Why You Need To Start A Managed Services (MSP) Business in 2021

02/23/2021

Managed services are growing in demand. Especially ever since the global Covid pandemic where social distancing rules came into place. Many businesses have had to shut their brick-and-mortar doors and instead open up digital doors. The transition from an offline world to an online world has not been easy for many of these businesses. Some continue to struggle, some have shut down but there are many who have achieved greater success from making an online presence.

Why does this matter to individuals or companies looking to become managed service providers (MSPs)?

Think of it this way. There are mainly two types of clients who require the services of an MSP.

Clients with limited IT knowledge and need professionals to manage their systems.
Clients who have large businesses that require dedicated IT professionals to manage their systems.

It’s true, many clients will settle for a break/fix service. But in an era when IT can make or break a business, it’s a huge risk to wait for something to break before calling someone to fix the problem.

Businesses now, more than ever, need an MSP to watch over the IT side of their business. Around the clock!

And that is pretty much what we are going to talk about today. Well, we are going to cover two main things:

The benefits of managed services to your own computer business.
The benefits of managed services to your potential and current clients.

So if you’re currently operating a Break/Fix computer business, then keep reading to find out why you need to switch to managed services.

Alternatively, if you’re thinking of starting a computer business for the first time, then this article will offer insights as to why building a managed services business will be the best thing you do in 2021.

Starting a Managed Services Business

Here’s what we’re going to cover today:

What is Managed Services
Things to Consider When Starting a Managed Services Business
The Managed Services Market
MSP for Large and Small Businesses
Why Managed Services Over Break/Fix
MSP Benefits for Clients
MSP Benefits for Your Computer Business

BONUS PODCAST: Why Managed Services

What is Managed Services

There are different concepts about being a Managed Service Provider. Some think that it is a sure way to lose money, especially if it is offered in an all-you-can-eat package. This means that eventually, you become someone else’s slave giving non-stop tech support. Some also think that it’s like an insurance policy, and you gain more money if there is nothing to fix. However, this approach makes your managed services hard to market. It gives the impression that your client is just wasting money.

Managed services are fundamentally the maintenance of the operating system and software. It is a business model that allows you to define the boundaries of your services. There are other ways to render your maintenance service aside from the all-you-can-eat approach. Also, managed service is ideally proactive in nature. It catches signs of software or hardware trouble over the horizon and remedies it. So it is not like insurance but has real value to the client.

It is important to have a clear insight into what being a managed service provider is all about. It is a doable and flexible business model. With it, you can even still charge for jobs that are outside the scope of your contract. But before doing that, you need to consider several things. This brings us to the next point.

Things to Consider When Starting a Managed Services Business

Before you jump on the bandwagon, it’s best to sit down and think things over. Your transition to managed services does not happen overnight. And it wouldn’t take too long either. Being in business for quite some time is already an advantage even if you are a solo technician. It means you have already built your reputation while doing break-fix jobs. And it will be significantly easier to market your managed services to your previous clients.

Decide if this is for you

The first step in becoming a Managed Service Provider is to think carefully if this move suits you. This is a big leap when it comes to your business mindset. List all skills and support that you are currently able to give. Run a financial report of repeat SMB customers and see how much they spend a year for break-fix jobs. Would it be more practical to offer managed services for home users rather than to SMB? Will it be sustainable? If you are a one-man business, what network size can you ideally manage? These careful considerations will help you decide if MSP is a sound business move for you.

Research your customer base

Understanding the needs of your clients is the key to being a successful MSP. And then offering the right services to help them where it matters most is the right strategy. You can dig deep into your market by asking your existing clients the right questions. What network technology are they using? Do you have the skillset to support their IT infrastructure? And what are their current concerns with their system? The answers will be your building blocks as you design service bundles for your managed services.

Choose the right tools

You may already be using several tools in your current break-fix setup. And you may have already developed your own niche of clients with your IT expertise. Focus on this strength when you offer your managed services. Additionally, you would want to look into new tools to be an efficient MSP. These are remote monitoring and management tools, finance software, and a system for tracking time and billing. Be careful not to spend too much time tinkering with tools though, they won’t get you any clients on their own.

Stand by your decision to offer Managed Services

You have to be thoroughly convinced that this is the next level initiative your business should take. You have to be sold with the idea yourself that becoming a Managed Service Provider is the way to go. This attitude will anchor you later on when making business decisions. It’s best not to slide back to break-fix. Your resolve will also help convince your clients when you sit down and present your MSP plans.

We all know that before diving into any business venture, it is vital to survey the market before dropping a significant amount of your eggs in that one basket.

So let’s now take a glimpse into the managed services market.

Managed Services (MSP) Market

The managed services market is currently taking hold of small businesses and continues to surge in overall growth. According to an annual MSP Global Pricing Survey by Kaseya, a market leader in IT management software, the majority of MSPs have experienced 15-20 percent growth for the past three years. The shift of small businesses to managed service providers is attributed to essential functions like network security, disaster recovery, and application management.

Additionally, small businesses do not have to worry about hiring a large in-house IT team as they expand. Flexible pay-as-you-go payment plans from managed services are more cost-effective as small businesses scale up.

If you are doing break-fix and contemplating making the shift to managed services, you’re going to learn why it’s the right way to go.

Why Managed Services Works for Both Large and Small Businesses

Both large and small-scale businesses that are running busy IT environments, often find that they do not have enough manpower to successfully do the job.

Companies have to deal with finding the right talent and making sure they are qualified. But these companies are then having to deal with that talent leaving, which is basically knowledge walking out the door.

The result:

A long-term loss to the bottom line.

In comes the third-party professionals. The top IT dogs are going to make a big difference, by offering solutions to companies that don’t want any more headaches of finding and nurturing IT talent.

The benefits of course go both ways, so a small tech firm will do very well if they can win some managed service contracts.

The Big Question: Why Managed Services (MSP) Over Break/Fix Services?

There are 3 significant factors that highlight the benefits of shifting your computer business from break/fix to managed services.

Let’s take a closer look at these factors.

1. Higher Demand for Security

Cybersecurity is becoming a growing concern for businesses every year. In February 2016, Hollywood Presbyterian Medical Center paid a considerable amount to regain access to its files after they were encrypted in a ransomware attack. In that same year, KeRanger became the first strain of ransomware to target Apple devices. And in May 2017, CNN reports the WannaCry ransomware to affect 99 countries. Europol called this attack to be on an “unprecedented level and requires international investigation”.

With all the security threats, businesses are naturally concerned. They need help in navigating the increasingly complex landscape of network and data security. And you can fill this need by offering a variety of security services, such as email security, spam filtering, and firewalls. Backup services are also equally important. Restoring to a recent backup is the only way to recover from ransomware without paying the hackers.

Also, the essence of managed service is preventive maintenance. This means that the network is regularly assessed, and monitored for problems. MSPs are also keen on keeping all firmware updated to lessen vulnerability in the network.

Reducing security threats is one of the top reasons why businesses turn to managed service providers for IT support.

2. Rising Need for Backup Solutions

Data security is another prime reason for businesses to hire managed service providers. Previously, the focus was only on how to prevent and solve IT security issues. There was minor consideration when it came to backup solutions. And some of these solutions may not necessarily be effective in protecting or recovering data. In this modern age, hackers are becoming increasingly proficient at what they do. So backup solutions offer effective ways for businesses to rebound from security breaches, which includes the popular ransomware attacks.

But a backup solution is not only for compromised security. It also provides businesses a continuity plan to recover from disasters. This requires a backup solution that stores data at another location.

Data storage at a different location has prompted the cloud to gain increased popularity. Not too long ago people were unaware of its potential to fill a business need. And businesses were skeptical about security and privacy in the cloud. They were then reluctant to make the switch. But with more and more reputable companies taking up the cloud mantle, businesses are now comfortable with the concept of cloud storage and applications.

However, most small businesses don’t have the technical expertise needed to make the transition. Some backup solutions may work independently from the cloud. And some may work together with it. It can be confusing for businesses to choose the right solution that fits their business need. Most businesses find it to be more convenient to hire an MSP to take care of their backup solution.

Check out a comparison we made with online backup services.

3. Recurring Revenue in Managed Services

Of course, businesses thrive when there is a steady stream of cash flow. Revenue is the life-blood of running a business. If you don’t have a solid recurring revenue model, you’ll find yourself at a competitive disadvantage. In break-fix, you don’t get paid unless something breaks. This can be a financial roller-coaster ride. And a couple of weeks with nothing broken to fix can cause your business to wither into a corner.

In the MSP model, renewable contracts with your clients guarantee a predictable income, which results in better cash flow management. This more predictable revenue from month to month makes managed services more attractive to traditional break-fix providers and VARs. Instead of waiting for something to break or need to be replaced, proactive service guarantees money from month to month, which is why this approach is becoming increasingly popular. And recurring revenue was the top contributor for the growth of managed services from the previous years

The trend in the IT support market is shifting. More businesses are looking into network security and backup solutions, which is a huge opportunity for managed service providers. The steady recurring revenue also offers financial security to MSPs, as opposed to break-fix. These three solid factors are what fuel the growth in the managed services market.

If you haven’t made the switch to managed services yet, then why not check out our eBook Transition to MSP: Getting Started Guide to help you with your journey.

Now here’s a list of the benefits managed services can offer your customers, so you can recognize and sell the solutions.

Why Managed Services Will Benefit Your Clients/ Customers

There are many reasons for your potential customers to consider managed services.

Here are just a few for you to reflect on:

Clients Have More Control Over IT Costs With Managed Services

When you are dealing with purchasing hardware, software, and network components, you already know that you will have to factor in the cost of upgrades, support, and repairs. You will also have to deal with the safe backup of company data. The cost of maintaining IT infrastructure for the daily efficient running of an organization runs into the thousands, and for a larger corporation, it can be millions. If you want to be able to control your cash flow and have a predictable IT cost, managed services can help you deal with that.

Managed Service Providers Offer Knowledge as a Service

This is an interesting part of what managed services can do for a business. If a business needs a System Administrator with knowledge of Windows and Linux Operating systems, you will either have to pay a lot to find one or you will need to spend time training the person. You also run the risk of training a good employee and seeing him or her leave for greener pastures when offered a better salary. This knowledge drain can cost money and time. When you let others deal with the knowledge and update, you are left with more time to deal with management and project oversight.

IT Setups Are Faster With Managed Services

If a company wants to set up a secure internet connection they don’t want to deal with buying your proxy server, firewall hardware, and software, they can get an external company to do the setup. They will gain time because the external party will already have the knowledge and it can quickly connect their company in a secure manner to the internet, and also allow a VPN or other encrypted medium to access remote data.

The last example of time-critical applications highlights the fact that managed service is a great way to pass on some of a company’s daily management to a specialized 3rd party while they reduce the overall cost of IT administration. The problem of connection latency and fear of security breaches still contribute to why some might be wary of managed services.

The future will partly be a mixture of both local administration and managed services. But the trend shows that more and more companies are going the managed service route due to the wonderful benefits.

Why did I just explain to you the benefits managed services aka MSPs can offer to your clients? Because as a business, it’s important to understand how your services can benefit your clients. That way, you know how to pitch your computer services to potential customers and win more contracts.

Now let’s turn to the benefits that managed services can bring to the table of your computer business.

Why Managed Services Will Benefit Your Computer Business

Here are the 6 key benefits to becoming a managed service provider over offering break/fix services.

1. Steady Income

One of the greatest benefits for your business is that when you have a managed service or maintenance contract, you know that the income will be steady. This is great for cash-flow management and predictability. It’s not much fun going in cycles all the time and working on “one time and done” type of jobs. Managed service contracts will help you become a more solid business, not to mention you will become a cog in your customers’ business machine, making your business even more secure.

2. Stability

This ties in with the first point, but managed service agreements will give your business more stability as you know when your next job will be. Obviously, the more contracts you get, the more stable your business will become.

3. Better Marketability

If you can offer solid managed services and provide reliable services to other businesses, word will spread. It’s one thing to win in the residential market, but if you can win in the business market and prove that your services can make business more efficient and profitable, your business will become quite valuable.

4. Better Positioning for Long-Term Growth

The market is seeing more and more companies using cloud services and third-party vendors to handle the non-core parts of their business. It makes sense that the trend of using third-party managed services will continue, making this market wide-open for solution offerings.

5. Better Workload Management

It can be a challenge when multiple broken computers at different locations need your immediate attention all at once. You may need to halt whatever you are working on and physically go to a client’s site. When this happens, you are likely to be forced to prioritize one customer over another. This out-of-control workload can lead to client churn, and you potentially lose more customers than you are bringing in.

But with managed services, you can strategically schedule your workload with your client. Its preventive maintenance nature allows you to spot problems on the horizon. And then deal with the threat before it becomes a full-blown disaster. You can even service clients remotely, which can save a lot of time.

6. Better Customer Relationship

A break-fix model incidentally associates your business with your customer’s inconvenience. This is regardless of how well or how fast you do your job. So to your customers, your business thrives when something goes terribly wrong with their computers.

On the other hand, you can be proactive as a managed services provider. You see potential problems and deal with them early. Your service reduces repair expenses in the long run. This way, your clients will view you as a steady and necessary cost of keeping their computers working. And they will see you as an important partner in keeping their business running.

Moving into the MSP model will not be easy. But it is a consistent, stable, and profitable business model. You will be able to organize your workload based on your business strategy. You can avoid urgent repairs overwhelming your workload. The steady and consistent revenue will enable you to manage your finances effectively. And the proactive approach of your services will show your clients that you are a necessary cost for their business.

PODCAST: Benefits of Managed Services Over Break/Fix — hosted by Bryce Whitty

Here’s a recorded podcast with MSP Expert, Bryce Whitty, breaking down the benefits of offering your clients managed services.

Podcast: Play in new window | Download (Duration: 2:09 — 4.9MB)

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Here’s a Transcription of the Managed Services Podcast

Bryce Whitty here from Technibble.com. The other day I had a viewer ask why I am always talking about managed services. It’s a great question and a good idea to go back to basics about why we do what we do.

What Is Managed Services?

So managed services is basically an outsourced IT solution for most businesses. The most common service is looking after the systems and make sure they continue running properly. But a lot do consultancy work helping them with strategic planning, security audits, hardware lifecycle, that sort of thing. One of the big benefits of Managed Services over Break/Fix is having a steady income for you.

When you have a managed service contract where your client pays you every month, you know that income will generally be fairly steady. This helps you with your cash flow management and predictability. It also helps you to scale better and do things like bringing on employees since you know you’ll be able to pay them next month.

Break/Fix vs Managed Services

Break/Fix can tend to be a feast-or-famine for many businesses. Sometimes lots of things breaking at once, while other times nothing is. You are generally at the mercy of something breaking and if nothing breaks, you likely won’t get a call. Managed Services also has a greater capacity to make you more money, because you start to separate your time from money.

In break/fix situations you are getting paid by the hour or at least by the job. With managed services, the goal is to prevent problems from happening in the first place. You can set up automation so your client’s systems mostly look after themselves, and require little input from you yet you still make money. There are more advanced services of course, but remote monitoring is one of the most basic ones.

Managed Service Benefits to the Client

The benefits are better for the clients too. They have less downtime and more predictable IT costs. It’s also in your best interest to make things more reliable and take less time, versus the break/fix model where you are paid hourly. So in short: Managed Services give you more reliable income and allows you to scale.

If you are currently a break/fix business and are looking at migrating over to managed services, then you may be interested in this free e-guide to help get you started.