Managed service providers offer management services covering application, network, and enterprise system. The pricing transaction between MSPs and clients is made using a pay-as-you-go model. Thus, the third-party company caters to clients without their own IT department or experts. Improvement of the daily IT operations and maintenance is one of their main job descriptions.
In its earliest form, MSP is only about managed IT services, which includes IT infrastructure management. However, more encompassing solutions have started to be offered to MSP clients. This makes this third-party business even more essential and relevant for both small and large-scale companies. MSP services now cover remote management and monitoring, cloud storage, mobile device management, and IT security solutions.
Managed Service Providers Business Relevance and Benefits
Through the years, the importance of outsourcing a managed IT service is a proven fact across industries. Enterprises outsource a third-party business if they do not have a regular dedicated IT team. The usual job descriptions of these experts include handling the IT development of the company. They also managed the maintenance and break-fix, which an IT department is tasked for.
Start-up and small to medium enterprises usually outsource their IT people, which then works remotely for a fixed pricing rate. Such a decision is crucial because outsourcing enables these businesses to cut off their IT budget. On top of being cost-effective, hiring third-party managed service providers enables them to focus on their core business.
Subsequently, it is not only small and medium companies that benefit from MSP outsourcing. That’s because large corporations have likewise joined in the bandwagon. For instance, government agencies contract MSPs whenever there are hiring and budget limitations.
MSPs on the Right Business Track
You are definitely on the right business track if you are a managed service provider. The need for MSPs is increasing more and more over the years, thus, making this business completely in demand. For some companies, MSPs are indispensable and their absence can gravely affect their companies.
In 2020, the IDC made a projection that the US market will spend up to $114.5B on managed service providers. This is a huge increase from the 2019 projection of $112B. Most importantly, there is an optimistic view for MSPs in the future especially its performance over the next years. This is on top of having a clear stance on the industry’s present state on the market.
Why Managed Services is a Confident Industry
The optimism in the MSP market is from the numerous opportunities that new and innovative technologies offer. Moreover, managed service providers also enter new market sectors, which means business expansion. Consequently, these opportunities are deemed instrumental in increasing the profit margins of MSPs.
Other new potential streams for MSP revenues include emerging technologies such as artificial intelligence (AI). The Internet of Things (IoT) along with drones are also possible earning opportunities. Nevertheless, the majority of MSP revenues are still dependent on traditional services. This will include conventional networking and connectivity with others.
In fact, networks and connectivity are the core and foundation of an MSP business. Moreover, they are the door to better retention, top-quality experience, and most importantly, business profitability. No wonder options such as joining an MSP community will continue to be a brilliant move for MSPs.
Not Getting More Profits? Here’s Why…
Marketing is the most critical strategy for MSPs to create awareness of their services, which leads to prospects and conversion. If you feel that your MSP business is not getting more profits than expected, look into your marketing campaign. Strategize your marketing plan starting with good networking. You can do this by joining MSP communities where you can find one of the largest networks of MSPs and IT vendors.
Unsuccessful Partnerships Ruin MSPs
Successful partnerships contribute to the sale, effective support, and distribution of 95% of MSPs and their products and services. However, establishing and maintaining a symbiotic relationship with these partners is the challenge. The best way around this issue is to take your time in assessing potential partnerships.
Evaluate all your potential partners and prospects as well as their resources. The best option is the one that can provide superior support to your MSP program. Other qualifications include tools on sales enablement, management, and critical product distribution. Draft your terms of the agreement and discuss it with your prospective partner. The best partnership is downright profitable and favorable to both parties involved.
Insufficient or Underperforming Staff
Managed service providers require the right amount of staff or personnel to operate their business. Moreover, these people in your MSP team must have the proper eligibility, experience, and expertise. One of the reasons why you are not reaching your profit goals is that you are understaffed. On the other hand, you may have the staff but your people are not being productive or performing well. MSPs should have standardized performance indicators as a solution. The success and profitability of your business depend on everybody in your team. Identify staff weaknesses and do correction measures to remedy the issues found.
5 Proven Steps to Boost MSP Profit Margins
Ensuring your business growth as managed service providers does not happen overnight nor is it a walk in the park. It requires time, energy, and commitment to make your business grow and earn profits. Here are five proven and tested ways to boost your profit margins today:
1. Vendor Assessment
Partnership with the right IT vendor makes both MSPs and vendors successful in their respective businesses. However, collaborating with the wrong one can have significant damage to your company. Thus, you need to carefully evaluate the vendor particularly their pricing and requirements.
Sufficient MSP profit margins may not be delivered if you make your decisions according to familiarity with the IT brand. There are other important elements to consider, which can significantly affect your profit margin. Re-check the vendor requirements and pricing especially vendor licensing models.
The cost of hardware should support both present and future customer quantity. The best IT vendors have good relations and programs for their MSP partners. They make sure that the partnership offers mutual benefits and success.
2. Realistic Service Approach
Managed service providers offer an extensive array of services such as software migrations, hardware updates, and helpdesk services. More and more MSPs are expanding their services and solutions, which means higher profitability. You can offer more but make sure that you are proficient enough to deliver. Moreover, decide on what services you can and cannot do.
Another effective way to boost your profit margin is to take advantage of MSP solutions that do not require man-hours. Such ongoing services will not cost you any negative impact on your balance sheet. Plus, it can help you earn easy money as well.
3. Monitoring and Automation
The best tools and assets for managed service providers allow them to manage, track, and monitor their end-users or clients. Some automation tools are available from IT vendors that you can partner with. Automated services allow MSPs to prioritize and manage their client’s businesses. This will include service delivery, billing, contracts, customer management, and more.
Automation is an MSP’s best friend because it shortens your service time and offers faster deliverability. Thus, automated service gives you time and in turn, time is money. Even if clients keep you longer than needed, they should be worth your time.
4. High Margin Solution Upselling
You can only upsell high margin solutions with established customer trust. For instance, you can offer an upgrade of an entry-level service. Upgraded solutions are more comprehensive and complex services. It is a surefire profit-boosting technique as most clients that started with basic network services grow. As they grow, so does their service requirements particularly network infrastructure.
Other service upgrades that managed service providers may offer include more storage and app services. This will include extensive infrastructure management, VOIP, and end-users’ solutions. Making this happen first requires you to establish rapport, trust, and loyalty with your MSP clients. All these lead to long-term and high-profit margins.
5. Market, Market, Market
Marketing your MSP services also means expanding your network by joining an MSP community. Adding a new client ensures the bloodline of your business and though this sounds simple, it is actually a daunting task. Sell your managed services to the right clients, starting with an effective and aggressive marketing campaign.
The first thing you need to do is to identify your strengths and what services give you the most profit. Develop your brand, highlighting what sets you apart from other MSPs out there. Maximize all the marketing channels that can boost your reach as well as your profit goals. Check out “managed service providers near me” and see how your competitors do on their marketing campaigns.
Managed service providers have an optimistic future in the industry that recognizes their value and indispensable role. Establish your brand and services as well as master your craft to attain authority and expertise. Excelling in your craft opens the door to more business growth and ensures your profitability upfront.
Discover how joining the MSP community of CWDash can guarantee a significant boost to your profit margin as managed service providers. Access our free tools to reach your business growth and success. Schedule a consultation with our MSP experts today!