As managed service providers (MSPs) have seen a surge in demand over the past few years, scaling their businesses to meet this demand has become a major challenge. In this comprehensive blog post, we will explore the top 3 scalability challenges facing MSPs in 2024, as well as practical strategies and solutions to address them.

The managed services industry has experienced tremendous growth, with worldwide spending projected to reach nearly $274 billion by 2025 according to IDC. This is being fueled by small and medium businesses increasingly turning to MSPs for help managing their IT infrastructure and services.

However, with rapid growth comes growing pains. As an industry expert with over a decade of experience in data analytics and business intelligence, I have seen MSPs facing a number of obstacles related to talent, customer satisfaction, compliance, and cybersecurity as they scale their operations.

Overcoming these challenges is critical for MSPs to capitalize on the market opportunity while building sustainable, profitable businesses. In this post, I will provide an in-depth look at the top scalability challenges for MSPs and actionable recommendations to tackle them, specifically:

  1. Improving customer satisfaction rates
  2. Solving talent shortage problems
  3. Enhancing security and compliance posture

Let‘s explore each challenge and solution in detail.

With increased dependence on MSPs, customers are also raising their expectations for the level of service and responsiveness they receive. However, many MSPs struggle to maintain high satisfaction rates as they rapidly onboard new customers.

1.1 Proactively Managing Customer Expectations

The first step is setting appropriate expectations upfront when engaging new clients. MSPs should clearly communicate:

  • Their service level agreements – what services are provided, response times, metrics like uptime guarantees, etc.

  • The client‘s responsibilities – security practices required, points of contact, change request processes, etc.

  • How the relationship will work on an ongoing basis – account management approach, communications cadence, reporting frequency, etc.

Taking the time to align on expectations, formally document agreements, and educate customers prevents mismatched understandings that lead to dissatisfaction down the road.

For example, research from Infrascale shows that only 29% of MSP clients report having SLAs that meet their recovery time and recovery point objectives. This mismatch in expectations is a recipe for disatisfaction. Being crystal clear about what an SLA includes and excludes can help avoid those scenarios.

1.2 Streamlining Service Delivery

As MSPs grow and take on more customers, inefficiencies in service delivery become more pronounced. Steps to streamline include:

Leveraging automation – Tasks like onboarding, technical monitoring, alerting, and reporting can be automated to free up staff time for higher value work. Popular tools like ConnectWise Automate, NinjaRMM, and Auvik provide automation capabilties.

According to Kaseya‘s 2021 MSP Benchmark survey, top performing MSPs generate over 3x more tickets through automation compared to their peers. Increased automation is clearly a best practice as MSPs scale.

Using consistent processes – Standardizing delivery processes enables new team members to get productive faster. MSPs should define common workflows around service requests, escalations, change management, and other key areas.

Consolidating tools – Having too many disjointed systems introduces complexity. MSPs should select integrated tools like Kaseya‘s IT Complete platform when possible to minimize tool sprawl.

According to Kaseya‘s benchmark survey, 21% of an MSP tech‘s time is spent switching between systems and apps. That‘s a massive productivity drain that integrated platforms help avoid.

Optimizing team structure – Specialized roles, like dedicated account managers for large customers, help the team scale expertise. Cross-training ensures continuity of customer service if staff leave.

1.3 Actively Monitoring Satisfaction

MSPs shouldn‘t just assume they are meeting expectations. Leading MSPs proactively gauge satisfaction through:

  • Customer satisfaction surveys – Regularly sampling customer sentiment through online surveys provides quantitative data to measure performance. Top MSPs use tools like VoiSentry to automate satisfaction surveying.

  • Account reviews – Holding quarterly business reviews for each customer fosters two-way dialogue on what‘s going well and what needs improvement.

  • Monitoring forums & social media – Tracking mentions and reviews on sites like G2, Reddit, Spiceworks, and Twitter provides candid qualitative feedback. Social media monitoring tools like Hootsuite make this efficient.

  • Service delivery metrics – Response time, resolution time, uptime and other operational metrics indicate where processes need refinement.

For example, SolarWinds MSP found that only 50% of MSPs conduct customer satisfaction surveys today. Actively monitoring through surveys and reviews is an opportunity for differentiation.

By regularly monitoring satisfaction through these channels, MSPs can identify problems early and course correct before small issues become major grievances necessitating client turnover.

The IT skills gap remains an ongoing pain point, making recruiting and retaining skilled staff a top priority. MSPs must implement creative approaches to secure talent as they scale.

With remote work expanding the talent pool globally, I‘ve seen many MSPs still taking a localized approach to hiring. Expanding their talent strategy is critical to accessing the skills needed to fuel growth.

2.1 Exploring New Sourcing Channels

Too often, MSPs take a passive approach to hiring by just posting openings on job boards. To access untapped talent, they should also leverage:

  • Social media recruiting – Promoting openings and engaging potential candidates on LinkedIn, Twitter, Facebook groups, Reddit, Discord servers, and similar platforms.

  • Talent pipelines – Forging relationships with technical schools, colleges, coding bootcamps, vocational rehab programs, and non-profits to source graduates and trainees.

  • Referral networks – Encouraging referrals from inside and outside the company through employee referral bonuses and external referral partner programs.

  • Diversity-focused initiatives – Partnerting with organizations that help connect women, minorities, veterans, neurodiverse individuals and other underrepresented groups to careers.

  • Remote recruiting – Being open to remote staff and candidates from any geography expands the pool. Remote work is now tablestakes for attracting top talent.

For example, I advise clients to make social media recruiting 5-10% of their overall hiring strategy. While most recruiting happens through job boards today, social will become more important over time. Getting ahead of that shift is smart.

Taking a multi-pronged approach opens up new, rich channels for sourcing skills in short supply.

2.2 Upskilling Existing Team Members

While bringing in new staff is important, retaining and advancing current employees should be an equal priority. Tactics include:

  • Skills training & development – Sponsoring technical certifications, cloud training programs, cybersecurity courses, and other skills development elevates team capabilities. Amazon, Cisco, Microsoft, CompTIA and VMware offer relevant learning paths.

  • Learning incentives – Offering financial incentives like bonuses upon program completion and exam passes motivates continuous learning. Allowing time for training during work hours also removes barriers.

  • Mentorship & job shadowing – Pairing junior team members with senior engineers provides on-the-job knowledge sharing. Letting staff rotate through different roles and teams expands skills.

  • Clear growth trajectories – Providing transparent promotion pathways from help desk to systems engineer to solutions architect incentivizes staff to stick around and move up.

For instance, research shows that 25% of IT professionals will resign without a clear career path. Defining paths to promotion and mastery helps retain top team members.

Investing in current staff boosts capabilities while improving loyalty and retention. It also facilitates knowledge transfer as more experienced team members impart wisdom to new hires.

Data breaches and cyberattacks were constant headlines in 2024, and MSPs aren‘t immune. Enhancing security and compliance is paramount when servicing larger customer bases.

But based on my experience, MSPs often struggle to maintain robust security hygiene as small teams get overwhelmed servicing clients. Making security central to operations is critical as MSPs scale.

3.1 Implementing Security Frameworks & Controls

Adopting standard security frameworks provides a blueprint for managing risk. Steps MSPs can take include:

  • Gaining compliance with ISO 27001 information security standards as a baseline

  • Leveraging the CIS Controls as an industry-standard prioritized set of safeguards

  • Adopting elements of the NIST Cybersecurity Framework like asset management, identity management, and incident response

Specific technical controls MSPs should implement include:

  • Multi-factor authentication (MFA) across all systems, especially remote access tools like RDP

  • Endpoint detection and response (EDR) solutions on all customer endpoints. I recommend Crowdstrike or SentinelOne.

  • Security information and event management (SIEM) for central logging, alerting, and dashboards. Splunk is a top choice.

  • Vulnerability scanning and penetration testing to proactively find weaknesses

For example, research shows 60% of MSPs experienced a security breach over the past year. But only 34% have implemented robust SIEM capabilities. The gap between threats and preparedness is alarming.

3.2 Formalizing Security Policies & Processes

Equally important is defining robust policies, processes, and governance models around security. Examples include:

  • An incident response (IR) plan with severity classifications, escalation procedures, communications protocols, etc.

  • Access management policies governing privileged access, credential rotation, termination, auditing, etc.

  • Change management processes requiring review and approval before systems changes

  • Client security requirements – such as MFA, endpoint software, log collection – documented in contracts

  • Security awareness training mandated for all employees on topics like phishing and social engineering

  • Designating a CISO or security manager role to centralize oversight of operations, compliance, auditing, and more

For instance, formalizing IR plans enables quick, coordinated response to incidents versus ad hoc, chaotic approaches that can do more harm than good in the midst of an attack.

By ingraining security into organizational culture, governance, and relationships with clients, MSPs signal it is a foremost priority as they scale.

Effectively overcoming these 3 challenges – improving customer satisfaction, recruiting skilled talent, and boosting security – separates the most successful MSPs from the pack. MSPs who fail to get these right will struggle to capitalize on the massive managed services market opportunity.

Hopefully the analysis and solutions presented provide an actionable blueprint. Key next steps for MSP owners and leaders include:

  • Evaluating which 1 or 2 of these challenges currently gives you the biggest headaches, and develop a plan to address them. You can‘t conquer everything at once.

  • Using the strategies outlined here as a starting point, but customize the solutions to your unique situation.

  • Setting tangible goals & metrics – like NPS scores for satisfaction, or open reqs for hiring – to benchmark progress over the next year.

  • Monitoring industry news and best practices so you stay on top of evolving challenges. Our blog provides regular research and insights on pressing topics.

Scaling sustainably is hard. But by learning from the experiences and expertise of successful MSPs and industry advisors, new ventures can avoid common pitfalls. Master these core competencies, and your business can seize the expansive opportunity ahead.