Who are managed services providers and how they help

What is a Managed Services Provider?

Managed Service Provider or MSP is a concept in which businesses outsource certain services to specialized providers. Any company that offers services focused on maintaining and operating the IT infrastructure and end-user systems is known as a managed service provider.

In the modern enterprise, the role of the MSP has evolved far past simple maintenance. An MSP is now a strategic partner responsible for delivering proactive, outcome-based IT solutions. They act as the “Chief Resilience Officer” for your technology, ensuring your systems are not just running, but are running optimally, securely, and in compliance with global standards.

SMEs are the target customer as only a few small and mid-sized companies have in-house IT capabilities to meet their demand. Hence many depend on obtaining the required expertise through their MSP.

What functions does an MSP perform?

Broadly speaking, service providers are individuals or entities that provide services to another party. As previously mentioned, the term MSP overwhelmingly applies to outsourced IT services. The following areas of business activity are regularly performed by MSPs: managing IT infrastructure and cybersecurity, technical user support and fully managed hardware and software outsourcing.

The modern MSP delivers services across three specialized domains: SecOps, CloudOps, and FinOps. These represent the complexity that has forced the death of the generalist IT manager:

SecOps (Security Operations): Continuous threat monitoring, managed detection and response (MDR), regulatory compliance (like GDPR or DORA), and vulnerability patching.
CloudOps (Cloud Operations): Cloud migration strategy, optimization of resource usage on platforms like AWS or Azure, and managing containerization technologies like Kubernetes.
FinOps (Financial Operations): Cloud cost management, reporting, and predictive budgeting to ensure clients are not overpaying for unused cloud resources.

The world of Information Technology is vast; therefore it is safe to assume that anything related to the provision of IT activities can be outsourced as you will see below in MSP examples.

Why MSPs are essential in the age of AI

The demand for MSPs is surging due to two primary market forces: complexity and scarcity.

The Cybersecurity Skills Gap: A single mid-sized company cannot afford to hire a full-time security engineer, a cloud architect, and a compliance expert. Yet, they need the expertise of all three to defend against advanced persistent threats. The MSP model allows businesses to affordably contract a collective team of specialists.
2. Complexity and Generative AI Readiness: As businesses seek to leverage AI, their data infrastructure must be pristine. MSPs manage the data governance, network speeds, and cloud environments necessary to make AI tools functional. Without a well-managed infrastructure, AI projects fail before they even start.

What is the MSP business model?

When talking about IT services, many will think of software updates and virus removal, however, these services only scratch the surface of those available. There are many options available to your business, Most MSPs operate with two kinds of offerings. First, there’s the project-based technical support service wherein an MSP is tasked with modifying or repairing a single problem, and that’s that.

The second most common service model is the subscription type, wherein organizations pay MSPs a standard fee for servicing their IT on a monthly, quarterly or annual basis, typically under a Service Level Agreement (SLA). Thereby, if something breaks during the subscription period, the MSP sends its team to fix the problem free of charge since the organization’s monthly fee covers it. Anything overtime or outside the scope of the agreement is typically compensated per hour.

The shift to a subscription-based SLA is critical because it fundamentally aligns the MSP’s goals with the client’s. In the old “Break-Fix” model, the MSP only made money when the client’s system failed. In the subscription model, the MSP’s profitability depends on the client’s system never failing. This incentivizes the MSP to be proactive, preventive, and focused on maintaining 99.99% uptime, effectively turning IT from a cost center into a predictable, fixed expense.

What is the state of the MSP market?

According to research, the managed services market will grow to $311 billion by 2027, almost doubling from 2021s $161 billion, buoyed by increased number of MSPs and the need for niche specialization.

It is estimated that the successful deployment of managed services by growing organizations help reduce IT costs by 25-45% and increase operational efficiency by 45-65% accordingly. Moreover, since COVID-19, the demand for cloud-based solutions has seen significant growth due to remote working models being adopted.

This growth fuels Niche Specialization, where MSPs focus on specific verticals (e.g., Financial Services, Healthcare, or Manufacturing). A vertical MSP understands the unique regulatory challenges (HIPAA, PCI DSS) and proprietary software of that industry, offering a much deeper level of expertise than a generalist IT consultant.

What are the benefits of an MSP?

Technology has come a long way since the latter days, and the reality is that most organizations today are not equipped to keep up with the pace of innovation. As a result, many find their IT to be reactive rather than proactive. Hence why so many multinationals have contracted MSPs who are specialized. Why so?

Contracting an MSP has several advantages and brings cost benefits, such as:

Avoiding downtime

MSPs can help adopt a proactive approach when it comes to critical systems; This is the foundation of Business Continuity. MSPs provide enterprise-level Disaster Recovery planning, ensuring critical data is backed up offsite and that systems can be restored within hours, rather than days or weeks, protecting revenue and brand reputation.

Gain access to experts

MSPs have experts for every vertical, each with years of experience; The Collective Intelligence of an MSP team allows clients to access a pool of specialized knowledge (e.g., firewall security, cloud migration, advanced threat hunting) for the price of one mid-level internal hire. This speeds up problem resolution by deploying pre-vetted solutions.

Access to technology

MSPs have the know-how to advise on the best applicable technology; Furthermore, MSPs own the licenses for sophisticated remote monitoring and management (RMM) tools and Security Information and Event Management (SIEM) platforms. This gives SMEs access to tools that would cost tens of thousands of dollars annually to license independently.

Cost efficiency

It is often more cost-efficient to hire an MSP than keeping it in-house; This efficiency is realized through the elimination of the hidden costs of internal IT: recruiting fees, training costs, retention bonuses, and the massive cost of downtime caused by a security incident that an internal generalist couldn’t prevent.

Easy to scale

MSPs can provide advice and adapt to the company’s decision when scaling up or down. MSPs facilitate organizational agility. Whether a company doubles its workforce for a seasonal spike or needs to launch a new department in a different geographic location, the MSP scales the necessary infrastructure (VPNs, cloud seats, security access) in days, not months.

Scenario: accelerating a startup

Consider “Company XYZ,” a financial startup that needs to launch its regulated digital payment platform in nine months.

The Problem: Company XYZ’s internal team consisted of two software developers and one part-time IT administrator. To launch, they needed three things: 1) a highly secure, immutable cloud environment; 2) continuous compliance reporting for financial regulators; and 3) 24/7 coverage for the payment gateway.

The MSP Solution: Company XYZ contracted a specialized MSP.

The MSP immediately deployed a cloud environment pre-configured for regulatory compliance (Security-as-a-Service).
They provided continuous security monitoring and automated log reports required for the mandatory audit.
The internal team focused 100% on product development, knowing the infrastructure was guaranteed.

The Result: Company XYZ passed its regulatory audit on the first attempt and launched on time. By outsourcing the compliance burden, the company saved an estimated six months in pre-launch preparation and avoided the high salaries of two full-time compliance and security engineers.

The selection framework

While benefits are clear, strategic leaders must mitigate the potential pitfalls of MSP relationships:

Vendor Lock-In: This occurs when a provider uses proprietary tools or poorly documents configurations, making it difficult to switch. Mitigation: Demand clear exit strategies, ownership of all data, and documentation standards upfront.
Cultural Mismatch: If the MSP is too focused on technology and not on user experience, they can frustrate internal staff. Mitigation: Test their service culture during the vetting process and insist on regular performance reviews that include end-user satisfaction scores.
Lack of Proactivity: A poor MSP acts like the old “Break-Fix” model, only responding to tickets. Mitigation: Ensure the SLA includes mandatory Quarterly Business Reviews (QBRs) and reporting on forward-looking metrics (e.g., optimization projects).

Are you looking for an MSP?

The right MSP can provide all the tools and services you need to keep your infrastructure in order. Think of them as an extension of your IT department, or for smaller organizations, you can consider using them as the IT Department, providing you with the expertise and resilience that your company is looking for.