Managed Service Providers (MSPs): Types, Advantages, Selection and Trends

What is a Managed Service Provider (MSP)?

A managed service provider (MSP) is a company that offers a portfolio of various IT services. The MSP then implements these services for its clients as an external service provider over an agreed period of time.

Typical managed services of an MSP include topics such as

• IT infrastructure
• Applications
• Databases
• Cybersecurity
• Cloud services

But managed service providers are also active in other service areas such as compliance, training, buildings and personnel.

The cooperation between MSP and company is regulated by a contract, the core of which is the so-called Service Level Agreement (SLA). Here, the contracting parties stipulate the essential points such as response times, downtimes, etc.

Since when have Managed Service Providers existed?

The term and the business model of the managed service provider have been around for almost 30 years. Managed services came into focus in the IT world in the 1990s with the ever-increasing complexity of information technology. Companies that lacked the necessary (and often highly specialised) IT expertise now brought the necessary expertise in-house via external service providers.

Over the past three decades, the managed service provider model has become increasingly differentiated. The range of IT services has expanded, especially in recent years, with the triumph of cloud-based solutions and the associated technologies.

What is the importance of managed service providers in today's business?

The importance of Managed Service Providers has increased significantly not only for internationally positioned corporations, but also for SMEs. The takeover of central and essential IT services by an MSP enables the commissioning companies to concentrate on their own core businesses, to strengthen the associated competences and to become more productive and efficient.

Because managed service providers must always be at the cutting edge of technology, their clients also benefit from this technological edge.

One driver for the growing importance of MSPs in the global economy is the high pace of change in an increasingly digitalised business world. In this increasingly volatile environment characterised by ups and downs, crises and discontinuity, the individual offers of managed service providers guarantee companies maximum flexibility and scalability in all directions. Those who can react flexibly and act proactively have a clear advantage.

What types of managed service providers are there?

Managed service providers offer their customers a broad and, above all, constantly growing range of IT services. This includes typical areas of IT, which we briefly explain below.

A core task of the MSP is the management of the IT infrastructure of the commissioning company. The IT infrastructure forms the core of the IT and consists of servers (cloud or on-premise), networks, storage, etc., which are managed by the managed service provider on the basis of the agreed service level agreement.

In the field of network management, the managed service provider is primarily concerned with providing the customer with a stable, secure and, above all, efficient network that runs smoothly. It is essential that the requirements of the company are taken into account: Are there already network policies that need to be implemented? Which settings need to be changed to guarantee optimal performance and security in the network? How can network settings be optimised so that communication runs securely and smoothly? The managed service provider takes care of these and other questions - such as troubleshooting, maintenance, data backup, disaster recovery and access control.

Application and database management, on the other hand, is all about flawless performance, high security and availability of applications and databases used in the company. The goal of the managed service provider is to ensure that the applications run as smoothly as possible.

In times of pressing cybersecurity problems, the topic of IT security is also becoming increasingly important. Secure data and secure data storage are essential for the success of a company. The managed service provider implements, manages and updates security solutions to provide the highest possible protection. Accordingly, MSPs must always be up to date on security topics such as firewall, antivirus and intrusion detection systems.

MSPs also support their clients in migrating IT to the cloud. In this cloud service management, they offer cloud-based services such as Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS). They manage the cloud infrastructure and always ensure that it is secure, scalable and efficient.

What other services do managed service providers offer?

Beyond the typical IT services, managed service providers offer other services that are also interesting for many companies. For example, they can assist with compliance regulations and strict data protection requirements.

Some MSPs also offer services such as helpdesk or end-user support, where possible problems or questions around IT can be clarified directly.

Managed service providers also offer services in the areas of buildings and training. Here, too, the aim is to relieve companies of administrative and organisational tasks to a large extent. Would you like some examples?

In building management, MSPs take care of the flawless operation of the company's buildings - from energy-efficient energy supply and economical lighting to relevant security systems.

With training management, companies can place the entire life cycle of training and education in the hands of a suitable managed service provider. The provider then takes care of the organisation, planning and delivery of company-relevant training. MSPs can also take over the provision, implementation and management of digital training platforms.

Things get a bit bigger when managed service providers also take over the strategic IT consulting and IT planning of their customers. They then support companies in the search for suitable technological solutions based on the defined requirements. They evaluate these technologies, plan them and also advise on budgeting.

How to choose the right managed service provider

How do you find the right managed service provider for your company? By first being clear about two central questions:

Which services do I want to have covered by an MSP?

What are my company's cooperation requirements?

Step 1 - What are my requirements?

First, take an honest inventory: What is the state of your IT? What are the minimum requirements it has to fulfil for your business to be successful in the long term? Which competences do you lack in this context and which ones do you want to book externally? Which services do you need to be able to fulfil the defined requirements?

At the beginning, also clarify the IT budget and a possible term for the cooperation with a managed service provider.

Step 2 - Which MSPs are eligible?

Now it's time for the research phase. Use the web for an initial overview and create a list of potentially suitable providers based on websites and online customer reviews. Pay attention to the following facts: How long has the provider been in business? Does the provider operate regionally or globally? What languages do the staff speak? Are there relevant case studies?

After that, go to your network and get further assessments of possible MSPs.

Step 3 - What technological competences do the providers bring to the table?

A key requirement when it comes to IT services. For this you definitely need the professional support and assessment of your own IT. Does the service provider have enough experience in your industry? Are there customer references from which you can derive relevant information? Has the provider possibly entered into cooperation agreements with important technology leaders or does he have certifications in an area that is important for you?

Step 4 - How does the provider deal with the issues of security and data protection?

What security guidelines does the MSP offer you? What security standards and certifications does it have - and are these sufficient for the requirements of your industry?

Step 5 - What are the service level agreement (SLA), key performance indicators (KPI) and cost model?

The SLA and KPIs are at the heart of the contract with an MSP. Therefore, you need to check this information carefully.

• What are the reaction times like?
• At what times is the MSP available?
• What does a possible escalation procedure look like?
• How are solutions to problems defined?
• What scalability does the MSP offer you?

And last but not least: How is the cost model of the MSP structured? Is there a monthly base fee? Do you only pay for the services you actually use? Are there extra costs and fees in special cases that you have to take into account?

Now you should be able to find a suitable service provider for your company's needs from a short list of managed service providers. In the last step, conduct interviews with your top candidates and clarify any open questions, preferably in a direct and personal exchange.

What advantages do managed service providers offer?

The advantages of managed service providers for modern and technology-open companies should have become clear. We summarise them again for you here.

Working with a managed service provider can save you fixed costs and give you control over your IT costs. You know from the beginning of the cooperation which IT budgets you have to expect for a fixed period of time. Planning and controlling the IT budget becomes easier. You save on cost-intensive training for your IT staff and on investments in new hardware and its maintenance.

This results in another advantage of MSP. Your internal IT department can fully concentrate on its core competencies. It becomes more efficient and all departments benefit from it.

Another positive aspect for your HR: they don't have to recruit highly specialised IT specialists for the company in a labour market that is almost empty.

Managed Service Providers are not the eternal lactating sows - but they almost are! They have up-to-date technical expertise and can therefore best support your company in technological matters.

Global markets are subject to constant change. What fits today may not be enough tomorrow. That's why your company needs a high degree of adaptability when it comes to IT. If your company grows strongly due to changing market conditions, you need to be able to rely on your IT infrastructure not falling to its knees. This is guaranteed by managed service providers who, thanks to outsourced services, can usually provide you with fast and suitable scaling options.

Not only since the introduction of the GDPR do companies have to take a precise look at the topic of data protection and data security. The requirements are constantly increasing, also due to the introduction of new regulations and laws. These also quickly touch on the topic of compliance. Well-positioned managed service providers support companies with security and compliance issues. Above all, with the right technology that noticeably reduces your risks.

If all these points are part of the service level agreement, they are guaranteed services for which the MSP must answer.

By using a managed service provider, you also support your HR. In a competitive labour market, HR no longer has to recruit highly specialised IT professionals - they work for your MSP. And thus also for you.

Are there challenges in working with MSPs?

The one-sided dependence on a managed service provider can prove to be particularly problematic. Therefore, the selection of the provider is of great importance. Here it is important to strike a balance with care. It is advisable to check the conditions and agreements laid down in the service level agreement at close intervals and to point out any problems immediately. Some MSPs exclude the risk of vendor lock-in from the outset.

Furthermore, it must be ensured that you retain control over your data and that it is absolutely secure with the MSP, because sensitive company data may also be transferred to your service provider. The MSP must therefore have implemented appropriate security measures and policies to ensure the confidentiality and integrity of your data at all times.

It is also important to put the communication between your company and the MSP on a firm footing. If your service provider is located in Asia and communication becomes problematic due to time differences or language barriers, challenges can arise. It is therefore important to clarify the communication channels and escalation paths in order to avoid possible misunderstandings.

The current very difficult situation on the IT labour market also poses problems for the MSPs themselves: they cannot find enough suitable staff or lose planned capacities due to the departure of capable employees. Here, a tool like equipme can help to efficiently set up and organise the cooperation.

These are best practices for a successful MSP partnership

In order for your company to set up the most successful collaboration with a managed service provider, you should take a look at the following best practices. Although they do not guarantee success, they have proven themselves in practice.

Communicate transparently and clearly

Define at the beginning of the cooperation which channels will be preferred for communication. Continue to communicate your expectations of the service provider. Define contact persons for all areas on both sides and describe possible escalation procedures. Make sure that the MSP has also received and understood this information. Set up regular meetings and ensure that you receive reports from your managed service provider.

Monitor consistently and give concrete feedback

Based on the jointly developed SLA, your own IT department should permanently monitor the work of the managed service provider. For this, goals such as response times and availability must also be measurable. Otherwise, the best monitoring is useless. Give timely feedback on the reports and on any problems that arise. Also clarify optimisation possibilities with the service provider. If both sides see themselves as partners, a trusting cooperation can develop.

Adapt cooperation to changing requirements

Nothing is as continuous as change. If your requirements change, the MSP must follow suit. That's why you should involve the service provider - if possible - in possible new plans at an early stage. These may involve technological upgrades or even changes to the IT infrastructure. The main factor here is the scalability of the IT services to changing conditions.

What are the future trends for managed service providers?

Digital service models benefit greatly from digital developments and trends, which in turn open up completely new options. However, it is not only the MSPs who benefit from these, but primarily the companies as well. We present important trends for managed service providers.

In order to maintain their own future viability at the highest possible level, managed service providers are also dependent on their business model functioning as smoothly as possible. Digital tools such as equipme help here, enabling MSPs to significantly relieve the burden on internal resources and to make cooperation with the customer even more transparent so that they can use their time for the essentials. Equipme makes it possible to standardise processes and services. All important assets and costs are managed in one central location.

A central trend with upward potential is automation and the optimisation of processes in managed services. If processes are not only digitised but also automated, IT systems can be monitored in real time and the necessary software or hardware resources can be provided more quickly. The advantage for companies is obvious: the speed is increased, the susceptibility to errors is reduced because manual processes are a thing of the past.

Closely related to this is the hype around artificial intelligence (AI). Managed service providers can use AI to automatically correct errors that occur and, in the best case, to predict problems so precisely that they no longer occur. Keyword predictive maintenance. Here, thanks to AI, it is recognised when the hardware or a device needs to be replaced, updated or repaired. Downtimes are thus reduced and companies save costs.

Furthermore, companies are already benefiting from hybrid and multi-cloud environments. These combine public and private cloud platforms as well as local infrastructures. MSPs integrate and manage these environments so that resources can be used seamlessly and efficiently.

MSP solutions can also be important for the increasingly important Internet of Things (IoT). The IoT needs the appropriate IoT services for its smart devices. The enormous amounts of data that are produced, sent, received and analysed in the IoT require edge computing. A strategy where IoT data is collected and processed at the edge of the network - instead of sending it to a data centre or cloud.

Frequently Asked Questions (FAQs)

What is a Managed Service Provider (MSP)?

A Managed Service Provider (MSP) is a company that provides and manages services for other companies. The focus is on IT services. But other areas such as compliance or training can also be taken over by MSPs.

How does an MSP differ from traditional IT outsourcing?

In classic IT outsourcing, a company's IT is outsourced to an external service provider. The internal IT or its positions are eliminated. When working with an MSP, the company's own IT remains intact, only certain, usually specialised and highly complex tasks are taken over by the managed service provider. The company's own IT can concentrate on the basic work and also control the work of the MSP on the basis of a service level agreement.

How do you choose the right MSP for your company?

First, one's own requirements must be clearly defined. The research involves evaluating the technological competences of MSPs and assessing their skills and experience with topics such as cyber security and data protection. In the service level agreement, it is important to define measurable key figures and services, which then form the contractual basis for a cooperation.

What are the advantages and challenges of working with MSPs?

The most important advantages for companies in working with MSPs are cost savings, relief for their own IT department, high technological competence, reduced risks in terms of data protection, compliance and security, guaranteed services thanks to SLA and flexible IT scalability. The dependence on an MSP in technical terms can prove to be disadvantageous; risks can increase if the MSP cannot implement the agreed service package.

What trends will influence the future of MSPs?

Key trends around MSP include artificial intelligence (AI), process automation and optimisation, hybrid and multi-cloud solutions, edge computing in conjunction with the Internet of Things (IoT).