With the managed service provider (MSP) business evolving at such a rapid clip, never has it been more true that an IT services firm that does well this year might be basking in the waning days of an obsolete business model.

Measuring the “potential” of an MSP to succeed in an industry newly dominated by cloud and where sustainable margins increasingly come from a changing mix of activities was the motivation behind the Total Service Provider Index (TSP).

The TSP Index is a creation of IT channel consultancy Clarity Channel Advisors (CCA), our partner in the annual MSPmentor 501 ranking of top MSPs.

For the second year in a row, every MSP that submits an entry survey for the 2017 MSP 501 – whether or not they qualify for the final list – will receive a TSP Index tier score.

In short, the Clarity TSP Index measures a company’s potential based on services revenue and productivity, measured by revenue-per-employee (RPE).

Applications for the 2017 MSP 501 will be accepted until midnight U.S. Eastern Standard Time on May 1, 2017.

“It is 100 percent accurate that the TSP Index is biased against companies with more labor-dependent business models, specifically models that leverage expensive engineers for tasks that can be automated,” CCA principal Jim Lippie wrote in an expert column describing the tool. “The TSP Index rewards companies that have figured out how to deliver recurring revenue (cloud, managed services) with automated tools and software packages that lower their total cost of labor, thus creating a more favorable RPE result.”The TSP Index algorithm is also weighted in favor of IT services firms that integrate paid consulting visits with managed services and virtual CIO consultations.

“This is because most of the solutions MSPs deliver are automated and remote and thus susceptible to the ‘out-of-sight, out-of-mind’ challenge so many MSPs wrestle with,” Lippie wrote. “We believe MSPs that augment their automated services with higher-value consultations performed by top-level employees who can ‘wow’ customers every quarter, deserve higher recognition.”

Clarity divided the TSP scores into four tiers, defined as follows:

Clarity officials noted that at this stage in the maturity of the IT services space there continue to be many quality businesses that score among the lower tiers on the TSP scale.

“In fact, some of the most innovative MSP 501 companies are Tier 4 organizations,” Lippie wrote, “but when it comes to cloud and managed service providers leadership and productivity efficiency, some companies stand above others.” 

Find the full survey application here.

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