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Is It a Good Idea to Add Software Development Services to MSP?

Vlad Vakser Vlad Vakser | February 8, 2023 | 8 min

The management of information technology and end-user systems for customers has become a popular service delivered by an MSP — Managed Service Provider. According to a Logic Monitor report, almost half of the enterprises spent more on MSP services last year than they did in previous years. The top three drivers are cloud migration, digital transformation, and tackling cybersecurity threats. 

While MSPs allow their clients to abandon support, maintenance, and monitoring processes, they still fail to meet all the emerging needs. Many of them are software development related. This leads to a limited offer and, therefore, missed profits. Should your MSP start software development? Let’s learn the pros, cons, and best practices. 

Is Software Development Included in the MSP Business Concept? 

A Managed Service Provider (MSP) is a third-party company that offers a range of services to manage and support the IT infrastructure of organizations. These services can include network and server monitoring, cybersecurity, cloud computing, data backup and recovery, software and hardware installation and maintenance, and help desk support.

MSPs work with businesses to understand their unique needs and provide customized solutions to meet those needs. They often operate on a subscription model, where customers pay a recurring fee for access to their services. By outsourcing their IT needs to an MSP, businesses can free up their internal resources and focus on core activities, while also benefiting from the expertise and resources of the MSP. MSPs can offer peace of mind to businesses by ensuring that their IT systems are running smoothly and securely, minimizing downtime and maximizing productivity.

However, the service doesn’t cover all the client’s needs as no software development is provided. What will MSP get if it implements software development services? Let’s find out.

Do You Need to Implement Software Development in Your MSP Business?

Imagine you are a bakery that sells delicious muffins and cakes. You already have a client base that enjoys your sweets and is satisfied with the provided services. However, clients often need more than muffins and cakes. Cupcakes, and cookies, together with a cup of coffee, are good options to diversify your offer and gain extra profit without sending your customers to a nearby coffee shop. The same applies to MSPs and software development. So, is it a good idea to add software development services to the MSP business? The answer is, obviously, yes, but let’s dive into more details. 

Advantages of Software Development Implementation to MSP Businesses

Here are the top four benefits you may reap if you implement software development services in the MSP business:

Increased revenue 

Recall the analogy with the bakery. That’s exactly the case with an MSP offering software development services. Adding a couple of developers with relevant professional experience allows you to diversify the offer and, therefore, increase your profit.

Stronger rapport with a client 

Why make your client search for a software developer when you can satisfy their needs? It improves client retention and satisfaction, which results in greater trust. 

A solid basis to keep and increase your market share 

The hot tech market makes you maintain a competitive edge. The wider your offer is, the larger your potential market share can be. This ramps up your reputation, which leads to increased income.  

A chance to attract more clients by offering more services 

According to Statista, acquiring more customers was a top challenge for MSPs globally. Software development allows you to satisfy more clients’ needs and provide fully-fledged services.  

Looking for a strong partnership?
Reach out to Langate

Risks of Software Development Implementation in MSP Business

While potentially higher profits sound lucrative, you should beware of the risks of implementing software development services to MSP. Failure to assess them may result in reputational losses and extra expenditures. Here are some risks to consider before you diversify your service offering:

Lack of Expertise

Software development is a booming market with thousands of players. While not all of them may excel, there are strong competitors with expert developers on the team. In order not to fail, you need to ensure you have the right experience before signing a contract for solution development. 

Don’t go for projects you have little knowledge about. It’s best to analyze your strengths and complement your weaknesses to provide quality software development services. Don’t forget, you can source skills to improve your team. 

Talent Shortage

According to a Korn Ferry study, the talent shortage is a top challenge globally. By 2030, businesses may lack 85 million skilled employees, which is roughly equivalent to Germany’s population. The IT labor market is well known for its lack of skilled talents, which may result in costly or slow hiring. Here’s why you may fail to hire a software development team at a management software provider company. 

Potential Reputational and Financial Losses

Think of software development for MSP as an MVP. When you fail to align the processes and accumulate the right expertise, you may not deliver the desired outcome. Therefore, you will either have to spend additional time, effort, and money, to rebuild the solution or will suffer from reputational losses. The latter may also alienate your existing clients. 

How to Start Adding Software Development to Your Company’s List of Services

If you decide to implement software development services in the MSP business, here’s a brief guide for you to consider:

Study your client’s needs and match them with what you can offer

The tech landscape is vast, which opens up a lot of opportunities. While you can opt for any software development niche, be it a mobile app or CRM development, it’s best to start from your clients’ needs. Here’s why:

  • You already know their domain and are likely to have experience with similar projects. Suppose you support web apps, and your client wants to develop a new one. You are well aware of the niche and web development specifics. It’s the web developers, UX/UI designers, QAs, or business analysts that you may lack.
  • By providing a wider range of services, you save on client acquisition and prevent your existing clientele from seeking help from your competitors. As a result, you can earn more and increase your market share with less effort. 

Source expertise and talent

Once you decide on the scope of the software development services, you need to gather a team. The more obvious option is to attract your in-house specialists. However, they may either be overloaded with current projects or require additional expertise. 

Here’s where hiring comes in. Yet, to hire an expert team, you need to have enough expertise to correctly evaluate the candidate’s professional background and skills. Besides, recruitment often takes several months, which may not be the option to quickly add software development to your portfolio.

The easiest option is to find a reliable partner with deep expertise in the niche and, preferably, a team. Consider outsourcing and outstaffing agencies to quickly source expertise.   

Start small and then scale your team

While it’s tempting to hire a full-cycle software development team, it may not always be a good idea. If you fail to provide enough work, you end up with huge costs. In other words, you will pay employees just to keep them. 

It’s best to partner with a reliable software development agencies that will either provide talents on demand or outsource the development services. It allows you to cut HR costs and ensure an expert team is delivering the project. 

Look for services that complement your business model

Instead of providing highly diverse services, it’s best to come up with a package. Analyze the scope and niche of the provided services and consider which ones improve your added value. While they may not always bring you a lot of profit, they’ll definitely improve customer acquisition and retention. 

Consider Langate Your Trusted Partner 

If you are looking for a reliable partner to help you tackle your tech needs, consider the Langate team. With us, you can get a fully-fledged service delivered by a goal-oriented team of professionals. 

We don’t only provide support and maintenance, but also offer you software development services. For example, we can boost your productivity with effortless document management solutions or set up streamlined data operations for improved analytics and, therefore, decision-making. 

If you need help with software development, don’t hesitate to let us know. We are here to assist you, from idea generation to implementation and support. Learn more about our service offerings for MSP companies.

Final Thoughts 

Do MSPs need software development teams? And can an MSP company earn more money by hiring a software development team? Yes, and yes! It’s a good chance to improve customer retention and rapport and increase your revenue and customer satisfaction by providing value-added services. 

In order to reach success, you need to be careful when deciding on the scope and niche of software development. Besides, it’s important to ensure you have the proper expertise to deliver quality solutions. 

Frequently Asked Questions

What is the difference between a management software provider and an outsourcing company?

A management software provider (MSP) is a third-party company that manages some minor daily tasks like maintenance, support, and cybersecurity. An outsourcing agency is typically focused on larger tasks that involve software development rather than assistance in the day-to-day routine.

What are the benefits of adding software development services to MSP?

The main advantages that software development brings to your MSP are improved retention rates, increased client satisfaction with your company and higher revenue, and more chances to attract new clients by offering additional services.

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