Introduction
Starting a Managed Service Provider (MSP) business can be lucrative in 2023. According to a report, the global MSP market is projected to reach approximately $500 billion by 2027.
Another study suggests that European and North American businesses are expected to spend 11 percent of their MSP budget on backup storage and managed-to-host. Furthermore, ten percent of the IT budget will be dedicated to support and maintenance.
This indicates a healthy market with lucrative opportunities for Managed Service Providers.
But what is MSP, after all? How do you get started with a successful MSP business and access the market? A comprehensive guide will help you start an MSP business in 2023.
What is an MSP?
Information Technology has taken businesses by storm, bringing lucrative opportunities to explore. However, managing IT infrastructure can bring tremendous challenges. These cause the organization to lose focus on its core business objectives. This is where MSP comes into the picture.
A managed service provider (MSP) is a company or entity that provides ongoing IT support and management services. These typically involve handling an organization’s IT infrastructure remotely, partially or entirely, as mentioned in the SLA (service-level agreement). The scope of MSPs includes IT asset management, issue resolution, 24x7 monitoring, and network security.
Unlike conventional IT service providers, an MSP takes a 360-degree approach to manage an organization’s IT systems. On the one hand, they act as an IT consultant and provide professional advice to help clients make informed decisions. On the other hand, they devise strategies to mitigate their IT risks and make them future-ready to address technological disruptions.
As more and more organizations struggle to navigate IT challenges, they are opting for managed service providers. This provides greater scope for anyone pursuing start an MSP business.
Key challenges that MSPs face
The global pandemic has fueled the rise of cloud adoption and remote monitoring. Work-from-home is the new normal today. Hence, many organizations are now considering a hybrid IT model. At the same time, they trust managed service providers with their mission-critical IT processes, systems, and day-to-day functioning.
With a new partner and modern technologies, organizations are likely to face several speed bumps. Downtime, disheveled systems, and lack of training –are inevitable with the change. In this scenario, an MSP may face several challenges when managing its clients. Let’s understand these here:
1. Fast-changing consumer behavior
Modern organizations are now more educated and informed about technology than before. Often, they decide to partner with an MSP based on a cost-benefit analysis. This changing consumer behavior makes it more challenging for MSPs to pitch their services to organizations. Therefore, they need to brainstorm new ways to offer more value to the clients.
2. Cloud migrations
The COVID-19 pandemic has taken cloud adoption and remote work to their peak. At the same time, security vulnerabilities are increasing rapidly. This calls for organizations to migrate to the cloud. The Cloud is an effective way to boost collaboration, improve productivity, and increase data security.
However, it can be challenging for MSPs to adapt quickly to sky-rocketing demand for cloud migrations. Offering and managing various types of cloud-based solutions can be cumbersome initially. On the other hand, offering cloud services need a completely new approach. Therefore, MSPs need to spend time and effort in training.
3. Security challenges
With fast-paced technology advancements, addressing cybercrime has become one of the significant challenges for organizations. Technologies have become sophisticated and so have hackers. DDoS attacks, malware, and ransomware have threatened even the most prominent organizations, causing significant losses.
Keeping up with the clients' expectations to provide the highest security measures has become challenging for MSPs too. They have to identify potential security risks and countermeasures. Additionally, they need to train their employees to address dynamic and complex security threats.
4. Customer retention
The managed services market has become increasingly competitive today. In this scenario, customer retention has become one of the biggest challenges for MSPs. New managed service providers are mushrooming daily, posing tough competition with cheaper prices for the same services.
Hence, an MSP needs to deliver additional value to the customers. At the same time, it is crucial to building trust through constant and transparent communication.
5. Automation
To start an MSP business and achieve success, it is crucial to automate your processes. Automation helps increase productivity and reduce operating costs while focusing on improving customer support. However, one of the significant challenges MSPs face here is choosing the right automation tool.
Scribe is a 100 percent free tool (with Pro options!) that automatically allows MSPs to create high-quality process documents and eLearning content. Using this tool, you can curate training courses or devise process documents to seamlessly integrate modern technologies into the organization. There is also a wide selection of pre-designed Scribes to choose from in the gallery.
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This can help you start immediately and automate processes, such as creating eLearning courses or methods.
Here's one at work.
MSP best practices
When you start an MSP business, you are likely to juggle many things. The most important tasks among these are customer onboarding and managing security. Discussed are industry best practices that can help streamline your operations, reduce costs, and efficiently handle your tasks.
1. Create a roadmap for client onboarding
Onboarding a client is one of the significant challenges an MSP faces. Hence, there should be a clear roadmap that provides transparency of the tasks. This helps achieve two things – creating a schedule for your employees and devising a path that outlines the goals of your project. It allows monitoring the progress and ensuring that you are not deviating from the roadmap.
2. Perform a profit & loss analysis
As discussed earlier, the MSP market is highly competitive. Numerous MSPs are offering dirt-cheap services to sustain themselves in the market. Therefore, it is essential to perform a profit and loss analysis when you start a business; This will help you create a comprehensive pricing strategy. It should include the costs for each service or package you offer.
The strategy should also focus on your total operating costs, break-even analysis, and also how you quantify your ROI. Determine how much you should charge your clients. Remember, the pricing model should be practical, depending on your service quality.
3. Do a quality assessment
This is a crucial MSP best practice you should follow. Evaluating the organization’s operating environment is essential to understand the groundwork you need to do. This will also give you an idea of various disruptions and bottlenecks you may face when kickstarting the project. The assessment will also help the clients understand the expected project timeline and other factors.
4. Maintain proper documentation
Documenting business-critical information is vital that most MSPs often tend to neglect. The more information you have, the better it is. Gather information at all levels. Though, the data you collect during quality assessment and onboarding is a powerful knowledge base. This information helps make informed decisions and serve the clients better.
5. Identify & document repeatable processes
Managing repeatable processes is one of the top challenges for an MSP. To efficiently control everything and deliver consistent client services, identify these repeated processes and document them. Visuals, like flowcharts, work excellently in writing such tasks. This aids in training your team as well as reducing complexities.
Documenting processes can be time-consuming and cumbersome. You need a cutting-edge document management platform to help you create high-quality and detailed process documents. Scribe is a simple and intuitive tool that allows you to capture and share processes fast. The device is 100 percent free and enables you to create engaging process documents.
The tool allows you to create your process documents or choose from hundreds of Scribe Pages to start immediately. The Scribes cover critical processes, which you can save and use to document repeated cycles.
6. Switch to the cloud
With everyone adopting the cloud nowadays, make it your strength. Offering cloud services to clients may be a significant value addition to their organization. Furthermore, it can be an effective way to generate more leads.
7. Threat detection & data privacy
Another key practice that MSPs should follow is constantly monitoring the servers and network systems for vulnerabilities. Start with securing web browsing and emails. Other data protection practices to follow are preventing unauthorized access and maintaining stringent email authentication measures. You should also ensure that users aren’t accessing seemingly malicious websites.
Regular data backups, patch management, and installing an antivirus are some ways you can prevent threats and protect critical data.
Following these MSP best practices will help start an MSP successfully.
Steps to becoming a successful MSP
Becoming a successful MSP requires a certain degree of groundwork and strategy planning. This quick guide will help you determine the conceptual framework for your business.
1. Determine your skillset
What does it take to become a successful Managed Service Provider? MSPs typically have a background in technology and IT. So, how do you make yourself stand out in the crowd? Do you have any unique skill sets or training? Perhaps you have excellent hardware knowledge. Or you have completed a cloud engineering, data science, or cybersecurity course.
But merely having IT skills is not enough to become a successful MSP. Having a business-oriented mindset and skills in finance, business management, or marketing & sales is crucial. This knowledge will be vital, particularly when you start an MSP business.
2. What is your MSP offering?
An essential step in developing an MSP business plan is to determine your niche or the services you want to offer. While some managed service providers cater to a specific technology segment or industry, others serve a broad range of business types. It all depends on your technical skills and business know-how.
Although you may have expertise in various technical fields, it is crucial to determine which areas will get you a profitable business. To understand this, see what type of MSP services have the highest demand in your market. For instance, you find that the managed security services market is already saturated in your area. So, you can focus on other sites, such as managed networks or backups.
Some other factors in determining here are:
- In which areas do you have the best technical knowledge?
- Which type of IT services can you offer cost-efficiently?
- Do you need to purchase specialized software tools or hardware to provide the services?
- Will it be easy to find skilled human resources for the type of service you want to provide?
If you plan to provide more than one IT service, combining them in a bundle or package is ideal. This makes it simpler to create a service offering to the clients, and you can also streamline things for your business.
3. Determine your pricing model
To determine the pricing model, it is first essential to consider your business start-up costs. How much does it cost to rent an office, or would you offer managed services remotely? What resources do you need to start an MSP business? Would you work as a one-man band or need more staff?
Once you get the answers to these, determine the pricing for your clients. It should be entirely based on the current market trends and the type of service you offer.
4. Pick the right software
To be a successful MSP, you must invest in a broad range of software tools to provide high-quality and timely managed services. Make sure you choose wisely, picking the one that is easy to use, cost-effective, and delivers what it promises.
For instance, Scribe is a free tool that allows you to create and share process documents quickly and easily. You can create multiple Scribes for different MSP processes, combine, customize, and share them through Scribe Pages. From employee training to new technology rollouts or client onboarding, Scribe makes it easier to explain processes and saves time.
Conclusion
With these tips handy with you, get started finding y our clients. Build a solid web presence to let customers know about you. Ask for referrals to establish a client base once you start getting clients, onboard them successfully, and kickstart your MSP business.
