Most Managed Service Providers Will Fail

In today’s cloud-based business, Managed Service Providers (MSP) are becoming a niche technology business that should be succeeding beyond their wildest dreams. And yet, many up and coming MSP companies have fallen by the wayside. For anyone who is considering what kind of service they should be providing to get into this side of the technology service sector, understanding why these failures are happening is key.

Service is Changing


Let me use our business as an example of why understanding the underlying problems is so important for any MSP starting up today. In 1998 I started an IT business called New Zealand Computing Solutions which was an MSP before there was a word for it. At the time I was moonlighting managing servers for a monthly fee while writing software in my day job. I never had any desire to be a tech troubleshooter or to look after resident clients. But through my work with large corporations I could see a need for better relationships between small businesses, their IT providers and their other vendors.

I specialised in charging fees for devices which later became known as being a managed services provider. We never had as many clients as a tech troubleshooting company, but that was never my intentions anyway. Naturally, I wanted the tier one clients that paid their bills, saw what we were doing added value to their business and treated us well. Like most MSPs we charged based on the number of devices and the types of devices. However, in 2007 I realised two problems:

  1. Most companies did not feel that desktop had many issues. This meant they would rather troubleshoot for workstations and get managed services on the servers separately. It was less a question of who had fewer problems and more a perception of the risk being less for desktop. Whether that was a true perception is another story. 
  2. We believed our technology was there to service and help business. We did not see it as just an expense or as a replacement for people. But could I get our clients to see us that way?
Based on these I decided to change the way we offered our plans. We decided to make them less about the machines and more about who we serve - The people.

So since then NZCS has offered Flat Rate IT based on the number of staff. This is similar to the SaaS model used by software like EzPSA. If your client’s staff number goes down you pay less and if their staff goes up you pay more. We do have a minimum of 5 staff as it is just not economical to offer our services to less than that.

Our business model is now changed from being an IT consultant to a business consultant. We paid attention to what our customers wanted and by doing so we were able to to grow into the kind of service business our clients needed. By doing this our customer base is growing and with our proactive approach they have fewer IT problems to solve. This is better for the customer as well as for us.

Keeping Your Client’s Needs in Mind 


Businesses are moving to the cloud. Do you want to be the DVD shop with one customer on a Friday night? Worse yet, do you want to keep your clients in that category? Then change, sell or die. If you charge your customers using a SaaS model, you can justify your fees as the servers disappear out of the rack and into the cloud. Your role changes into becoming the service that knows the best cloud providers to deal with. This means you can help both your business and your client’s business save money and get more value.

Where Do You Want Your Client’s Allocating Their Budgets? 


Think about it for a moment. If you have a base of clients who do not need to spend $20K on servers they can afford to pay you to manage all their IT, vendor relationships and integration. This means you are a service that helps them to grow their business instead of a cost of doing business.

Sometimes we forget the big picture for the small print. We are all in an industry that is growing faster every year. It is exciting, but it can also be hard to stay up to date. You can enable your clients and be the one that brings them into today’s tech miracles. Being in the technology business you should know to never fear change as it is the precursor to the next challenge.