Managed Service Provider (MSP)

 A third-party company that remotely manages customer's IT infrastructure and end-user systems is a  managed service provider (MSP). SMBs,  non-profit and government agencies hire MSPs to take care of day-to-day management tasks. These services include network and infrastructure monitoring and management.

MSPs usually handle management services on a daily basis so customers can focus on improving their business without worrying about  system downtimes or IT service problems.

MSPs may specialize in specific segments of IT, like storage, or on specific vertical markets, like financial services, legal, healthcare or manufacturing. For example managed security service providers, offer specialized services, like a remote firewall administration and other security-as-a-service offerings. Managed printing service providers will maintain printers and their daily supplies. Usually MSPs deliver their services remotely over the internet.

The concept of MSPs starts in the 1990s with the emergence of application service providers (ASPs), which offered remote application hosting. ASPs helped cloud computing and companies that would provide remote support for IT infrastructure. MSPs were concentrate on the remote monitoring and management (RMM) of servers and networks. During the time, they expand their scope services to differentiate themselves from other providers.

Today, the terms Cloud Service Provider and managed service provider are sometimes used when the provider's service is supported by a service-level agreement (SLA) and is delivered remotely over the internet.

Managed service provider can help a business to improve its operations.

SMBs typicaly use MSPs. Many smaller organizations or companies have limited IT capabilities, so they may consider a MSP's service as a way to obtain IT expertise. Even larger enterprises may contract with MSPs as well. For example, government agencies have limited budget and may contract an MSP to supplement their in-house IT team.

MSPs take care of the complex, consuming or repetitive work involved in the management of IT infrastructure or end-user systems. MSPs usually do the following:

• Manage  IT infrastructure
• Technical support
• Cybersecurity software for IT
• Manage user accounts
• Manage contract
• Compliance and risk management
• provide payroll services

How do MSPs work?

When an MSP is requested to meet the business objectives of an organization, it is usually expected to fill in some gap or role in an IT system or staff. Communication between the organization and the MSP starts with an assessment that determines the organization's existing environment. This assessment may point out potential room for improvement and how to support business goals properly.

There is no specific setup for all organizations, thus an MSP could provide many different service options. Two examples of MSP service options are fix technical support services and subscription services.

MSP fix technical support services focus on remotely fixing or sending technicians to a customer location to resolve the issues. MSPs that provide this option charge the company for the time spent and for any parts used to resolve the problem.

MSPs that offer a subscription service work on the quality of service of an organization's network and usually bill monthly. If an issue arises, the MSP will fix the problem as part of the agreement between the organization and the MSP. Payment through the subscription model is based on defined rates per computer or equipment.

Monitoring, maintenance, reporting, security and other services are defined using an SLA that includes what the organization can expect from the MSP. Response times, performance and security specifications are also included in the SLA.

MSPs may provide their own services, other providers' services or an integrated mix of the two. Pure-play MSPs specifically focus on one vendor or technology and more commonly offer their own services.

MSPs also focus on deploying specialist software platforms that automatically manage functions. These platforms consist of RMM tools and professional services automation (PSA) applications:

• RMM software enables off-site technicians to maintain IT systems, such as networks, servers, desktops and mobile devices. These tools also enable MSPs to apply patches and other system updates.
• PSA tools enable an MSP to manage an organization's projects, billing, assets and inventory.

A managed service provider often provides its service offering under an SLA -- a contractual arrangement between the MSP and its customer. The SLA spells out the performance and quality metrics that govern the relationship. Organizations need to be precise when agreeing on the commitments they make in SLA contracts.

An SLA may be linked to an MSP's pricing formula. For example, an MSP may offer a range of SLAs to customers, with the customer paying a higher fee for higher levels of service in a tiered pricing structure.

What are Different types of MSPs?

The Different types of MSPs are recognize based on the criteria chosen to categorize them. As an example, if a business chooses to organize MSPs by the size of their target customers and how much responsibility they take on, MSPs can be organized in the following way:

• Pure-play MSPs. They are smaller providers that concentrate on monitoring networks and application performance. Most of their services are focus on reporting and alerts.
• Staffing legacy MSPs. They are generally target mid-level organizations and offer a wide range of services, such as software installation and upgrades, monitoring and reporting.
• High-level MSPs. They are small and large providers, their customers outsource as much of their IT processes as needed. usually, high-level MSPs provide a wide range of services.

MSPs can also be categorized based on their services:

• Monitoring. These MSPs provide real time monitoring software for applications, servers,  network devices or websites.
• Remote support. These MSPs provide cloud-based software and remote support.
• Proactive support. These MSPs take care of preventive maintenance to be ahead of any issues on software and network equipment.
• Centralized management. These MSPs offer a management console for large networks, monitoring, update management and security.
• Scheduled maintenance. These MSPs provide organizations regular and periodic maintenance tasks.
• Simplified billing. These MSPs do the invoicing, payments and budgeting via a billing management system.

Benefits of using managed service providers

Benefits of MSPs:

• Help an organization to tackel staff shortages. Outsourceing some tasks to the MSP will help an organization to fix workers shortage.
• Provide expertise. Using a reputable MSP help an organization to access expert resources.
• Provide business continiuty. MSP's help the business to prepare for or recover from a disaster.
• Provide constant monitoring. Many MSPs offer 24/7 monitoring services using complex network monitoring tools that offer system visibility and cloud management.
• Improve security. Some MSPs provide security software and awareness training.
• Improve cost efficiency. If unplanned repairs are needed, paying a fixed monthly amount will be more cost-effective than paying hourly. While the MSP handles the day-to-day management services, customers can concentrate on their business.

Challenges of managed service providers

Managed service providers have some challenges as well, for example:

• Not all MSPs offer security measures. Many MSPs do not have a major concern on cybersecurity.
• Dependent on third-party organizations. Organizations that use MSPs for daily tasks may form a reliance on them. If the MSP fails to follow the SLA, the organization could experience downtime or other issues.
• Waiting on a response. It may take time until MSP respond to an issue.
• Potential upselling. An MSP may try to upsell an organization on technology or services.
• Inaccessible information. An organization's information may not be freely accessible if the MSP is using a proprietary tool to manage and monitor its infrastructure.

Pricing model for managed service providers

Managed service providers usually use one of the following pricing models:

• Per-device. The MSP charges the customer a flat fee for each device.
• Per-user. The MSP charges a flat fee per user, include users who use multiple devices.
• All-inclusive. The MSP charges a flat fee for its IT infrastructure support and management services.
• Tiered. Organizations can choose the bundle of services that best fits their needs. This is typically a favored pricing model for MSPs.
• Monitoring-only. MSPs only provid monitoring and alerting services.

In each pricing model, the customer pays the flat fee on a regular basis, often monthly. Such pricing methods let MSPs sell services under a subscription model. This approach provides the MSP with a monthly recurring revenue (MRR) stream, in contrast to IT projects that tend to be one-time transactions.

MRR differs from other business models, as providers pursuing the break/fix model, for example, usually price their services on a time and materials basis. They generally bill an hourly rate for repairing a customer's IT equipment and charge for parts or replacement gear.