Managed service provider: Definition, types, and pricing model

What is a managed service provider?

A managed service provider (MSP) is a third-party firm that runs your IT and business support tasks for a set monthly fee.

• An MSP handles work like networks, data backup, security, and software updates.
• You pay a predictable fee, so costs stay easy to plan.
• Many MSPs now also cover HR, payroll, and customer support.

Technology sits at the core of daily work for firms of every size. Every business now leans on tools like email, file storage, and encryption. As a result, downtime or a breach can quickly hurt sales and trust.

Keeping up with new tech is hard, though. Hiring a full in-house IT team also costs a lot. Because of this, many firms turn to a managed service provider instead. An MSP gives you expert help without the price of a large payroll.

A managed service provider offers many IT services to businesses. For example, it can take on:

• Network administration
• Data backup and recovery
• Cybersecurity
• Software upgrades

In the past, an MSP mostly managed infrastructure, security, networking, and apps. Today, the scope is wider. A managed service provider may also handle human resources, payroll, customer relations, and supplier tasks. Booth is a clear example of these modern managed services.

First, you pick an MSP and agree on service level agreements (SLAs). Next, the provider studies your outsourced work in detail. This review helps a managed service provider use its resources well. As a result, it can keep costs low while it lifts your output. If you want the full picture first, this guide to key areas of IT outsourcing services is a good place to start.

Types of managed service providers (MSPs)

Not every managed service provider works the same way. Here are the main types you will meet. To see the full menu of tasks you can hand off, browse these types of IT services you can outsource.

Full-service MSPs

This managed service provider covers a lot of ground. It handles hardware and software buying, network management, and security. So it works well for firms that want one partner for all their IT and non-IT work. Booth’s full-service managed support keeps a client’s IT and non-IT tasks tuned for speed and output.

Cloud MSPs

Cloud MSPs manage cloud-based services. These include software-as-a-service (SaaS) apps and cloud storage. This type of managed service provider helps you move data and apps to the cloud. It also keeps that data safe and ready to use at any time. If you are new to the setup, this primer on cloud infrastructure breaks down the basics.

Vertical MSPs

Vertical MSPs serve one industry, such as healthcare or finance. As a result, they know the unique IT problems of that field. They then build custom fixes to match those needs. Because they focus, they often spot risks a general provider might miss.

Managed service provider: Pricing models

A managed service provider can charge in several ways. Here are the common pricing models you will see. For a wider view, these outsourcing pricing models show how vendors set rates across the board.

Flat-fee pricing

With this model, you pay one set monthly price. That price covers a fixed managed service package. So your budget stays simple and steady.

Here is the formula for the flat-free pricing model:

Hourly rate x (# of hours worked) + (Materials cost x (Markup percentage)) = Flat-fee price

Example:

$100 (Hourly rate) x 8 (# of hours worked) = $800

$8 (Material cost) x 50% = $4

$800 + 4 = $804 (Flat-fee price per month)

Per-device pricing

Per-device pricing charges a fixed monthly fee for each device. That could be a server or a desktop computer. This model suits firms with many devices to manage. It also helps teams on a tight budget who prefer one bill a month.

Per-user pricing

This model charges a fee based on how many people use the tools. So as more staff use the products, the provider earns more. Because of this, the cost grows in step with your team.

Tiered pricing

As noted, a managed service provider can offer many services. The tiered model charges different rates for different service levels. As a result, you can pick the tier that fits your needs and budget. A strong provider also watches security closely, much like an outsourced cybersecurity service would.

For reference, here are some of the managed services that Booth offers:

• IT deployment and support
• KPI development and performance management
• Employee productivity
• Employee engagement activities
• Holistic employee experience
• Legal and compliance matters
• Recruitment, HR, and payroll
• Facilities management

Frequently asked questions

What does a managed service provider do?

A managed service provider runs and supports your IT and business tasks for a set fee. It can cover networks, data backup, security, and software updates. Many now add HR, payroll, and customer support too.

How is an MSP different from a break-fix IT vendor?

A break-fix vendor only steps in after something breaks. An MSP works all the time to stop problems before they start. As a result, you get steady support and fewer surprises. A managed help desk service is one common part of that ongoing support.

How much does a managed service provider cost?

Cost depends on the pricing model and the services you pick. Common options are flat-fee, per-device, per-user, and tiered plans. So you can match the spend to your budget and needs.

Is a managed service provider worth it for small businesses?

Yes, for many small firms it is. An MSP gives you expert help without the cost of a full IT team. Because of this, you can focus staff time on core work instead.

Key takeaways

• A managed service provider runs your IT and support tasks for a set monthly fee.
• Common types include full-service, cloud, and vertical MSPs.
• Pricing models include flat-fee, per-device, per-user, and tiered plans.
• An MSP gives expert support without the cost of a large in-house team.

Booth offers managed services outsourcing

Booth’s managed services let you hand many business tasks to its team of pros. This firm also offers a flexible pricing model. So you can pick the service level that fits your needs and budget best.

To hire an experienced MSP, contact Booth today!