What is meant by “Managed Services”?

Let’s begin by explaining what is meant by the term “managed services”.  This is a term used to describe the performance of routine IT services, such as those that might be performed by an in-house IT department, on a regular and on-going basis.  The exact nature, scope, and term of services to be performed or provided and the fee (usually a flat monthly rate) to be charged for those services are covered in a written agreement or contract.

Managed services usually include the installation of some form of remote monitoring and management (RMM) software by the Managed Services Provider (or MSP) so that notifications of an imminent or actual fault or failure are sent to the MSP for corrective action.  In some cases, the problem can be automatically remediated or corrected by the RMM software itself.  The RMM software also provides a way to connect remotely to the various servers, workstations, and other devices that make up the managed infrastructure so that timely corrective actions or help desk support can be provided without the need to schedule and dispatch a technician to the site.  However, some on-site support is usually included for those problems that cannot be corrected remotely.

So why should I consider Managed Services?

So now that I have described what “managed services” means, let’s talk about why a business owner should consider such an arrangement with their IT services provider.   Small and medium-sized businesses (SMB’s) frequently worry that if they sign up for Managed Services they are signing up for a monthly bill that they don’t really need and think that calling their IT services provider when the need arises, i.e. ‘on-demand’, is good enough and will be less expensive.  This is usually not true, and there are a number of reasons why:

  1.  1. On-Demand Rates:  Managed Services agreement customers typically pay a flat monthly fee for UNLIMITED routine service hours, and pay no after-hours or emergency rates regardless of when the work is performed. Customers who do not have a Managed Services agreement pay standard on-demand rates, which are much higher for evenings or weekends and for emergency work at any time.  This is necessary because the lower frequency of service visits and the absence of 24/7 monitoring for on-demand customers means the MSP does not stay as well informed about the customer’s infrastructure.  For such customers the IT service provider will frequently walk into a rat’s nest of partially-installed equipment, customer-attempted repairs, and ill-advised system restores which completely mask or otherwise compound the original problem. This makes the resolution more complex and time-consuming and frequently requires more senior personnel.  In addition, the inability to schedule or at least anticipate major changes such as system or software upgrades for on-demand customers means the IT service provider typically has to find staff to work on an evening, weekend, or emergency service call on very short notice when they may already be engaged in other work or planned family activities.  Higher rates help discourage such afterthought planning, pay for staff overtime, or at least help compensate for the hassle involved.  And as a final thought it is worth noting that even small businesses derive benefit from a Managed Services agreement because the flat-rate monthly payments are easier to budget for than the periodic expense spikes that typically occur with on-demand support.
  2. 2. Service Priority:  Managed Services customers get a higher priority of service than on-demand customers.  While good IT service providers always try to give every customer a prompt and complete response, in busy times a Managed Services customer will typically get responded to before an on-demand customer and if necessary the MSP may pull resources off of a routine on-demand job if those resources are needed for a Managed Services customer.  And some Managed Services providers will even offer a VIP level of services to customers that need head-of-the-line privileges over even other Managed Services customers.
  3.  3. 24/7 Monitoring and Help Desk Support:  Managed Services customers get 24/7 monitoring of their critical infrastructure and service functions and routine help desk support for their local and field personnel ; on-demand customers do not.  What does this mean in practical terms?  Well, a typical example that most customers can identify with would be system backups.  MSPs will monitor system backups for Managed Services customers so that the MSP will know if a backup fails and can therefore look into the failure and undertake the repair at once, in many cases before the customer even knew there was a problem.  An on-demand customer will monitor their own backups and call the IT service provider if a backup fails; the IT service provider does not watch the backups for the customer nor ensure that a backup is taken or sent off-site.  The same is true for many other scenarios as well.  Because of 24/7 monitoring, the MSP will typically know if the internet goes down, a server fails, or a network switch or router stops working.  An on-demand customer has to notify the IT service provider of these events and the IT service provider REACTS to the request as compared to a Managed Services customer where the MSP can be PROACTIVE because it has its hand on the pulse of the customer’s infrastructure.  And a Managed Services agreement that includes help desk support means that your personnel can call and ask for help with many routine problems like missing network shares, forgotten passwords, or account lockouts and the MSP handles those for no additional cost.  An on-demand customer will pay for each and every service call
  4. 4. Scope and Quality of Support: Some small business customers will have a person on-staff who handles day-to-day issues such as missing network shares, password changes, and simple user questions. Larger customers might even have an actual IT person on staff.  But even in these cases, those individuals will not typically be well-versed in the full range and scope of IT services being used in today’s workplace.  Services such as Active Directory, Microsoft Exchange,  SQL Server, SharePoint, VOIP, video conferencing, two-factor authentication for remote or traveling users, and wide-area networking between the corporate office and branch offices or project job-sites all require more sophisticated skills and training.  A full-time IT person with all of these skills will command a very high salary.  By utilizing an MSP, the skill-set of an entire enterprise-level IT department can be available when needed for far less than the cost of one average full-time IT support person.

What about projects?

An often misunderstood aspect of most Managed Services agreements has to do with ‘Project’ work.  Simply put, project work is work that is not normally or only infrequently required in the day-to-day operation and maintenance of a functioning IT infrastructure.  An MSP can readily estimate the level of effort required to provide support for an infrastructure of a certain size for a company with a certain number of users.  Many MSPs will have years of experience in estimating that kind of work.  But the MSP will not know at the time it estimates your agreement when and if you plan to replace any or all of your workstations this year or just part of them, and the MSP will not know if you are going to ‘cascade’ the old workstations to other users and if those users’ workstations will be further cascaded, and so on.  The MSP will also not know if you are going to buy another company and double the size of your infrastructure, upgrade your servers, add a VPN between your existing office and a new office in another city or state, or change your line of business application or your version of Microsoft Office on all or a large portion of your workstations.  These are infrequent ‘non-routine’ activities that the MSP cannot readily plan for when preparing an estimate for a Managed Services agreement, so many MSPs treat these types of evolutions as “projects” and estimate and bill for them separately.

Now one might argue that workstation change-outs, software upgrades, and equipment additions are routine activities in a normal growing business, and in a certain sense they are.  But what makes them non-routine, at least for the purposes of a Managed Services agreement, is that they are typically infrequent and only occur once every several years.  Further, an MSP typically does not have enough information on the scope and schedule for such activities at the time the agreement is being prepared.  Even if the MSP did have a preliminary estimate and schedule for such activities when preparing the agreement, such evolutions are often capital expenses and the budgets, scope of work and schedules frequently change as these efforts near implementation and the MSP cannot be certain that won’t happen.  So these perhaps normally occurring but infrequently performed tasks are also handled and billed as projects, just as an in-house IT department would handle them.


Hopefully, this explanation of the key differences between an IT service provider’s on-demand services and a Managed Services model provides some food for thought when you are weighing the pros and cons of entering into a Managed Services agreement versus obtaining IT services on-demand.  A Managed Services agreement provides the most comprehensive support and offers by far the best value for most small or medium-sized businesses.  Managed Services let you focus on running your business while the MSP acts as your IT department and takes care of all those pesky help desk issues and IT problems.  A Managed Services agreement also ensures that your IT infrastructure gets regular attention, stays current with updates and maintenance activities, and gets restored to operation quickly if something fails.  Doesn’t the infrastructure that forms the central nervous system of your business deserve that kind of attention?

George Hefter
TCT Computer Solutions