Managed Services Provider (MSP) does NOT mean “Hand Over the Keys”

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Fair warning – this is a bit of a rant  . . .

Let me start with the definition of Managed Services Provider (MSP) from wikipedia. “Managed services are the practice of day-to-day management responsibilities and functions as a strategic method for improving operations and cutting expenses. Although the terminology varies, typically the person or organization that owns or has direct oversight of the organization or system being managed is referred to as the offeror, client, or customer; and the person or organization providing the managed service is the service provider or Managed Services Provider (MSP).”  Here’s part of the definition that I find most critical – “Generally the client remains fully accountable for the overall management and control of the organization or system – including the functionality and performance of the managed service.”   Now for the rant – Not managing your MSP is the same as turning over the keys to the kingdom and hoping that it is still intact when you return.  Bad idea!

We have several clients that have been convinced that working with an MSP will be the answer to all their problems – they’ll save money, increase service, be able to focus on their core competency, etc.,  but failed to think about what it will take to implement and manage that MSP.  Some are even stunned that they would be required to manage a firm that they hired to manage on their behalf.  Hiring an MSP is outsourcing – make no mistake about it and outsourcing relationships are doomed to fail (over half of them do) unless they are properly managed.  Here are some things you need to think about BEFORE deciding to use an MSP:

  • Do you understand the full economic cost of outsourcing? This requires putting together a comprehensive TCO model that includes the cost of managing the provider.  The devil is in the details here.  The MSP cannot (and most likely will not) tell you all the costs associated with the relationship.  This exercise can reveal that a deal that looked very attractive really isn’t
  • Is there a set of suppliers that can provide you with access to better technology, expertise and or capabilities? This requires understanding who the players are in the supply market that are the right fit for your organization AND have the capacity and capability to meet your needs. Many MSPs have the capability but do they have the capacity to service you properly?
  • What have others done and what lessons have they learned? This is huge.  Many consultants will sell you on the benefits but won’t tell you all the issues and challenges you need to work through before taking this on.  DO SOME BENCHMARKING and don’t enter into any arrangement without doing thorough reference checks.  If the supplier can’t provide you with any or the references are not as favorable as expected THAT IS A RED FLAG – don’t ignore it
  • Have you sold this internally? If you haven’t, STOP here.  Outsourcing has even more change management issues than sourcing.  Don’t ignore your internal stakeholders because they can be the biggest roadblock to your success.
  • How are you going to manage the MSP? Do you have the internal competency to do so?  Understand how you are going to manage the MSP (plan, plan, plan) before you enter into an agreement. In addition, managing an MSP is not the same as managing a group of employees.  An internal managers is required to manage activities while the manger of an MSP need to manage outcomes.  This is a very different skill set.

Once you decide to work with an MSP (assuming you have addressed the questions above along with about 100 others 🙂 ) then you need to immediately start planning.  How you are going to implement the solution within your organization, ensure the solution is ADOPTED (without this there is zero ROI) and properly manage the relationship?  For the answer to these questions, you will have to wait for my next writing.  In the meantime, please think, sell, plan and properly execute BEFORE you turn over the keys to a Managed Services Provider (MSP).

Let us know what you think and join in the conversation . . . . . 

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Anne has been leading consulting and financial management organizations for over 25 years. She has extensive expertise in Strategic Sourcing, change management, contracting & contract management (both the buy side and sell side) organizational design and supply chain management. Anne has a passion for collaborating and educating her clients while helping them to uncover hidden value in their organizations. In addition, Anne has been named by Supply & Demand Chain Executive as a “Top 100 Provider Pro to Know” every year since 2007 and a 2013 Top Female Supply Chain executive.


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