How To Increase Your Profits As a Managed Service Provider

By David Sweetman, SAP Business ByDesign for, CRN June 05, 2012

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By reviewing the process listed above, it becomes very clear that MSPs have to be masters of project management, service delivery and managing cash flow. However, many existing VARs, who are looking to become MSPs, are good at project management, but are newer to managing rigorous service level agreements under tight margins—they don’t have the systems and processes for service level management.

The challenge is not just limited to new entrants into this market. Many existing MSPs use multiple spreadsheets, stand-alone SFA and support systems and project management tools to manage these processes. Their customer and prospect database typically sits in separate spreadsheets. Their transition project schedules are created in a Microsoft Project (or Microsoft Excel) and typically reside in the engagement manager’s laptop. Client environment information may be captured in multiple spreadsheets and Word documents. The availability of consultants with the right skill sets to drive the transition from the client to MSP environment and ongoing service delivery is tracked in a separate spreadsheet. The billable non-people expenses associated with each project may be tracked in yet another spreadsheet. Billing becomes a nightmare in such situations. The customer issues are tracked in a standalone support system, creating a huge issue - sales reps, while trying to sell additional services into an account, many not have visibility into support issues in those accounts.

When a MSP is small, such manual methods and fragmented systems may just work. But, as the MSP grows and continues to use manual processes and fragmented systems, things begin to fall through the cracks, leading to missed deadlines, lower than planned service levels, inaccurate invoices and higher costs of operations. In an environment, where competition is thick and margins are thin, this may prove to be deadly for a MSP.

Fortunately, integrated software packages for service providers are available and they support end-to-end business processes of a MSP and address the issues listed above. The full scope of capabilities covered by such packaged solutions includes:

Design: Ability to grow their footprint within a client by providing new and innovative services in a cost effective manner is core to any MSPs long term growth. A software solution for MSPs supports such capabilities, which includes project and document collaboration, as well as ability to analyze unstructured feedback from customers (in the support process) to identify new business opportunities.

Market and Sell: MSPs need to have an effective go-to-market process covering prospect segmentation and targeting, campaign management, lead management, pipeline management, proposals, contracts/SLAs and close. Such a process enables an MSP to reduce new customer acquisition costs, bringing client profitability forward. Software solutions for MSPs support such capabilities.

Plan: Project planning is a key part of the delivery process and requires capabilities such as project schedule planning, project resourcing and project expense planning. The packaged software solution for MSPs addresses all these requirements.

Transition and Deliver: These are the processes where ‘the rubber meets the road’ and should be a core capability of any MSP. A comprehensive software package for MSP includes project and document collaboration and project reporting.

Bill: Ability to capture time and expense, and support various types of billing including time and material, fixed price, milestone and deliverables-based are core capabilities in a software solution for MSPs. Such features enable an MSP to support multiple pricing models and become easier to do business with.

Support: MSPs should have the ability to capture support issues, route to the right support analyst, escalate and/or close them and report of time-to-resolution vs. SLA. A comprehensive MSP software solution supports such capabilities.

Analyze: An MSP solution should have comprehensive reporting and analytics capability, so management always has visibility into all key metrics of the business such as backlog, liquidity/cash flow, utilization, profitability by project/customer/service etc.