Managed Services Providers

Should you hire a Managed Service Provider or MSP?

The term "MSP" can cover a lot of partially-overlapping ground. e.g. Help desk, monitoring, security, and virtual server services, to name a few. Some MSPs may specialize in one area while others have multiple, dissimilar managed offerings. It's a broad subject in the I.T. world.

In this article, I'll focus on local asset managed services. This type of MSP generally provides the following services. These are the same services that pay-as-you-go I.T. consultants can offer as well.

  • Hardware health monitoring

  • Backup systems

  • Network monitoring

  • Help desk and break-fix

  • Anti-malware security and monitoring

  • Remote-based maintenance and perhaps onsite maintenance as well

  • Update and hotfix management

  • And other things that a specific client may need

Managef Service Provider MSP.png

Cost

The first cost metric is usually based on the number of assets covered (how many computers, monitors, printers, etc.) or simply by number of users/employees. As offices have more devices these days then the per-user model is becoming more common.

Other cost metrics are based on any/all of the following points depending on what is important to you.

  • Monitoring only; mitigating action costs extra

  • Fixed or unlimited hours? Or incidents per asset or per user per contract period?

  • Remote only or onsite included?

  • Guaranteed response time?  e.g. 2-hour, 4-hour, same-day, next-day?

  • Business hours only (8/5), 24/7, or something in between?

  • Failure or error mitigation only or new functionality as well?

  • Assigned or random technician?

  • Periodic equipment upgrades, refreshment, or replacements included?


Most MSP contracts are for labor only -- no parts, equipment, licenses, or other expenses included. MSP contracts that do include periodic equipment refreshment or replacement cost considerably more, as you can guess.

Why MSP Plans Exist

As you've probably observed, an increasing number of software products these days are subscription-based. Microsoft Office, many Adobe products, anything in the "cloud", etc. are all subscription-based. The answer to why is obvious: It provides a reliable and predictable income stream to the software maker. Instead of getting the customer's money only once, subscription models guarantee ongoing revenue.

 

I.T. consulting firms, especially those with regular employees, have long ago moved to managed service contracts for exactly the same reason. These contracts generate reliable and predictable income to the MSP.


Imbalance

A big problem with an MSP is utilization imbalance. That is, are you making enough use of your MSP to warrant the cost? Depending on the service level you require, your monthly costs might be anywhere from $50 to $250 per user per month. The lower end of that range might only include automated remote monitoring services and trouble alerts.

Suppose your MSP charges $150 per user per month which is in the mid-range of cost today. And suppose you have 10 users in your business, including yourself. The annual cost would be $18,000. Are you getting $18,000 worth of use from that contract? If you are under utilizing your MSP then you are throwing money away -- likely quite a lot. Similarly, if you over utilize your MSP (especially if by a lot), they may hike your rates at the next contract renewal. It's rarely a true break-even at the end of the contract. That would be quite a coincidence, yes?

 

15 Users? That's $27,000 per year. Those numbers get pretty high, pretty quickly. Higher user counts may earn a minor per-user discount but, still, it's a lot of money.

Conversely, a "pay as you go" (PAYG) I.T. consultant might charge $75 to $150 an hour. Assuming $100 per hour, that same $18,000 annual cost would pay for 180 hours of work per year. Did all of your I.T. needs for which you needed professional help hit 180 hours last year? Probably not.

 

Another reason MSPs cost more is there are more mouths to feed. With an MSP, a hired tech usually does the work, be that remote or onsite. The MSP owner is usually more engaged in business development or other internal matters. The tech*, the guy doing all the work, makes a fraction of the hourly equivalent of your contracted MSP cost. The owner, who doesn't do much of anything from your perspective, makes the real money.

 

* And about that tech: Does the MSP send a random tech who has to bone up on your particular system every time? Even if the same tech is assigned to you, how long will that tech stay with the MSP? If the tech is particularly good then s/he may seek better opportunities.

 

Babysitting


MSPs advertise that by constantly monitoring your systems they can head-off potential trouble before it arises. There's a grain of truth in that, but the full truth is that many problems give no indication of upcoming trouble. Computers and networks generally get along without a lot of close intense monitoring. And to the extent that monitoring is helpful or needed, much of it is automated, issuing warnings only when it thinks it spots trouble. The MSP isn't burning a lot hours by manually checking on these things.

Servers, however, do require closer monitoring and maintenance due to their critically importance nature. But any decent PAYG provider offers server monitoring as well. You don't need an MSP just for that.

MSPs in general are on the winning end of their contracts since they have the experience and upper hand in negotiating rates and terms. An MSP likely has dozens of clients whereas a client would have only one MSP. If the MSP has been around for any length of time then they've figured out how to price their services and draft contracts to come out on top.

Ultimately there's no definitively right or wrong answer to the MSP vs PAYG arrangement. Probably the biggest question to ask yourself is how heavily your firm relies on outside I.T. expertise? Is your firm, your employees, particularly needy, calling for every little thing? Or do you only need help with the heavy lifting?

My Business Model

I'm a PAYG I.T. consultant for the reasons of imbalance that I discussed above. I provide good value and detailed invoices. I don't gouge on remote control, bill extra for off-hours work, and phone calls for advice or to ask questions are always free.