OpenDNS has been working with Managed Service Providers (MSPs) for almost 5 years. During that time, we’ve seen some pretty profound changes to the industry. MSPs have evolved and adapted in many ways to better suit the market, fueling incredible growth. As a product manager focusing on Umbrella for MSPs, it’s been incredible to help our partners grow and observe the evolution of the MSP.

What is an MSP?

The commonly accepted meaning of an MSP is an IT service provider that supports its customers on a remote basis and offers an all-you-can-eat billing model.  MSPs leverage Remote Monitoring and Management tools (RMMs) to both remotely support customers and to automate routine tasks through scripting. Professional Services Automation (PSA) tools like ConnectWise and AutoTask emerged to enable MSPs to better manage workflows and optimize their businesses. The combination of PSA and RMM allowed a level of automation and continuous process improvement that has enabled MSPs to disrupt the IT services market.

But what does this mean to the customer?

The MSP model caught on with customers because it enabled them to have their IT needs taken care of for a flat monthly cost that is easy to budget. The MSP model made customer uptime the MSP’s top concern. As a customer, I don’t care why the computers are down. I just want my employees to be productive. By moving the cost of fixing IT issues from the customer to the MSP, it incentivized MSPs to be proactive, invest time in proper maintenance, and choose the solutions that were best of breed instead of those with highest resale margins.

Expanding markets

Traditionally, MSPs have focused on SMBs with a particular focus on the 10 to 75 employee customer size. The majority of customers are small businesses like doctor’s offices, law firms, accountants, manufacturing firms and car dealerships. These are businesses that want top notch technology but don’t want the costs or management burdens of hiring full-time IT.

MSPs expanded to fill the role of the virtual CIO for SMBs by forecasting IT replacement costs and proposing improvements that could benefit the business.  While most still serve a variety of customers, many MSPs have focused on specific verticals such as healthcare or legal that have very specific IT needs.  However, the more interesting evolution has been in MSPs expanding into the larger end of SMB and even the mid-market with 100 to 750 employee companies.

MSPs move to the mid-market

Larger SMBs and mid-market organizations often have in-house IT but too often, these departments are stretched thin with heroes working tirelessly to keep their organizations running. In this situation, MSPs act as a force multiplier by extending their automated processes and larger teams to make in-house IT more effective (and let them finally have a weekend off!). In some cases this means having the in-house IT do the face-to-face help desk interactions, such as new employee set ups or troubleshooting, while escalating core service issues up to the MSP. In other cases, this means turning over server management to the MSP while keeping in-house IT to manage the end points and employee needs. While the model still hasn’t been standardized, it’s easy to see that MSPs are moving up-market with strong value props and customer demand.

The rise of the cloud

At this point nearly everyone has talked about MSPs’ opportunity in the cloud. The evolution we’re seeing is in how MSPs are executing on this opportunity.  It’s not just about offering a choice of Office365 both in-house and cloud-hosted, but about leveraging existing capabilities to offer new services. Application hosting for a wider variety of services, such as ERP and accounting, has given rise to the new breed of service provider that is easier to scale and can better serve a wider variety of customers. It also allows MSPs to practice a land-and-expand strategy of getting a customer through hosted applications and expanding the account to include full off-site managed IT.

Another growing market for MSPs is Virtual Desktop Infrastructure or VDI. The MSPs host the virtualized infrastructure and maintain customers’ virtual machines. This means that the end customer remotely connects to their “work computer”. The virtual desktops are hosted right next to applications to improve performance of mission-critical systems. A big benefit of this model is that since the computing happens at the server or data-center, end point hardware performance is now almost irrelevant.  All the data is also hosted remotely and lost or stolen laptops hardly disrupt the business.

The challenge with rolling this out in scale is getting enough bandwidth for a larger office. Here in the San Francisco Bay Area, available bandwidth varies significantly based on location. Even more importantly, the cost of bandwidth is incredibly variable based on geography. While VDI would be practical for our office in the South of Market (SoMa) area, it would be cost prohibitive or impossible for an organization over 50 employees just 30 miles away. The viability of this model is ever changing and is one we are watching closely.

What’s next?

I believe that MSPs will find new opportunity in the shift to a roaming workforce.  Work is no longer a place you go, it’s a thing you do. Workers at organizations of all sizes already take laptops on business trips and home for the weekend. However, for the millennials now entering and soon to be leading in the workforce, the ability to work remotely is a core requirement rather than a privilege. MSPs have perfected the ability to support customers remotely and should be leveraging this expertise to position themselves as the established experts for this emerging market. The next-gen MSP will enable customers to evolve and support the workforce of the future. OpenDNS’s internal slogan is that we enable the world to connect with confidence anywhere and on any device. I truly believe our MSP partners will enable the world to work anywhere with the confidence of having world-class IT support wherever they may roam.