Top 5 Threats to the Growth of Managed IT Service Providers


Are you losing sleep over how to manage your IT Services projects for better growth? If yes, you are not alone. How MSPs (managed service providers) can grow their revenue in 2021 is one of the hottest topics right now.

Expected to grow at a compounded annual growth rate (CAGR) of more than 9% to hit an impressive $282 billion in 2023, demand in MSPs is rising and fast. You should be making a killing, right? Afterall, most companies hate dealing with complex technology and would be happy to have someone expertly handle their IT Services – unfortunately, it’s never that easy.

As you focus on potential profit, you must also factor in the challenges and threats that threaten the growth of your business. Here are the 5 factors that are threatening the progress of Managed IT Service Providers and how to deal with them to stay on top of your game!

1. Failure to match resource demand with capacity

As a project manager, have you mastered the art of aligning project demand with capacity? Demand for managed IT services is at an all-time high and you could be losing out on potential business if you pass on this opportunity. When you have inadequate capacity, you cannot take on new business which means you operate below your actual profit potential. Prospective customers could also lose confidence in your business since you cannot meet their needs.

To balance capacity and demand, you should look towards forecasting demand. This will help you to predict a dip in capacity and re-organize your resources accordingly to meet new demand.

2. Inability to quickly identify money-losing projects or clients

If you want to make it in the IT Services business, you can’t be working with any and every client that engages with you.

Many Managed IT Service providers are, however, making much less than their potential because they haven’t mastered the art of saying “NO” to unprofitable projects or business opportunities.

The CEO of Convergence Network, Eric   Gray, set the pace for how an efficient MSP should operate. He walked away from 90% of customers and retained just 4! With those 4 clients, he still managed to drive 9% revenue growth for the business.

You need to develop a knack for choosing profitable clients, especially now that we are looking at a potential flux in overall demand for IT Service Providers. To engage high-quality clients only, start by doing the math. Set your desired profit margin, work within a budget, and monitor costs to ensure that you are not wasting time on profit-losing work or clients.

3. Lack of effective collaboration between various teams

If things are going well for you and your MSP is scaling, you may hire more team members. While this kind of growth is great, it introduces a new problem – communication. A break in communication at any one point could lead to delayed projects, a decline in the quality of work, and loss of business.

Finding a way to streamline communication between different teams will ensure projects run smoothly.

4. Absence of a single source of truth and real-time visibility into all ongoing projects

Have you ever found yourself answering “I’m not exactly sure” when your customer asks for a status update? Maybe you also struggle estimating when you are likely to complete a particular project. These are not situations any business wants to find themselves in.

Failing to give your client the answer they need, kills their confidence in your business and damages the likelihood of future business. The ability to view all project activity in real-time helps you provide answers and solutions when problems emerge– and fast.

5. Extended delivery-to-cash time

The process of billing your client should be easy and fast. Delayed payments can cripple your business. You have employees, vendors and contractors who expect to get paid in time. You also have internal operations that require money to flow smoothly.

If the process of billing clients has slowed to a crawl because of delays in collecting, processing or combining data from contractors and employees, you are putting your business at a cash-flow risk. It’s essential to have a clear path to billing your customers, resulting in a smooth and consistent flow of cash.  

Overcoming threats to business growth using project management software

Project management is no easy task. On one hand, you want to ensure every team member works as efficiently as possible. On the other hand, you have multiple projects that must run smoothly. With all these moving parts, finding a way to handle it all with ease is every project manager’s main objective. That is where project management software comes in.    

The right project management software will:

  • Help with demand forecasting If you have been struggling to balance demand and capacity, resource capacity planning software will come in handy. Such software will help you forecast demand and spot future downtime, enabling you to proactively avoid potential gaps and issues.
  • Provide real-time profitability data by project, client, or portfolio Ensuring that you are working profitably is crucial. Project budgeting helps you track your budget against your actual cost and target profit margin.   Project management software with powerful reporting and business intelligence will ensure that the management team is always in the know regarding what projects and clients are making the most money and where there is a risk of going over budget.
  • Improve team collaboration Better team communication will mitigate the risks of delayed projects or misunderstanding. Easy messaging, instant notifications, file sharing, image annotations, and an approval workflow, will keep all stakeholders up-to-date and informed.  
  • Create a single source of truth for all stakeholders The executive team and managers will have visibility into accurate and up-to-date statuses and financial data on all ongoing and historical projects. As a result, faster and better business decisions will give your IT Services company an edge over the competition.

    With software that allows you to create a guest portal, your clients can finally monitor the progress of their projects. They can also channel their requests or queries through the portal, easing communication and ensuring customer satisfaction.   Even more, you can use AI forecast software to determine how quickly you can complete a project and communicate the same to your customers.

  • Decrease delivery-to-case time Manually compiling all the data required to bill your clients is an uphill battle. But not when you have software that helps you automate the collection of timesheets and expenses from all employees and contractors. That same software should also be able to consolidate everything into a single billing report, allowing management and clients to quickly review and approve it, and then pass it to their invoicing software. The result? happier clients and better, faster cash flow.

Do you want to grow your Managed IT Services Company faster than competition?
Easy Projects has all the tools you need to help you run a profitable business and scale fast. Ask for a guided tour of Easy Projects today and see how it can help you achieve faster growth for your business!

The post Top 5 Threats to the Growth of Managed IT Service Providers appeared first on Blog | Project Management Software | Easy Projects.


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