As technology evolved over the last 20 years, I.T. service providers were forced to alter their business models to adapt to the ever-changing needs of businesses. Out of this evolution came the Managed Services Provider (“MSP”), a business model that focused on proactive technology management rather than the traditional “break-fix” model of years past. Not all service providers truly adopted this new model, though. In fact, most designed a service offering that masqueraded their tried-and-true break-fix services with a new managed services billing strategy. This approach is still prevalent today, especially with service providers that were established prior to the introduction of the MSP model.
True Managed I.T. Services
The MSP model is actually quite simple yet profound:
A managed I.T. service provider delivers to their customer unlimited labor hours to support and maintain the customer’s technology for a flat monthly fee. This monthly fee scales based upon the size of the customer, but always includes unlimited hours for technical support.
To be profitable, the MSP must focus their efforts on reducing the number of labor hours the customer requires each month since the MSP must absorb the cost of those hours. The MSP achieves this by proactively identifying and resolving issues before they escalate into major problems.
This model is beneficial to the customer because it forces the service provider to maintain the customer’s technology in such a way that it becomes more reliable, secure, and efficient. If the MSP fails to accomplish this, they will be forced to hire more support staff and their profitability will succumb to high overhead.
Beware “Essentials” Service Plans
Service providers that evolved their break-fix business into the new MSP model struggle with the change because it’s a far stretch from the traditional, risk-free model of billing for every labor hour they deliver. In response, many of these service providers resort to a basic-style service plan that includes some of the proactive and cybersecurity services but eliminates the unlimited technical support hours. Similarly, other providers will limit the number of hours the customer can use each month and then bill them for any hours above and beyond the base amount.
This approach may seem attractive to smaller businesses since it lowers the monthly recurring cost of the service plan, but it is a win-lose business relationship. It’s a clear win for the service provider because they get to charge a recurring fee AND cover all their labor hours. But this is a loss for the customer because the service provider is no longer incentivized to deliver a proactive approach to I.T. management. The service provider may promise to focus on those efforts, but there is zero financial consequence if they fail to deliver on that promise.
Mature Businesses Need Mature MSPs
Mature businesses understand how detrimental cyber-attacks and technology interruption are to their bottom-line. They also understand the difference between a mature MSP (such as Digital Boardwalk) that only offers true managed I.T. services, and other service providers that offer cost-saving plans and break-fix services. True managed I.T. is not just a service plan or billing model that can be customized per-customer. It is a fundamentally different approach that must be baked into the culture and entire operations of the service provider’s business.
Qualifying a Mature MSP
One of the easiest ways you can qualify a managed services provider and compare them against other service providers is to ask:
“How many businesses and endpoints does your company support, and with how many technical staff?”
Mature MSPs will support a large number of businesses and endpoints with fewer technical staff because their strict focus on proactivity and problem prevention means they require far fewer help desk employees. Other service providers, however, often boast having larger teams but not as many customers, which is ultimately a consequence of their break-fix delivery model.