Five Reasons Why Smaller MSPs Need a PSA Tool

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    Written by Ben Chappell on 2021-09-22 Last updated 2021-09-22 - 5 minute read

The top challenge facing managed service providers (MSPs) today is two-fold—one, the current speed of change in technologies, and two, the growing amount of services required by clients. Both combine to exacerbate the demands on MSPs, and make it necessary for service providers to transform so they can keep up with the modern-day level of play.

What is more, over half (57%) of IT service providers say that they experienced disruptions or outages with their normal software, productivity or collaboration tools as a result of companies shifting to a remote work model in the first half of 2020. 

That’s where Professional Services Automation (PSA) tools come in and can create a centralized hub for the ebbing and flowing of critical business processes. By optimizing workflows, a PSA tool can generate visibility into customers, internal operations and profitability.

This is something that is vital for all businesses no matter their size, but especially for smaller MSPs to not only grow and scale, but keep up with the competition. In this blog, we will outline the top five reasons why smaller MSPs need to implement a PSA tool, and why.

#1) Gain higher utilization and profitability 

In a recent survey, it was shown that nearly 80% of professional service firms have invested in a professional services automation (PSA) solution, and those that do tend to have 4% to 10% higher billable utilization.

Both time tracking and billing can be streamlined and improved using a PSA solution, allowing MSPs to track the hours employees spend on a variety of tasks. For growing MSPs, time is money, and truly understanding the time commitment and cost of individual contracts can arm MSPs with knowledge about how best to prioritize workloads and clients. 

This profitability extends when it comes to MSPs bidding on a new project. By using the vast amounts of quantitative historical data about the time and cost of executing projects that a PSA solution can provide, smaller MSPs can more confidently bid on projects based on data and not a hunch. By bidding accurately, smaller MSPs can ensure their contract will be profitable and help improve their ability to remain competitive with the more dominant players. 

This will help growing MSPs to avoid the common mistake of underbidding, which means losing profit on contracts in the long term. Research into one MSP’s user base revealed an average of $20,000 more profit per billable resource annually using a PSA solution.

#2) Centralize cloud operations to save time and protect margins 

It was found that 89% of IT service providers believe the COVID-19 pandemic is causing organizations to accelerate their migration to the cloud. With a PSA solution, MSPs have a leg up on this shift because a PSA tool is automatically backed up to a SaaS dashboard attached to a secure, cloud-based platform.

Businesses don’t need to test, maintain or update their platforms with a PSA solution, which makes for maximum uptime and consistency with margins. This is significant for smaller MSPs because it means fewer IT professionals are needed as well as increased security—with many PSA platforms boasting two-factor authentication to mitigate unauthorized access attempts.

In a study of 786 technical professionals across small and large organizations, 94% use cloud SaaS, with 70% of CIOs attracted to cloud-based SaaS for its agility and scalability—something that is vital for smaller MSP looking to grow.

#3) Leverage automation to reduce human error

Human error accounts for 12% to 15% of the mistakes in manual billing. As any business owner knows, mistakes can quickly add up in the form of unnecessary costs. Automating your data input can mitigate costly errors and also save your company money in operating expenses. In fact, Goldman Sachs estimated that automated data capture is only about a third of what less-efficient manual data capture costs.

With improved internal operations, the prowess in PSA solutions can reduce the more menial tasks for employees and decrease the potential for billing mistakes that lead to revenue leakage, meaning fewer resources wasted overall. Not to mention, for MSPs with smaller budgets, there's less room for mistakes, and more money is needed for investments for growth. When an MSP can ensure customer usage is measured accurately and billed accordingly, the opportunity to scale is provided. 

#4) Drive decisions with accurate data 

Data is often a business's most critical asset, as it gives actionable intelligence that provides insight for growth. PSA solutions can deliver value by bringing the power of data to internal operations.

With a customizable PSA tool, companies can work easily and efficiently through a tailored platform that shows mission-critical business data in real-time. If used properly with an appropriate adoption strategy, PSA tools can create a knowledge base that can solve issues quicker and optimize workflows for MSPs to save time on every ticket. 

Eighty-three percent of organizations with PSA software are able to assess potential revenue before accepting or approving projects. By utilizing a PSA tool, smaller MSPs remain a step ahead of the competition by knowing where and how to spot potential financial opportunities and avoid pitfalls—using data to help their money work smarter and not harder.

#5) Increase business continuity through integrations 

PSA solutions can feature many integrations with MSP-centric applications, including RMM, CRM, accounting, email protection, managed print, business continuity and cloud storage solutions. With a singular and central hub of information, transparency and consistency across operations increases. This expands the capacity for smaller MSPs to see and improve the Key Performance Indicators (KPIs) that are essential for business growth. 


A National Computing Centre study found that 54% of businesses who implement a PSA solution improve their resource utilization and 58% increase project effectiveness. By streamlining the online management of projects, PSA tools can seamlessly increase efficiency across functions—including time and expenses, invoicing, billing, resource planning and budget tracking—allowing for the adoption of more strategic initiatives
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Opportunities are ahead for smaller MSPs

The managed services market is predicted to reach $356.24 billion by 2025, suggesting that more businesses than ever are seeking solutions from MSPs of all sizes. What is more, MSP businesses using PSA software have reported seeing a 45% increase in project margins. 

The numbers prove that by providing an end-to-end view of your business and operating models, PSA solutions can be a viable resource for small MSPs to remain competitive among the bigger players. 

One solution that can fit the needs of MSPs of all sizes is CloudBlue PSA. Find out more about how CloudBlue PSA can help you grow your MSP business and contact us at PSA@CloudBlue.com with any questions.

 

About the Author: Regional Sales Manager - Americas, CloudBlue PSA Follow Ben Chappell on , LinkedIn or Website


Tags: business growth, cloud msp billing, cloud software, managing growth, msp business model change, msp growth trends, MSP

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