. Cloud Services and Management: MSPs manage cloud environments for scalability, security, and efficiency. According to a recent IDC study, organizations using managed cloud services can reduce IT costs by up to 50% and gain agility and scalability.
6. Software and Hardware Installation and Updates: Service providers take care of the end-to-end software and hardware installation process. They also notify frequent updates related to new version releases for added security. A lack of up-to-date software may open your company to risks and lead to financial loss and reputational damage.
7. Helpdesk Support: 24/7 support is available from MSPs to receive and manage issues associated with IT. This helpdesk support helps minimize downtime and enhance productivity by immediately resolving technical difficulties.

How Do MSPs Work?

The Operational Methodology of Managed Service Providers typically involves the following steps:

1. Assessment and Risk Analysis
2. Strategy Development
3. Strategy Implementation
4. Continuous Monitoring
5. Regular Maintenance and Updates
6. Incident Management
7. Reporting and Review
8. Continuous Improvement and Adjustment

MSPs, primarily operating remotely, can respond quickly to identify and troubleshoot issues without having a physical presence at the customer site. They also provide onsite support for more complex operations (e.g., hardware installation and upgrade). This also includes other automated systems, such as Remote Monitoring and Management (RMM) software or Professional Services Automation (PSA) software, Backup, and Disaster Recovery solutions to efficiently manage their clients’ IT environment. These tools enable the MSP to uncover potential concerns, automate repetitive activities, process tickets and billing, and recover data when needed.

Assessment and Risk Analysis

The MSP evaluates IT systems through assessment and risk analysis. The whole point is to determine any risk or vulnerability between the hardware, software, network configuration, and security measures. These risks can be identified, and then MSP can figure out strategies to decrease these threats, further securing the IT environment.

Strategy Development

Strategy Development is the next step after Assessment, where MSP creates a custom IT strategy that works well for your needs. This approach is essential because it provides a blueprint for the exact services that MSP will offer, including any required adjustments or upgrades to IT infrastructure.

Strategy Implementation

Strategy Implementation involves the execution of the agreed-upon IT strategy. Your MSP will either configure the new systems, reconfigure the existing ones, or install software to ensure every single component is up and properly running. This step is vital for converting a strategic plan into an operative reality corresponding to the client’s needs.

Continuous Monitoring

Continuous monitoring is about regularly looking for potential problems or threats in the client’s IT systems using an MSP. This proactivity allows the MSP to take care of problems before they can affect business operations, ensuring that the IT environment is always up and running as intended.

Regular Maintenance and Updates

IT systems should be maintained and updated regularly. Regular system updates and patches, hardware and software upgrades, etc., will be the Managed Service Provider’s (MSP) responsibility. This maintenance ensures that your application’s IT infrastructure operates efficiently and is not exposed to vulnerabilities.

Incident Management

Incident Management is the MSP’s response to whenever issues appear with your IT. Whether troubleshooting from a distance or providing on-site support, the MSP quickly gets into action to fix things and minimize downtime for business operations with minimal impact.

Reporting and Review

The MSP provides the client with scheduled reports on how their IT systems are running. These reports show any problems or incidents and the steps necessary to address them. That kind of visibility allows clients to understand the health and value of their IT infrastructure.

Continuous Improvement and Adjustment

This is where the MSP reviews and improves IT strategy to adapt to changes in client demands or new technologies. This allows IT to ensure the infrastructure stays up-to-date and continuous to help advance business objectives.

Types of Managed Service Provider

MSPs are categorized into two types based on the size of client organizations and the services they offer:

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:

1. Lower-Level MSPs: These providers focus on reporting and alerting services. MSPs monitor IT systems, provide alerts about issues, and create performance reports. The targeted clientele of lower-level MSPs is small businesses that require minimum IT support.
2. Mid-Level MSPs: These MSPs cater to mid-sized organizations, offering a broader range of services. Services offered by these providers include system installation, upgrades, cybersecurity, data backup and recovery, and IT consulting. They have enough resources and expertise to manage more complex IT infrastructures.
3. High-Level MSPs: They provide end-to-end IT management services to organizations of all sizes. They manage highly sophisticated IT environments, and their service portfolio spans routine maintenance, disaster recovery, and IT strategy development across various industries.

2. Categorization by Service Offered:

MSPs can also be classified based on their specific service offerings:

1. Cloud Support MSPs: These MSPs have specialization in cloud computing services. Their expertise in planning, managing, and implementing cloud infrastructure and applications helps clients leverage cloud technology benefits. These benefits are scalability, flexibility, and data security with optimal performance enhancement.
2. Proactive Support MSPs: They dedicate their resource to helping businesses prevent IT issues before they occur. These MSPs deploy advanced monitoring tools and follow a proactive approach for early problem detection, which helps minimize operational disruption while prioritizing uptime and reliability.
3. Monitoring MSPs: Their focus is to observe IT systems continuously. They diligently monitor the health, performance, and availability of various components like servers, networks, apps, and databases. They ensure everything works well so businesses can carry out IT operations smoothly and uninterruptedly.
4. Remote Support MSPs: They work remotely and provide assistance and troubleshooting services without being physically present at the client’s site. It is suitable for organizations seeking quick problem resolution without needing on-site interventions.
5. Centralized Management MSPs: These MSPs focus on streamlining the management of clients’ IT infrastructure through centralized management platforms. They maintain standardized operations, simplify IT management, and reduce the complexities of overseeing multiple systems.
6. Backup and Recovery MSPs: These MSPs specialize in data backup and recovery strategies, ensuring that essential data is consistently backed up, securely stored, and can be rapidly retrieved in instances of data loss. Their expertise in maintaining data integrity and providing robust solutions helps safeguard IT infrastructures against potential disasters.

Benefits and Drawbacks of Hiring MSPs

Managed Service Providers (MSPs) present various advantages to businesses aiming to streamline their IT operations. On the flip side, some drawbacks exist, making weighing these benefits against possible challenges vital.

The Benefits of Hiring MSPs

Among multiple benefits of hiring MSPs, here are 5 key benefits of MSPs:

1. Proactive IT Support: MSPs provide proactive monitoring and maintenance to catch issues that could preemptively cause problems for your business.
2. Access to Expertise: MSPs have a well-staffed team with expertise in various technology fields that businesses can leverage when required.
3. Cost Savings: Outsourcing IT functions to an MSP results in substantial business cost savings. It allows them to dodge expensive infrastructure investments and removes the headaches of employing their IT staff.
4. Scalability: MSPs offer scalable solutions that can grow as a business expands and grows. This flexibility is particularly advantageous for companies that have changing IT needs.
5. Enhanced Security: As cybersecurity becomes more critical, many MSPs adhere to standards such as the National Institute of Standards and Technology (NIST) or other security frameworks to protect business systems and sensitive data from potential threats.

The Drawbacks of Hiring MSPs

Despite the advantages, there are various challenges associated with outsourcing to MSPs:

1. Dependency: Hiring an external service provider for your critical IT functions means dependence. If the MSP is undergoing operational or technical problems of its own, it could end up affecting your business.
2. Limited Control: Using an MSP to take over all your IT functions also means you have limited autonomy in managing systems and processes.
3. Security Concerns: Entrusting sensitive data and granting remote access to external parties has inherent security risks.
4. Communication Challenges: The inability to communicate well with an outsourced third-party service provider might cause issues and requirements that must be resolved promptly.
5. Cost Considerations: Companies must examine price points and service-level agreements because not all contracts are created equally. This ensures that an MSP keeps costs low by billing additional fees.

MSP Pricing Structures

Managed Service Providers (MSPs) offer a variety of pricing structures to cater to the diverse needs of businesses. Here are some common pricing models:

1. Tiered Pricing
2. Per-user or Per-device Pricing
3. Project-based Pricing
4. Customized Pricing

Each of these is designed to provide price variety so organizations can choose a model based on size, traditional works, and budget-specific needs. Engaging with MSPs about these pricing models and pricing details will enable businesses to make well-informed decisions that balance cost and service quality. Here are a few commonly adopted pricing models:

Tiered Pricing

This pricing model allows MSPs to offer different service packages at varying prices. Companies choose a form that fits their needs and price point, from basic support to full IT management. This model is great for smaller organizations trying to scale with versatile IT offerings.

Per-User or Per-Device Pricing

This model charges a single rate per user or device. The simplicity of budgeting based on the number of users or devices is ideal for organizations with a stable number of users or devices. It predicts costs, making IT expenses more straightforward to manage.

Project-Based Pricing

This model prices each particular project or one-time task. It’s a project-based billing system where costs are determined by the scope and duration of the project, making it suitable for businesses with temporary IT requirements. This allows for transparent budgeting and targeted resource use.

Customized Pricing

With Customized Pricing, processes are analyzed at the client level, and a tailored solution is derived. This model is perfect for corporations with particular or abnormal IT needs, ensuring businesses only pay for the services they use.