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11/10/2011
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Manage Your Managed Service Provider

How to make an MSP work for your business.

InformationWeek SMB - Nov., 2011 InformationWeek Green
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Michael A. Davis

Small and midsize businesses looking to grow should focus on their strengths and delegate other tasks to those that can handle them better. IT is no different, which is why managed service providers have grown to be an almost $55 billion business in the last four years, according to research firm Visiongain. Whether you're outsourcing all IT or just the management of a mainframe application, picking the wrong provider can cost more than just money; it can slow growth. Picking the right MSP is critical.

Cost savings is a key reason SMBs outsource IT. Companies spend 80% of their IT budgets keeping the basic infrastructure running; that's dead money that doesn't contribute to growth. Most studies, including those from Dell and Gartner, estimate a 25% to 40% hard savings from outsourcing this work to an MSP, but they don't always take into account additional fees. It may cost $3,000 per month for an MSP to handle your servers and workstations, but if you want to install a new machine, that will be an extra $350. Want to install a wireless access point? That'll cost extra, too.

Most MSPs will audit your environment to learn the network and add you into their platforms. They're also looking for gaps and problems they can offer to fix. In my MSP business, the first year of a managed services agreement often has additional projects that amount to 150% of the agreement value. For some businesses, that amount can exceed the current IT budget!

When you meet with prospective providers, ask them for a breakout of project-based vs. agreement charges, and also ask for a list of additional project costs you can expect. The best MSPs will provide a list of fixed-fee additional services that lets you estimate the costs you'll incur over the next year or two.

MSPs love recurring monthly revenue, and you'll have to sign a one- or two-year contract to get their best pricing. Make sure you understand all the details. Will you need to give 30 or 60 days' notice to get out of it? What if the number of devices in your company goes up or down--how are costs recomputed? Get each clause explained or have an attorney review the contract.

Opt for a short-term contract when working with a new MSP. You can always extend it and get the discount pricing, but until you have vetted its technical team, don't commit.

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