How to Build an MSP from Scratch

It's a steep learning curve to bring a profitable MSP proposition to market, VARs and vendors are learning.

Simon Chappell, CEO & Co-Founder

July 1, 2024

4 Min Read
Build an MSP
Mike Flippo/Shutterstock

Progressive and forward-looking businesses are always exploring new and innovative ways to grow and remain competitive. That can be a challenge, especially when the rate of change in technology is happening so fast. We're fed the mantra that businesses need to be agile, able to adapt to changing market conditions. Arguably, software businesses have an advantage because they can be nimbler and adapt more quickly than traditional businesses that sell hardware. But if experience has taught us anything, it's that transitioning to a new business model is never easy, as many business owners will tell you.

Cashing In On the SaaS Model

The delivery of software-based products and services changed irrevocably with the advent of public cloud and the availability of software-as-a-service (SaaS) platforms. Practically every business or organization, of every size, will access standard word processing, spreadsheets and collaborative tools and services via Microsoft 365 (formerly Office365) or an equivalent platform, Google or otherwise. There are more sophisticated requirements the higher up the food chain you go, catering for everything from cybersecurity and storage to software development, and enterprise-grade solutions for all manner of use cases. Demand for these services is high. Plus, they can be paid for on a consumption basis, which IT departments prefer because it removes the need for CapEx investments, leaving them to pick and choose what they need to suit their on-premises or cloud native infrastructures.

Which brings us to managed services and the managed service providers (MSPs) who provide those services. MSPs are in a fairly comfortable position as they're built to support the utility cost-based model that facilitates the delivery of cloud and SaaS products. It's a model that suits customers because it's quick and easy for them to adopt as they migrate critical functions to SaaS platforms and services.

But for vendors and value-added resellers (VARs) looking to transition to MSPs, it's far from quick or easy. In fact, it's hard work. Like any other business, setting up an MSP takes time and trial-and-error steps before you reach a stage where you have the people, infrastructure and experience in place to deliver a high-grade, quality service, one that other businesses can adopt via white label or strategic partnerships with a trusted MSP.

The Value of a Specialist MSP

Integrating a SaaS platform to support a specific business use case or IT function is expensive, and it also involves training, support and maintenance, which eats into budgets and resources. Not to mention the upgrades. This is one of many reasons MSPs have been so successful over the last decade. A qualified MSP can manage that function for you, removing the need to retrain or hire new people to maintain the platform and eventually master it. The MSP will run it for you and probably do a better job, simply because it can devote resources to it 24/7.

Looking at our own experience, we anticipated the demand for cloud data management and immutable backups and decided to back a gold standard solution in what was an emerging space. We've been offering it as a managed service ever since. But, as I've already noted, taking a world-class solution and offering it on a consumption basis for a monthly fee isn't straightforward. Disaster recovery and data backup is a sophisticated solution that involves compliance, security and business continuity. Done correctly it can be a life saver, providing a fallback that ensures data and systems are back up and running following an outage or cyberattack. It doesn't bear thinking about what might happen if it was done incorrectly, the risk is too great. Is that a risk a new entrant into the MSP space is prepared to take?

Being an MSP Is a Full-Time Job

The reality is that even the most well-respected VAR or vendor that prides itself on service delivery and customer service probably isn't equipped to make the transition to an MSP. It takes time and investment to set up any new venture, let alone establish an MSP.

New businesses or new lines of business are cash hungry; they sap your energy and resources. Starting from scratch is hard work. You need to develop the right proposition, which involves finding the right people, and develop your own software and tools capable of integrating the service you're looking to manage. The financial benefit is margin certainty, with an additional business benefit of creating excellent customer "stickiness."

The key to success is being 100% focused on the managed service proposition. If you're going to commit, then you need to create a separate managed services division within your own business, or create a separate business entirely, one that is dedicated to building the MSP offering. Then you'll be in a position to take advantage of the lucrative revenue that the utility-based models offer. But until then it's probably a safer bet to partner with an established MSP and collaborate with them.

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About the Author(s)

Simon Chappell

CEO & Co-Founder, Assured Data Protection

Simon Chappell is the CEO and co-founder of Assured Data Protection. Following a career in private equity, he founded data protection service provider Backup Technology (BTL) in 2005, which he sold to iomart Group in 2013.

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