Traditional MSP vs. Hybrid Approach
MSPs (Managed Service Provider) have been around the IT service landscape since the early 2000s. IT service companies adopting this delivery model have grown to over 40,000 in the United States. MSPs now represent most outsourced IT services delivered to small and medium sized businesses—i.e., approximately two-thirds of IT service providers adopt some level of MSP services with the majority adhering to a strict MSP delivery model. For businesses and organizations that receive some level of outsourced IT support but are not sure if their support provider is an MSP, this thought piece will provide you the answer by giving insight into how MSPs operate and how they compare to service providers that adopt a hybrid approach to delivering IT services. If you are having misgivings about your MSP this thought piece may validate some of your concerns. How MSPs Operate The MSP delivery model is rooted in proactive preventative maintenance—i.e., finding problematic issues before they pose potential down time and remediating threats before they occur. MSPs evolved from the advent of remote application service provider platforms (ASPs) that made it possible for technology professionals to manage networks remotely. These platforms have evolved into full-service offerings with the ability to monitor, track, and execute tasks of critical technology infrastructure from afar that includes: Monitoring network infrastructure performance, i.e. network devices, endpoints, etc. Automated updates and patching Security Back-up and Recovery MSPs will typically bundle these monitoring services with scheduled routine onsite visits, which may be limited or unlimited, as well as typically unlimited remote support for day-to-day reactionary issues all at a flat rate (make note of the aforementioned). Contract agreements are typically tuned for reoccurring maintenance, which may include on-call remote emergency support with the option for out-of-scope onsite visits, infrastructure hosting, and applications management that can be built into the cost. This is often referred to in the industry as “all you can eat”. MSPs hold their heads high on providing wrap around IT services. They will compare the benefits of the MSP delivery model against the shortcomings of traditional services that are often referred to as “break/fix”. Break/fix providers are often portrayed as fixated on meeting or exceeding hourly billable goals whether it be achieved through time and material billing, through guaranteed billable hours generated from regularly scheduled onsite maintenance, or both. It is true that billable hour work can be potentially an expensive endeavor. However, it is also true that the traditional break/fix model of IT services by and large is no longer widely practiced. To be fair to those few existing traditional break/fix providers, it would be disingenuous to assume the intentions of all break/fix shops are a part of a wider conspiracy to nickel and dime their clients as is often portrayed in MSP marketing materials and content. Most IT service professionals that do not adhere to the traditional MSP model follow a ‘hybrid’ model for delivering services. There can be real benefits from using an MSP for all you can eat services, particularly if a business is looking to completely outsource all Its technology responsibilities from network to endpoint to applications management. However, there are caveats to this. We’ll begin by going over the caveats of the MSP model and contrasting them to the hybrid practices of many non-MSP providers. To make sense of how MSPs provision and charge for services, think in terms of health insurance, i.e. being on either a gold or platinum tier health plan. Most MSPs will require all “you can eat” service which includes monitoring of your network, security, back-up, and unlimited remote and / or onsite support. A step above is when the MSP provides/leases hardware, hosts the network, and provides all the application licenses (e.g., M365, VMWare, etc.), operating network licenses, and company domain. For MSPs it’s a numbers game and the way to get ahead is through contract by volume—i.e. locking in clients to fixed fee contracts that are padded. Similar to the insurance model, the formula ensures that if a set of customers in any given month have support overages, the MSP is more than covered by the mere volume of contracts. Like an expensive health insurance plan, you are paying a premium for preventative care. Also, just like with any insurance plan there always going to be out pocket costs—e.g., network upgrade, cloud migration, disaster recovery scenario, etc. The MSP recipe rests on automated intervention and minimizing the necessity for human intervention as much as possible to maximize revenue. Standard MSP Practices Here are caveats associated with core standard practices of MSPs that all potential customers should consider carefully before signing a contract. MSPs charge a monthly flat rate and position this as more price advantageous to an hourly rate. The truth of the matter is an hourly rate is always a part of the equation in determining the fixed rate. The reality is the cost of doing business with an MSP can get expensive. (We’ll get more in to pricing later) Coat tailing on the last point, monthly fixed rate for services including unlimited remote and onsite support is not unlimited. It works just like the unlimited data plan for mobile phones. All mobile carriers have an unspoken limit on data. If you happen to meet that limit before the end of the month and go over the limit, there is no consequence of additional charges, but your performance will be throttled. Businesses on MSP contracts will experience a slowdown in response times if they happen to regularly require a high demand for support. MSPs try to work in all possible scenarios to make sure they have a healthy buffer to cover demand. Speaking of contracts, All MSPs require contracts. In some cases, for terms as long as 5+ years and at the very least annual contracts that require annual renewal. This is one way to keep their clients locked in. An MSP fixed fee/unlimited services contract is a textbook example of a bait-and-switch tactic. Many MSPs offer hosting services, lease … Read more