Navigating Hyperautomation for MSP Efficiency and Profitability

By: Peter Kujawa

Hyperautomation represents a significant opportunity for MSPs to enhance profitability and efficiency. By adopting best-in-class practices, measuring productivity gains, and strategically managing staffing, MSPs can navigate the complexities of this transformative technology. As the industry evolves, those who embrace hyperautomation with a strategic mindset will be best positioned to thrive.?

Understanding the Power of Best-in-Class Metrics and Hyperautomation?

Hyperautomation serves as an umbrella for all automation-related processes, including Robotic Process Automation (RPA) and AI-driven solutions like large language models. These technologies promise to streamline operations, reduce costs, and enhance both customer and employee experiences.?

The concept of "best-in-class" is crucial here, referring to the top 25% most profitable companies, according to Service Leadership's methodology. For MSPs, achieving best-in-class status means consistently delivering top quartile profitability, which currently stands at an adjusted EBITDA of at least 16.3%.?

Impact of Hyper Automation on MSP Profitability?

Hyperautomation has the potential to significantly boost MSP profitability when implemented correctly. By reducing labor costs and increasing operational efficiency, MSPs can enhance their financial outcomes.?

• Revenue Model: In the U.S., typical best-in-class MSP charges approximately $165 per user per month for recurring services, resulting in a revenue of approximately $7.5 million annually.?(Per user pricing can vary substantially based on target customer profile, managed service plan inclusions, and other variables.)

• Cost Reductions: The first wave of implementation (18-24 months) can reduce managed service payroll costs by 20% and project service costs by 10%, leading to an increase in EBITDA from 18% to 23% over 18-24 months.?

However, the journey is not without pitfalls. Missteps, such as matching price cuts to efficiency savings, can erode potential gains, underscoring the need for strategic pricing and investment in hyperautomation.?

The Long Road: 36 Months to Modest Profit?

Achieving significant profitability gains through hyperautomation is a long-term endeavor, often taking up to 36 months. During this period, MSPs must navigate the complexities of implementation while avoiding common mistakes.?

• Price Cuts: Avoid matching efficiency savings with equivalent price reductions. Instead, focus on maintaining current pricing, including price increases to capture the value of improved efficiency.?

• Growth Assumptions: Be cautious with assumptions about growth from price reductions. Data indicates higher-priced providers often have better customer satisfaction and revenue growth.?

To truly benefit, MSPs must focus on sustainable strategies, leveraging automation to enhance service delivery without sacrificing profitability.?

Best Practices for Implementing Hyperautomation?

Implementing hyperautomation successfully requires adherence to best practices and a clear understanding of the processes involved.?

Key Steps to Success??

1. Process Documentation: Ensure processes are well-documented and mature before automation.?
2. Dedicated Resources: Assign dedicated personnel to oversee automation initiatives, focusing on defining, implementing, and maintaining new processes.?
3. Adoption and Measurement: Regularly measure and verify that new automated processes are being adopted and are delivering expected efficiencies.?

By following these steps, MSPs can ensure a positive return on investment from their automation efforts.?

Measuring Productivity Gains in Managed Services?

As MSPs embrace hyperautomation , measuring productivity gains becomes essential to validate the success of these initiatives.?

• Service Multiple of Wages: This key performance indicator measures the revenue generated per dollar spent on service wages. Best-in-class MSPs achieve a multiple of 2.9 or higher.?
• Efficiency Metrics: Track metrics such as tickets per managed service engineer and noise levels per endpoint to assess improvements in service efficiency.?

Enhancing Service Efficiency with Staffing Strategies?

Hyperautomation also offers opportunities to refine staffing strategies, ensuring that MSPs can deliver high-quality services efficiently and enhance profitability.?

• Staffing Models: Best-in-class MSPs benefit from a staffing model that emphasizes lower-level technicians, supported by robust documentation and streamlined processes.?Hyperautomation should adjust the model slightly to require less lower-level techs per new user added and over time, increase efficiency for techs at all levels.

• Attrition Management: Use natural attrition to gradually adjust staffing levels, reducing reliance on higher-cost employees.?

"You need to make a focused effort on it and do it right to get the gains."?

Maximizing MSP Efficiency Through Hyper Automation?

To fully realize the benefits of hyperautomation, MSPs must adopt a strategic approach, focusing on key areas such as help desk operations and vendor partnerships.?

• Help Desk Focus: Prioritize automation in help desk operations, where the greatest opportunities for efficiency gains exist.?

• Vendor Evaluation: Partner with vendors who currently offer robust automation tools and a clear roadmap for future developments.?

"Hyper automation is designed to elevate the experience for both employees and for customers while bringing efficiency."?

Service Leadership Inc., a ConnectWise solution Compensation Survey: A Strategic Advantage?

Participating in the Service Leadership Compensation Survey provides MSPs with valuable insights into industry compensation trends and wage inflation forecasts.?

This data equips MSPs with the information needed to make informed staffing and budgeting decisions, enhancing their strategic planning capabilities.?

If you provide your compensation data for your employees, you will receive a free copy of the full report.

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