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Continually automating processes, improving efficiencies and reducing the cost of service delivery are the ingredients of a successful managed services provider. But having the necessary systems to run the business is critical to ensuring successful internal MSP operations. For many MSPs, service delivery is their Achilles' Heel.
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"Typically, MSPs struggle with identifying their service delivery costs," said Charles Weaver, CEO of the International Association of Cloud & Managed Service Providers (MSPAlliance). "Too much manual intervention exists, therefore, their margins suffer. Automation almost always results in greater efficiency, higher consistency of the service, and greater profit margins."
How efficiently MSPs are able to automate is one of the single biggest indicators of long-term success. Some 59% of MSPs report having optimal technical process efficiency, while 41% are "getting there," according to CompTIA's recently released 5th Annual Trends in Managed Services report. The report, released in June 2016, was based on a survey of 400 U.S. MSPs.
"Without a house in order on the inside, the other key pillars of a business can be weakened," the report stated. Today, however, a majority of MSPs are "feeling a lot better about internal operations than they were in 2012," the last time the industry association fielded questions on the topic.
Operational efficiency is important to an MSP's business because the model actually "reaps more when doing less," even though it is often remotely monitoring customers' systems 24/7, the CompTIA report noted. This is a big driver for automating as much as possible. "Inefficiency in such an environment -- lack of automated processes and no uniform approach to managing multiple customers -- can be a drain on the bottom line."
MSP operations: What systems do companies need?
Traditionally, the key systems for running MSP operations have included remote monitoring and management (RMM), professional services automation (PSA) and remote control. In fact, PSA software for MSPs is what back office ERP or CRM platforms are to end-user companies, the CompTIA report stated. This continues to be the case today, although MSPs have had to add some newer tools to their arsenals.
For years, PSA and RMM tools have defined the MSP genre, said Carolyn April, senior director of industry analysis at CompTIA. That's because those tools allow MSPs to manage functions like resource management, automated time and billing, project management and report generation, among others. But now MSPs are adding cloud versions of those tools, along with business continuity and disaster recovery software, she said.
"Business continuity and disaster recovery is the third leg of the stool of tools MSPs are using today," April said. "That's the one thing that's really come out in the last year or two, other than the fact that many companies are creating cloud versions of their tools."
PSA-related software revenues will reach about $12.88 billion by 2022, up from $6.26 billion in 2014, Grand View Research projected in the spring of 2016. PSA and RMM systems "are still the 'eyes and ears' of MSPs," Weaver agreed. "But the forward-thinking MSP is already incorporating new systems into their toolkit, such as password/two-factor authentication, enhanced network monitoring [since] many MSPs have more than one monitoring platform [and] security and backup."
Automated tools, especially RMM tools, are the best option to help avoid the human error aspect of network maintenance, added Paul Cissel, CEO of Internet & Telephone (I&T), a provider of IT managed services. "They also allow us to prove our reliability by incorporating statistics into our Monthly IT Management Report."
However, small MSPs -- which make up the bulk of the market – haven't necessarily moved to using commercial software tools and are instead relying upon homegrown tools, according to April. "But they realize they can't grow without using some commercial software."
Addressing Pain Points
When it comes to service delivery, handling user requests and network administration for a client's network is the main operational pain point for Anchor Network Solutions, a $2.5 million MSP with about 75 clients and 14 people. "We use an RMM tool to manage as much we possibly can and consolidate our efforts," said the company's CEO, Vince Tinnirello. Anchor Network Solutions automates patching and PC troubleshooting. "That's probably one of the most operationally efficient things we can do, setting up the RMM tool … and not having to manually go in and do things."
Yet, Tinnirello said clients will ask, "Can't you just automate the installation of Microsoft Office?" That installation can be automated for a single enterprise whose apps are all standardized and don't change, he said. "But when you have 70 or 80 different clients … the overhead to automate and install is unbelievable. We might use other techniques and some things have to be done manually." When a client buys a new computer, for example, installing the software manually is faster and easier, he said.
"You have to be a big enough MSP to hire someone to just handle automation tasks," Tinnirello said. "You don't just check boxes and say 'Cool, all the software's [going to] get automated automatically.' So it depends on your setup. Operationally, that's the struggle."
Because of rising competition, monthly revenue per customer/device has decreased, observed I&T's Cissel. This has forced MSPs to choose to either do more for their customers with the same tools and assets, or choose different tools and provide different products that have increased margins. "We have implemented an IT security product as a way to differentiate our company, provide more value for customers and to increase our margins."
As I&T has grown and the industry has matured, the company has also adopted the mindset of "what was good enough to get us here, will not be good enough to get us where we want to go," Cisssel said. "We have needs for other solutions that traditional tools cannot provide." One of the biggest challenges I&T has taken on, he said, is project management. "RMM and PSA tools struggle with managing multiple projects with multiple tasks and multiple technicians."
Additionally, he said, I&T is seeing customers putting a greater emphasis on security, and traditional RMM tools were not developed with security information and event management in mind, so they lag behind in this area. "We have to leverage several third-party security tool sets in order to provide security services," which need to be integrated with the company's existing RMM and PSA tools.
PSA and RMM are still the core tools for automation, Tinnirello said. However, there is no one tool that does it all and sometimes Anchor Network Solutions has to incorporate third-party tools to perform additional automations to take automation to the next level, he added. "One thing that I think all of us do … as MSPs, is ask questions about certain tasks or tickets that are done and could this have been automated? If the answer is no, move on, but if answer is yes, you want to go back and review later and see what's required to automate and analyze if it's worth the time and investment. If it's a repeatable process, then yes," Tinnirello explained.
Some MSP operations call for customization
Charles WeaverCEO, MSPAlliance
There are limitations to what vendors are providing off the shelf, which requires some customization or the need for MSPs to develop their own tools for tackling certain types of MSP operations issues. "There are always limitations in vendor platforms, which is a testament to the complexity and diversity of MSP environments," Weaver observed. "The more vendors attempt to be all things to their partners, the more likely it is that they will become less proficient at any of them. Specialization and expertise still matter."
There is still work that needs to be done when it comes to systems integration to make sure RMM and PSA tools work together, April said. "I think the biggest complaint I hear is that integration of these tools isn't quite perfect yet, and so there are still steps many MSPs have to take themselves to tie the various tools together … so customer data syncs up," she said. The vendors are working on this, she added, but "they're not quite there yet with a fully automated platform that is seamless."
Vendors do their best to track market trends and develop tools as things evolve, but very often management tools used by MSPs can sometimes lag behind the technology that customers want to use, Cissel said. I&T has successfully integrated new tools for antivirus, antimalware, and two-factor authentication into its product offerings. But customers expect I&T, as its customers' main IT resource, to be at the forefront of new technology, he added.
"As customers ask us to help them to implement new kinds of technology that we have not managed previously, incorporating new tools into a standard technology stack and a consistent training program has become exponentially more difficult," he said.
As vendors continue to innovate, he said I&T hopes "they keep the management of their new software in mind as a crucial element of its use. One of the keys is making sure all MSP-based software can be managed by a NOC (network operations center) across many customers -- and every alert automatically updates the CRM/PSA and creates a more robust knowledgebase on each customer."
One crucial factor in selecting of tools and vendors, Cissel said, is their ability to integrate with the CRM tools I&T uses. "We have seen a huge improvement from many vendors as they have gotten better at APIs that allow for integration across our tool sets."
Automation continues to be such a hot topic that the more enterprising MSPs are always looking at moving the needle, April said. Fifty-seven percent of survey respondents said they are focusing on expanding into new, emerging services like internet of things.
Robotic process automation technology is another emerging technology in the IT service provider space.
"We are always on the lookout for new technology and exciting tools to bring to our customers," Cissel noted. "If there is a technology in the future we feel we can leverage for our customers we will absolutely explore our options."
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