Partnering with Managed Service Providers: Navigating Conflicting Interests and Expanding Reach (2/4)

Introduction

In the first article of this series, we discussed the strategic choices available for optimizing client delivery, particularly the balancing act between maintaining in-house teams and partnering with Managed Service Providers (MSPs). We explored how each model brings its own set of advantages and challenges. Now, let's dive deeper into leveraging MSPs to maximize flexibility and reach, while managing cost and quality considerations. In this second article, we will focus on how to select the right MSP partners, manage these partnerships effectively, and navigate the sometimes conflicting interests between your company and your service providers.

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The Growing Importance of Flexibility in Service Delivery

For companies with an expansive geographical footprint or ambitions to scale, managing service delivery is increasingly complex. In-house teams provide high control over quality and customer experience but are often limited to high-density areas where customer volume justifies the investment. In contrast, MSPs offer a flexible, scalable solution that extends a company’s reach across various regions without the significant fixed costs associated with building and maintaining a dedicated workforce. The challenge lies in leveraging MSPs effectively to maintain the same high standard of service, irrespective of location.

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The Cost and Coverage Conundrum

Relying exclusively on in-house resources poses significant limitations, particularly in regions where client density is low or where the cost of establishing a dedicated team outweighs the benefits. In these situations, expanding service reach with MSPs becomes necessary. However, working with external partners introduces new challenges: variable service quality, lack of specialized knowledge, and potential misalignment with the company's standards and values. The question, then, is how to harness the strengths of MSPs while mitigating these inherent risks.

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Strategic Use of MSPs for Broader Reach

To effectively leverage MSPs, companies need a well-thought-out strategy that considers the different types of providers and the specific needs of each market:

1. Regional Contractors and MSPs: Regional providers bring valuable local expertise and are well-suited for bridging service gaps in areas where in-house teams are not cost-effective. These providers often have established relationships within their regions and can adapt quickly to local demands. However, their ability to scale is limited, and they may not consistently meet the same service quality standards across different locations.
2. National MSPs: National MSPs offer broader coverage and scalability, making them ideal for companies that need a uniform level of service across multiple regions. They possess the infrastructure, resources, and networks to provide consistent service delivery. However, their attention is often divided among many clients and solutions, which can lead to variability in service quality, particularly in less densely populated areas.
3. Hybrid Models: A hybrid approach that combines in-house teams with regional or national MSPs offers a balanced solution. By deploying in-house resources in high-density regions and relying on MSPs in areas where a dedicated workforce is not feasible, companies can optimize their reach while maintaining control over service quality. This model also allows companies to build internal expertise where it matters most, while leveraging external support in more challenging or cost-prohibitive regions.

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Extending Reach and Flexibility with MSPs

Partnering with MSPs can provide several key benefits that enhance service delivery:

• Scalability and Reach: MSPs provide the flexibility to scale services according to demand, ensuring adequate coverage in all regions. This adaptability is essential in markets where demand is volatile or where rapid expansion is required.
• Cost Efficiency: MSPs allow companies to minimize capital investment by converting fixed costs into variable costs, paying only for the services rendered. This approach is particularly useful in regions where the volume of work does not justify the expense of a permanent, in-house team.
• Local Expertise: Regional MSPs bring deep local knowledge, helping navigate regulatory, cultural, and logistical complexities that could otherwise hinder service delivery. Regional MSP may also be a requirement because of geographic remoteness. Prime examples in the US are Hawaii, Alaska or the Rural West, where even nationally operating MSPs may not be able to provide adequate coverage.

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Despite these benefits, the key to maximizing the value of MSP partnerships lies in carefully selecting the right partners, setting clear expectations, and actively managing the relationship.

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Dichotomy of Needs: Balancing Conflicting Interests

When working with MSPs, companies must recognize a fundamental dichotomy: the diverging interests of the MSP and the company they serve. The MSP, as a business entity, seeks profitability and operational efficiency. This often means concentrating resources in regions where they have the most coverage and minimal costs. On the other hand, your company aims to deliver consistent, high-quality service across all regions, regardless of how easy or profitable a particular area may be for the MSP.

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Examples of Potential Conflicts:

• Coverage Imbalance: MSPs may have stronger coverage in certain areas and weaker presence in others. They naturally seek to maximize profitability by focusing on high-density, low-cost regions. Meanwhile, your company might prefer to insource services in those same regions to leverage the higher penetration rate for cost efficiency and to build internal expertise.
• Service Prioritization: MSPs supporting multiple clients may prioritize requests based on profitability, resource availability, or contractual obligations, which may not align with your company's priorities. This can lead to delays or inconsistent service quality.
• Resource Allocation: In low-density areas, an MSP may deploy less experienced technicians or provide limited resources to save costs. However, from your company’s perspective, every customer expects the same level of expertise and service quality.

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Resolving Conflicts: Strategies for Alignment:

1. Transparent Communication and Negotiation: Open communication is key to aligning expectations. Regular discussions and negotiations can help clarify priorities and address potential conflicts. Ensure that both parties understand the business needs and limitations of each side, fostering a collaborative approach rather than an adversarial one.
2. Tailored Service Level Agreements (SLAs): Develop SLAs that reflect the specific needs of your business while accommodating the MSP’s operational realities. Include clauses that incentivize high performance in low-coverage areas or offer flexibility in high-penetration regions where your company might choose to insource services.
3. Performance-Based Incentives: Offer performance-based incentives that align the MSP's goals with your own. For example, reward them for maintaining high service levels across all regions or for exceeding agreed-upon response times and customer satisfaction metrics. This encourages the MSP to invest in areas that may otherwise be neglected.

Regardless of the approach taken—whether relying on in-house resources or partnering with an MSP—servicing certain geographic regions will inevitably come at a higher cost. Recognizing this reality upfront and factoring it into your commercial models can help mitigate some of these challenges. Consider implementing higher service fees for customer locations in less accessible or low-density areas. By aligning your pricing strategy with the actual cost of service delivery, you can protect your profit margins while still maintaining the flexibility and reach needed to support all regions effectively.

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Conclusion

Effectively leveraging MSPs requires a strategic approach that balances both your company's and the provider's interests. By selecting the right partners, establishing clear agreements, and fostering a collaborative relationship, you can maximize the benefits of working with MSPs while minimizing the risks. As you refine your service delivery model, consider how you can better align your objectives with those of your service providers to create a mutually beneficial partnership.

In the next article, we will explore strategies for maintaining consistent service quality across all regions when working with MSPs. Stay tuned for insights on how to achieve a seamless customer experience, no matter where your clients are located.

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#CustomerSuccess #ServiceDelivery #ManagedServices #Leadership #ClientExperience #BusinessStrategy #PartnershipManagement

Disclaimer: Article generated with assistance from AI