Everything you ever wanted to know about Managed IT Services
For many businesses, Managed IT Services can mean a step-change in the level of efficiency, productivity and profit they’re able to achieve. Especially for small to medium businesses, the ability to tap into a level of IT talent they could never afford full-time can make a big difference in how they operate.
That is why companies increasingly depend on Managed Service Providers (MSPs) to achieve business-critical goals. Some organisations look to MSPs to bridge talent gaps, streamline operations, or accelerate processes. Others prefer to pay for managed IT services rather than incur the far greater cost of maintaining an in-house department. Many organisations are also reluctant to acquire advanced (and expensive) technology stacks to sustain their competitive edge – when the more margin-friendly option of managed cloud infrastructure is available.
Given the myriad benefits, it is unsurprising that the global managed IT services market is expected to grow to US$410.2 billion by 2027.
Indeed, the market is huge but what are its component parts and the types of services under its umbrella? And what are MSPs and how are they different from other technology companies? How can you tell which provider is the best MSP for your business? More importantly, which specific benefits of managed IT services can propel your company to its next horizon?
Here’s a basic tour of the landscape.
- What is meant by Managed IT Services?
- What does Managed Service Provider (MSP) mean?
- What are the types of Managed IT Services?
- How does Managed IT work?
- What is included in a typical Managed IT Services Contract?
- What is a Fully Managed IT Service?
- What is the MSP business model?
- What is included in Managed IT Services?
- What can an MSP do for you?
- Why are Managed IT Services important?
- How many Managed IT Service Providers are there?
- Are Managed IT Services worth it?
- What are the organisational benefits of Managed IT Services?
- What are the disadvantages of managed services from a client perspective?
- What should you look for in an MSP?
- Final Tips
What is meant by Managed IT Services?
Managed IT services refer to a range of outsourced information technology assets (hardware, software, teams, systems, support services, and guarantees) provided by a third-party entity (MSP) to a customer over a specified period of time, typically from 1 year to 3 or 5 years. The MSP assumes responsibility for planning, building, and managing the client’s entire IT infrastructure or a specific subset of it. This frees the client from the risks, capital expenses, and difficulties of managing the relevant IT system(s) on their own.
What does Managed Service Provider (MSP) mean?
MSPs are third-party companies that proactively manage technology solutions for enterprises aiming to outsource their IT needs in order to cut costs, focus on core business, accelerate processes, scale up operations, or improve service quality. Given the nature of their business, MSPs can own massive data centres, run sophisticated IT infrastructures, and employ technical specialists and domain experts to meet their exacting service obligations. To support clients who rely on their server, network, or software systems, MSPs provide 24/7/365 monitoring and tech support.
What are the types of Managed IT Services?
Managed IT services can be classified into several types of managed solutions. These include project-driven and custom services for IT networks and infrastructure; communications and mobility; data storage and backups; information security; help desk and technical support; project-based application development; regulatory compliance and risk management; process automation/optimisation; cloud solutions; digital transformation; and strategic planning. Some MSPs provide a full range of these services while others specialise in specific solutions.
Common Types of Managed IT Service
- IT Security Services
- IT Networks & Infrastructure (Build-out, Monitoring, and Optimisation)
- Data Storage, Backups, and Disaster Recovery
- Business Communications, Conferencing, and Mobility
- Managed Print Services
- Help Desk and Tech Support
- Managed Cloud and Hybrid Solutions
- Application Development and Business Process Automation
- Analytics, Strategy, and Digital Transformation
How does Managed IT work?
In a typical managed IT service environment, the client pays for and uses the resource(s) and services provided under a plan. On the other hand, the MSP ensures each resource’s continued usability within agreed service standards. To fulfil their side of the bargain, MSPs assume responsibility for the continuous monitoring, maintenance, and optimisation of the relevant IT resources. MSPs also need to provide the client with an agreed timeframe of support (business hours, extended hours or 24/7) for quick resolution of issues that may arise during the service period.
What is included in a typical Managed IT Services Contract?
An important component of the contract with the MSP, called an SLA (Service Level Agreement) details the services and resources provided by the MSP, plus the obligations, expected performance standards, and remediation policy of the MSP.
What is a Fully Managed IT Service?
A fully managed IT service unloads the responsibility of IT planning, implementation, monitoring, optimisation, and scaling from your organisation to the MSP. This typically entails outsourcing the build-out and proactive management of business IT essentials (such as connectivity and bandwidth, network infrastructure and security, communications and mobility, cloud applications, data storage, disaster recovery, and help desk support) to a capable MSP. A fully-managed IT service enables the client to focus on its core business, without worrying about the technologies that support it.
What is the MSP business model?
MSPs make money by providing essential IT functionalities to organisations at lower costs, with high service quality, minimal risks, higher efficiencies, and greater scalability than when businesses undertake the implementation and management of their own IT. MSPs achieve this largely by streamlining their own resources (hardware, software, network systems, and human experts) and spreading the cost of those resources to a large number of clients. Depending on the type and mix of IT services per client, MSPs adopt various billing methods (such as monthly itemised billing based on the number and type of devices managed, the number of end-users served, or the type of managed services rendered.)
What is included in Managed IT Services?
Managed IT services come in different packages. Some clients prefer to engage a single MSP to implement and manage an end-to-end IT solution, while others subscribe to several MSPs for specific IT services that they need. Specific managed IT services include network support and security, data storage and backups, communications and mobility, business process automation, cloud solutions, strategy consulting, and help desk support.
What can an MSP do for you?
Essentially, an MSP enables you to focus on your core business without worrying about the IT systems behind it. By assuming responsibility for your IT functions, MSPs mitigate all the risks related to building and maintaining your own IT infrastructure. In addition to monitoring your IT systems and ensuring their continued reliability and efficiency, MSPs can also evaluate your operational needs and business goals and build a technology roadmap moving forward.
Since the first MSP’s arrived in the 1990’s, they have evolved from just offering application hosting services, server maintenance, or remote monitoring and management (RMM) of networks. Today, there’s an MSP for every business need – from data security to full-range voice-and-video communications. Specialist MSPs offer services such as vCIO (strategy consulting), managed printing, business process automation, and sector-specific solutions such as those for non-profits, mining and healthcare.
Why are Managed IT Services important?
Without managed IT services, businesses and organisations would be forced to build and manage their own IT infrastructure. Going your own way would entail significant capital expenditure plus the costly maintenance of a dedicated IT department. It would also mean that a company has to embrace the attendant risks of maintaining its own IT network. Lastly, the challenges of optimising an IT infrastructure can erode a company’s ability to focus on its core business which, in turn, negatively impacts its competitive edge.
How many Managed IT Service Providers are there?
Based on compuBase’s records as of May 2022, there are 66,692 Managed Service Providers across Europe, the Middle East, Africa, North America, Latin America, and the region of Australia and New Zealand. Note that this estimate does not include many regions including China, India, and much of Asia. For Australia and New Zealand, compuBase reports a figure of 1,348 MSPs.
Together, MSPs will have a market value (if you were to try and buy them all) of US$274 billion by 2026, according to Statista.
Are Managed IT Services worth it?
The demand for managed IT services continues to be on the uptrend according to industry reports from different business intelligence firms. Companies around the world believe they need managed IT services as an indispensable operational resource, with many viewing MSPs as strategic partners in keeping their business profitable over the long term. Based on a global survey, organisations that rely heavily on managed IT services were better able to take advantage of market opportunities and/or had a greater ability to scale.
What are the organisational benefits of Managed IT Services?
Companies enjoy operational, financial, security, and strategic benefits from managed IT services. Managed IT services are designed to accelerate manual processes, improve operational efficiencies, and enable customers to focus more on improving their core businesses. By default, these services comply with strident data protection standards, providing an additional layer of security for clients. Meanwhile, realised savings (from a reduction in overheads) and better margins (from higher efficiencies) translate to improved financial performance for clients. Lastly, seasoned MSPs can draw from their vast knowledge base and domain expertise to provide customers with strategic, long-term guidance.
What are the operational benefits of Managed IT Services?
- By assuming responsibility for IT functions, MSPs enable companies to focus more on their core business. Greater focus leads to improved service quality, which in turn leads to higher customer satisfaction.
- MSPs ensure optimal resource utilisation, which improves operational efficiency and drives better business margins.
- Constant monitoring (24/7/365) and proactive management ensure that potential problems are identified before they happen and that the rare issues that do sneak through the tight net are resolved immediately. This keeps downtimes at a minimum which can become very costly and damaging to a brand if left unchecked. Depending on the service level agreement, MSPs also provide clients with some form of guarantee on the consistency of uptimes and quality of service. 24/7 technical support availability is a given.
- Customers have access to on-demand MSP resources. Flexible plans allow for adding and removing specific IT resources to support change management and/or scaling goals.
- Companies can deploy disruptive technologies faster,including those that can significantly change market and/or financial performance.
- End-to-end MSPs serve as a single point of contact for virtually all IT-related issues, plans, or strategies. These MSPs employ and train multiple teams of experts and specialists who can fix problems or provide advice on just about any aspect or function of information technology.
What are the financial benefits of Managed IT Services?
- Outsourcing IT functions helps reduce operating costs and bypass significant capital expenditures that occur when a company opts for an in-house solution.
- Faster implementation of technology upgrades means more efficient use of cash.
- MSP contracts have predictable billing schemes, making it easier for companies to implement better budget management.
- Operational efficiency – achieved through technology uplift and process/resource optimisation – leads to better margins, which improve the overall profitability of your organisation.
What are the security benefits of Managed IT Services?
- To be seen as competitive and effective, an MSP must acquire numerous industry certifications and remain aware of many regulatory and compliance regimes. They need to keep up-to-date with industry issues and trends while their systems are expected to meet industry standards at all times. Having domain experts from MSPs to manage your IT infrastructure helps mitigate risks, particularly in the area of data loss prevention, backup protocols, disaster recovery, and overall IT security.
- Partnering with an MSP often grants access to rare expertise and practical insight on the best practices for a wide range of IT systems and functions across industries.
What are the strategic benefits of Managed IT Services?
- In many cases, MSPs serve their clients as strategic partners and stakeholders in their long-term success. The experience of a seasoned MSP in dealing with different types of customer challenges builds domain expertise and a wellspring of practical solutions, game changers, and timely insights. These enable MSPs to orchestrate market/competitive advantage for their clients through tailored technology solutions.
- Managed IT services enable companies to have greater flexibility and scalability in terms of their technology resources. This makes it easier for businesses to appropriately respond to market opportunities, risks, and disruptions. Moreover, MSPs enable small companies to adopt leading-edge technologies even when they lack the budget and in-house expertise to acquire and manage the new technology on their own.
- End-to-end MSPs serve as cost-efficient partners for digital transformation, long-term business planning, compliance reviews, needs assessment, and future-proofing. They help businesses reinforce growth plans and corporate strategies with the most efficient application stacks and the optimum technology frameworks possible.
What are the disadvantages of managed services from a client perspective?
Not all managed service arrangements deliver a net positive for companies. Many factors could cause a contracted service to fail in meeting the client’s desired outcomes. These include inaccurate needs assessments, a mismatch between client and MSP, unclear business goals and SLAs, partnering with inexperienced and under-resourced MSPs, and engaging multiple specialist MSPs whose signature solutions have poor interoperability.
Those factors aside, here are key disadvantages of managed IT services as viewed from the client’s perspective. Note that several items detailed below are largely misperceptions about MSPs and their line of business, especially among companies that have yet to partner with one. As such, these are “perceived risks” instead of “established issues” that perennially impact MSP clients.
- Business privacy and data security issues. It is true that cyber security counts among the major selling points for MSPs but engaging them also means potentially sharing your own trade secrets and winning recipes. When you allow a third party into your inner circle, you risk sharing sensitive information with an entity that is not a part of your organisation – even when it nominally claims a stake in your business. Fortunately, data protection is a key tenet in the MSP business model, and most are able to lay out how they handle your sensitive information to lower the risk of a breach. While the rule of thumb is to trust MSPs as data security experts, it is still best to partner only with recognised players.
- Difficulty in switching MSPs/Bound to a long-term contract. Managed IT services are designed for the long haul. This presents a palpable risk for clients who would typically be bound to an MSP contract for at least one year. Just as in the case of human relationships, a long-term partnership with an MSP exposes a company to a lot of risks, including the real possibility that the relationship will sour sooner than anybody expected. It would then be difficult to exit such a situation unscathed – either due to penalties levied in the contract for pre-termination or due to the resulting upheaval in the organisation such an exit would foment. This scenario might constitute a massive financial and operational setback, especially for small to medium-sized businesses. As in the first item on this list, the trick is to partner with a reputable MSP from the get-go. This way, the painful experience of switching MSP partners can be avoided, while the cost of commitment to a long-term partnership will be worth the trouble.
- Lack of cohesion between your team and the MSP. It is natural for potential clients to worry about a mismatch between their unique goals/vision and what an MSP would actually deliver. Hypothetically, a generalist MSP might lack an in-depth understanding of your line of business and prescribe off-the-shelf solutions that do work at face value, but with less efficiency and impact compared to a tailored solution that runs on all the right data points. The key is to really “partner” and “work” with the MSP by clarifying your objectives, detailing your expectations, and sharing all relevant information that will enable the MSP to fine-tune an IT solution for your unique needs. Look for adaptable and versatile MSPs that provide more than the standard fare on the menu. Shortlist those that also offer standalone IT projects, custom application builds, and sector-specific solutions such as those for manufacturing, healthcare, finance, and logistics.
- Underwhelming scope of work. Companies new to MSPs might have the misconception that these savvy providers are the be-all and end-all of their IT needs. A few – the best of them – might have bragging rights to that distinction but a lot more will likely leave you … underwhelmed. Unless a company relinquishes literally all its IT functions to the MSP, it will still need to address multiple IT-related issues that are not included in the SLA. For example, any problems encountered with application software that is not listed in the MSP’s supported third-party resources will remain the client’s responsibility. Moreover, MSPs that lack proper accreditation or certifications even for specific resources already on the list might still be limited in the technical support they can provide. This is why track records, industry accreditations, and third-party certifications are crucial factors in choosing an MSP to partner with.
- No boots on the ground/Virtual support only. Cloud computing, advanced communication networks, and telepresence/remote assistance technologies have significantly curbed the need for in-person onsite support. However, many businesses still appreciate and prefer to partner with IT support providers that can readily deploy human tech teams to their site to fix business-critical issues such as hardware repair or installation. Unfortunately, only the largest MSPs maintain data centres and offices across the globe. On the other hand, some MSPs are regional players and a large number cater to highly localized markets. Businesses that need or prefer to have onsite services can partner with such regional or local MSPs with proven track records. (Note: Onsite support may involve additional costs).
- Limited access to insights acquired during the design, development, and deployment stages of the solution. Unless the customer has a dedicated team that works closely with the MSP, the opportunity to gather and curate valuable insights from the engagement is foregone, leaving the MSP as the sole beneficiary of an expanded knowledge base. For most companies whose core business is only remotely tech-oriented, this is a reasonable trade-off. After all, they did decide to outsource IT functions in the first place. But for knowledge-driven and insight-hungry companies who find value in knowing exactly how specific business challenges are resolved, that can be a hefty price. As mentioned, one solution is to dedicate a cross-department in-house team to work closely with the MSP. Another is to stipulate in the SLA that among the reports the MSP needs to provide is one that details solution design and specifications, solution components and costs, and historical performance analyses.
- Steep costs of partnering with big-name MSPs. Depending on the scale, scope, and type of MSP engagement, the resulting overall cost to a customer can range from a bargain to a burden. Most MSP engagement is “inexpensive” only when compared to bankrolling your own full complement of IT experts and your very own IT infrastructure. In a practical sense, any business expense compared to that is probably loose change. When you expect more from an MSP, expect costs to be substantial but reasonable. Some MSPs charge upfront fees and recurring monthly fees. To rationalise costs and get the most out of managed IT services, conduct a thorough audit of your current resources vs. your business goals. This will help identify the key MSP resources you need, those that are good to have, and those that are irrelevant to your operations.
What should you look for in an MSP?
Here’s a 4-point list:
- Always choose MSPs with proven credentials (such as industry certifications and third-party accreditations) and a track record of excellence (as inferred from relevant awards; a robust portfolio of easily recognisable customers; and superb ratings in customer satisfaction benchmarks such as the Net Promoter Score (NPS)).
- Prefer managed service providers who cater to and have successfully helped companies that are similar to your own in terms of size, market, and line of business.
- MSPs with a strong local presence (in case you need onsite tech support) should also be on your shortlist.
- Finally, consider MSPs with a reputation for commitment, adaptability, accessibility, fast response, data protection, reasonable pricing, and strategic insight.
While managed IT services can dramatically improve many aspects of your business, partnering with the wrong MSP can deliver the opposite effect. No one really wants to learn from expensive and exhausting failures. It is important to have clarity in your business goals as well as the criteria for shortlisting potential MSPs before deciding which candidate to choose for a long-term engagement.
For most businesses, managed services have become as essential as common utilities. But they are clearly more than that. Managed IT teams perform the heavy lifting needed for smooth daily business activity and also serve as a gateway for business excellence, innovation, and achievement in your own organisation. It is not uncommon for corporate success stories to have a chapter on how an MSP helped orchestrate a breakthrough.
If your goal is to have a more productive team, better technologies, faster processes, and a greater impact on profit, a reliable MSP will improve your chances of success.
When deciding to partner with an MSP, start with this simple 9-point checklist:
- Identify your key business goals.
- Make an audit of your current systems.
- Make a pre-assessment of your technology needs.
- Allocate a budget for IT improvement.
- Create an MSP shortlist.
- Form an implementation plan with your MSP of choice.
- Demand a comprehensive and detailed Contract and SLA.
- Always hold the MSP accountable for excellent service delivery.
- Conduct a strategic review and draw the next roadmap 5 months after contract start.