MSP (Managed Service Provider)
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Definition
An MSP (managed service provider) is a company that takes ongoing responsibility for a client's IT – monitoring, maintenance, support, security, and backup – for a fixed recurring fee, typically priced per user or per device per month. The defining feature is the commercial model, not the technology: the MSP is paid to keep things working, so its incentive is to prevent problems, where a break-fix shop is paid by the hour when things break.
Why it matters to an MSP
Understanding the model is the difference between running an MSP and running break-fix with a subscription invoice. The economics rest on three things. First, recurring revenue: MRR under one- to three-year contracts gives predictable cash flow, a valuation multiple that project revenue never earns, and the ability to hire ahead of demand. Second, tooling multiplier: an RMM and PSA let one technician support roughly 250–400 endpoints, which makes a fixed fee profitable instead of a bet against ticket volume. Third, standardization: one defined technology stack across all clients, so every environment is supported the same way.
The market is crowded and mostly small – most MSPs have fewer than ten employees and serve companies of 10–200 users, competing with other local shops, the client's cousin who "does computers", and vendors increasingly selling direct. What separates the ones that grow is not technical skill; it is picking a niche, pricing to a target margin rather than to the competitor down the road, and treating security as part of the base service. The channel – distributors, vendor partner programs, peer groups – is built around this model; see the MSP vendor channel and how to start an MSP.