How Can the FTE Model Compete with the MSP Model?


  • Service Provider

    This question comes up a lot, but often in reverse. We talk about MSPs (using the term as a generic catch all, we mean ITSPs inclusive of MSPs) and how their model is superior to having in house IT staff as a result of the larger business rule that you always in source your core competency and outsource everything else (with obvious scale exceptions in specific cases.)

    But I want to ask it in reverse, because I think it might make it easier to approach. Given the things that an MSP (or ITSP) can do based on their larger scale and IT being a core competency, what situation would arise that would allow an FTE to compete?

    Key: You cannot use "overpriced" or "does bad work" or any other equally applicable problem to describe either situation. We aren't talking about different people, but different modes of acquiring the same IT. Keep it apples to apples, assume the same people hiring or acquired through two different approaches, not different people. MSPs can be good or bad, cheap or expensive, just as FTEs can be. We are discussing the models, not experiences with bad hiring or vendor selection.

    Some key facts:

    1. MSPs will always have equal or greater scale than FTE.
    2. MSPs is outsourced, but does not imply off shore, non-local, or even off site. MSPs can be 100% dedicated resources, 100% on site just like an FTE can be.


  • MSP's won't always have equal or greater scale than a FTE. I think it would be better to say "sometimes". Perfect example, if I started a new MSP start up today, from scratch, there is no way I wouldn't cost more than an established and furnished MSP.

    We're talking from scratch! If I have no hardware, software, tools, other human resources to delegate to, and no processes in place other than what I came out of school with and what I picked up from working various jobs. It would cost WAYYY more to get established.


  • Service Provider

    @krisleslie said in How Can the FTE Model Compete with the MSP Model?:

    MSP's won't always have equal or greater scale than a FTE.

    It's part of the definition. It's literally impossible to have an exception here.


  • Service Provider

    @krisleslie said in How Can the FTE Model Compete with the MSP Model?:

    Perfect example, if I started a new MSP start up today, from scratch, there is no way I wouldn't cost more than an established and furnished MSP.

    Correct, you'd be an inefficient MSP. but the least efficient MSP, in the worst case scenario, doesn't fall below the FTE line, it only approaches it. The MSP model is always equal or better, no possibility for exceptions.

    Sure, there are better and worse MSPs, but you are using "isn't perfect" as a distraction from the real "is still better."


  • Service Provider

    @krisleslie said in How Can the FTE Model Compete with the MSP Model?:

    We're talking from scratch! If I have no hardware, software, tools, other human resources to delegate to, and no processes in place other than what I came out of school with and what I picked up from working various jobs. It would cost WAYYY more to get established.

    Not compared to an FTE. It's equal. And if you ever get to more than one client, it's better. That's the key... it's never worse, the worse case is equal, all other cases are better.



  • How does remote MSP handle the physical aspects of IT?

    Examples:

    • Installing new physical servers, replacing HDDs, adding new server components, upgrading physical servers
    • Plugging in network cables to servers, new network cables from patch panel to switches, adding network components to rack and servers... switches and NICs
    • Replacing a users compter, imaging a users computer, replacing failed components on users computer
    • User BYODs, Outlook/software setup on phones, tablets, etc.
    • User station setup, desktops, monitors, etc... location moves, scraping components
    • ...etc... the list is actually pretty big

  • Service Provider

    @obsolesce said in How Can the FTE Model Compete with the MSP Model?:

    How does remote MSP handle the physical aspects of IT?

    You specifically added "remote" when I explicitly stated you couldn't add artificial or reversible constraints with remote being one I mentioned in the OP.

    Reverse it, what if the MSP was on site and the FTE were remote? How would that remote FTE handle those things when the MSP is on site all the time?


  • Service Provider

    @obsolesce said in How Can the FTE Model Compete with the MSP Model?:

    • Installing new physical servers, replacing HDDs, adding new server components, upgrading physical servers
    • Plugging in network cables to servers, new network cables from patch panel to switches, adding network components to rack and servers... switches and NICs
    • Replacing a users compter, imaging a users computer, replacing failed components on users computer
    • User BYODs, Outlook/software setup on phones, tablets, etc.
    • User station setup, desktops, monitors, etc... location moves, scraping components
    • ...etc... the list is actually pretty big

    In apples to apples, which is the only case that is applicable to discuss, the MSP does all these things identically to the FTE. If the FTE is on site, the MSP is on site. If the FTE is remote, the MSP is remote. So while we can't know the answer without more specifics to a use case, what we CAN say is that very obviously... as always, the MSP can do all of this as well, or possibly better, than an FTE can.

    So it continues to prove the point, the only downsides to MSPs are imagined constraints that are not part of the MSP model.



  • I'm always open to hear how it would be better 🙂 i'm not a debate monkey, I'm more of an "enlighten me" kinda guy. For me personally, knowing all the moving parts and knowing how to properly use them is more important. That's wisdom. Companies usually pay for wisdom more so than only knowledge, in general.

    A person to person debacle between FTE vs a MSP (single individual in this case) is going to definitely be between efficiency and more importantly being effective. You could have 100 team member MSP and be efficient, but are they effective?

    It will always be a philosophical difference and challenge, which is the thing is we want. In life there is rarely a one thing is always the best thing always till eternity. But that is what makes us all better, being able to adapt and change.

    I totally agree with you in a case like my own, because the client I have can't afford a FTE and if he could the company would be ran totally different. So being a MSP to him saves him $$$. I know that and agree with that.

    However I think what really needs to be explained so it's not a quick answer is what is more detail on what is offered vs what isn't offered between a FTE and MSP. One can't make a decision if it is better or worse with just one view.


  • Service Provider

    @krisleslie said in How Can the FTE Model Compete with the MSP Model?:

    A person to person debacle between FTE vs a MSP (single individual in this case) is going to definitely be between efficiency and more importantly being effective. You could have 100 team member MSP and be efficient, but are they effective?

    You are missing the point of the "model" comparison. You can't cherry pick one aspect that is arbitrary and decide that that causes a concern.

    Remember, any MSP always has the option of going to one to one to match what an FTE can do. Always, no exceptions. So ANY concern you have that a different MSP approach might not be best isn't applicable, because no MSP is required to do it that way.

    MSPs simply bring more options. MSPs can do any approach that an FTE can do, and potentially many more. So any "what if" that suggests that an MSPs is different than an FTE is flawed.

    You have to keep the suppositions to how an FTE would be superior to an MSP acting like an FTE. Of which I can't think of any possibility of there being one.


  • Service Provider

    @krisleslie said in How Can the FTE Model Compete with the MSP Model?:

    However I think what really needs to be explained so it's not a quick answer is what is more detail on what is offered vs what isn't offered between a FTE and MSP. One can't make a decision if it is better or worse with just one view.

    This is what makes it easy...

    FTE offers X.

    MSPs offer X + more.

    An MSP can (and often do) offer anything an FTE can do, including full time dedicated, full time on site, one to one, etc. But then offer loads of flexibility, scalability, and options on top of that. There's literally nothing an FTE can offer than MSPs don't offer, too. But MSPs offer so much more, in most cases.

    That's my point, I don't know how it is physically possible for an FTE to compete. In the most extreme theoretical case where the pure FTE model is ideal for a client (never seen this in the real world, it's a pure theory case) then the MSP falls to the worst case of being "the same". Any variance, in any way, and the MSP improves and the FTE declines.


  • Service Provider

    @krisleslie said in How Can the FTE Model Compete with the MSP Model?:

    It will always be a philosophical difference and challenge, which is the thing is we want. In life there is rarely a one thing is always the best thing always till eternity. But that is what makes us all better, being able to adapt and change.

    Correct, but we know that there are models that are "never right." The the world is not one size fits all, but we often use that to excuse ignoring the obvious fact that "some sizes fit none."

    This isn't a case where a single MSP approach fits all needs. It's simply realizing that the FTE approach meets no needs.



  • Humby I think there is a reason and place for both. In someway, both are symbiotic to each other. A company must have ways to prove if either of the two are adding value, efficient and effective at least at the core, but each company may have other categories that "grade" someone or an entity and if they even like what they are getting offered.


  • Service Provider

    @krisleslie said in How Can the FTE Model Compete with the MSP Model?:

    Humby I think there is a reason and place for both.

    But based on what? If the FTE provides no possible value, only represents risk... when do we say "there is time and place for putting the company at risk without benefit?"

    The answer is... there isn't. It seems reasonable to say that there is a time and a place for everything, but it's not at all true. That's just a catch phrase that sounds nice. It's a false platitude. The point here is that logically we can demonstrate that it is literally impossible for an FTE to make sense. Since they cannot add value, only risk, they can't be the right choice.


  • Service Provider

    @krisleslie said in How Can the FTE Model Compete with the MSP Model?:

    A company must have ways to prove if either of the two are adding value, efficient and effective at least at the core, but each company may have other categories that "grade" someone or an entity and if they even like what they are getting offered.

    No, that's not how it works. One model simply is better than the other. We can show that. The theoretical company in your example has no means to compare the two outside of this logic exercise which proves the point. Any attempt to evaluate otherwise would be introducing false, misleading artefacts that would only serve to confuse.


  • Service Provider



  • @scottalanmiller if it can't be measured it can't be improved. But a company has to care otherwise, it's kinda a moot point. I realize I maybe looking outside of IT/MSP and in general and I'm trying not to miss your points because they definitely are valid.


  • Service Provider

    @krisleslie said in How Can the FTE Model Compete with the MSP Model?:

    @scottalanmiller if it can't be measured it can't be improved.

    Not all things are measurable, that's a business fallacy that is important to avoid. We can't measure, but we CAN prove that one model is inferior. There is no purpose to measuring something already known to be inferior. Knowing how much it is inferior offers no business value.

    At which point you need to measure the measuring - how much money is lost by trying to measure something for no reason?


  • Service Provider

    @krisleslie said in How Can the FTE Model Compete with the MSP Model?:

    But a company has to care otherwise, it's kinda a moot point.

    Of course they have to care, hence the entire point here. Caring = doing the logical proof = MSP is the only valid model.

    That's the basis that we are going for. We can't prove to what degree it is better, but we CAN prove that it is better. And proving that it is better is all that matters for decision making, and decision making is all that matters to the organization.



  • @scottalanmiller in that model, then it assumes no company ever should have a FTE or a FTE in IT only?



  • The question I have never seen Scott bring up is the MSP making money on the backs of the workers.

    So Scott said we consider the same employee in both cases. As an FTE, the employee, Bob, gets paid $60K + benefits, we'll assume that makes his total $80K/yr.

    Wouldn't that same employee cost the MSP the same money? Assuming it does, Why would the MSP charge the same amount to the customer as they pay their employee? Isn't the MSP in the market to make money? And if they are wouldn't that suddenly make Bob cost more to the customer vs if the customer hired Bob as an FTE?


  • Service Provider

    @dashrender said in How Can the FTE Model Compete with the MSP Model?:

    The question I have never seen Scott bring up is the MSP making money on the backs of the workers.

    So Scott said we consider the same employee in both cases. As an FTE, the employee, Bob, gets paid $60K + benefits, we'll assume that makes his total $80K/yr.

    Wouldn't that same employee cost the MSP the same money? Assuming it does, Why would the MSP charge the same amount to the customer as they pay their employee? Isn't the MSP in the market to make money? And if they are wouldn't that suddenly make Bob cost more to the customer vs if the customer hired Bob as an FTE?

    Usually, he generalizes this point and stating that the FTE was not working the entire time so the MSP will not and thus will actually cost less.

    But it is not an apples to apples. It is an assumption.

    It is certainly true that the same person will cost more if 100% deployed in place of an FTE or the MSP will lose money. Because the MSP has the same overhead, taxes, insurance, bonding, etc., as the company.


  • Service Provider

    @obsolesce said in How Can the FTE Model Compete with the MSP Model?:

    • Installing new physical servers, replacing HDDs, adding new server components, upgrading physical servers Bench work
    • Plugging in network cables to servers, new network cables from patch panel to switches, adding network components to rack and servers... switches and NICs Bench work
    • Replacing a users compter, imaging a users computer, replacing failed components on users computer Bench work
    • User BYODs, Outlook/software setup on phones, tablets, etc. We do this remotely every day.
    • User station setup, desktops, monitors, etc... location moves, scraping components Bench work
    • ...etc... the list is actually pretty big non-existent. 🙂

    So even for remote stuff and whatever... there are lots of ways to deal with this. Ignore that this isn't apples to apples and that FTEs have to deal with this too every day...

    1. Bench work on site is trivially easy to solve. Whether it is on call remote hands, on internal on site resource, a partner company, internal resources that handle these tasks, etc. Getting people to do simple non-IT tasks is very easy should these tasks be assigned to the MSP agreement - which is common, but also important to understand that this is outside of the scope of what MSP means and implies an outsourced bench department too. Common, but technically separate. (In larger companies, these tasks weren't even bench, but facilities as they were seen the same as lamps, chairs, desks, etc.)

    2. This kind of work is typically a tiny fraction of the overall work in IT. There are exceptions, but a typical environment this is around 1-2% of the workload if IT and bench are merged.

    3. Having worked in both MSP and remote MSP work for decades, this stuff is important, but generally exceptionally simple to handle. It might seem like a big deal, and for some company it is, but for normal companies, it is not.

    4. Traveling resources are a great way to go too. For example, @gjacobse went to NC for a week recently because they needed someone in site. I went to Atlanta recently. There is more than one way to skin that cat.

    But it is important to remember, the overall topic isn't about remote vs. local, but FTE vs. MSP which have no such intrinsic values. If we want to discuss remote vs. local, we have to look at not the hiring model, but the remote hands, work from home, choosing location, etc., benefits.


  • Service Provider

    @krisleslie said in How Can the FTE Model Compete with the MSP Model?:

    @scottalanmiller in that model, then it assumes no company ever should have a FTE or a FTE in IT only?

    One rule: FTEs should be in core competency, and no other department.

    There are places where exceptions are soft, though, like janitors and unskilled work.


  • Service Provider

    @dashrender said in How Can the FTE Model Compete with the MSP Model?:

    Wouldn't that same employee cost the MSP the same money? Assuming it does, Why would the MSP charge the same amount to the customer as they pay their employee? Isn't the MSP in the market to make money?

    So this is actually a great question and one that comes up internally (we are an MSP) a lot. But the answer is actually surprisingly simple:

    It's a loss leader (or really a "break even" leader.) It doesn't make money, but it doesn't lose money, so it's no big deal to do. But it has other benefits, like growing the company, testing and proving staff, etc.

    All that says why MSPs don't care and are willing to do it. But that doesn't explain why they'd want to do it. But that answer is easy once you notice the one thing that I said earlier which is - using a one to one pure FTE scenario is a one in a million scenario. It's basically no risk to the MSP, they could do FTE replacement all day, every day and break even. Whatever. But if any client doing that decides to move to any alternative model then the MSP starts making money. And in the real world, it's not the one in a million customer that does that, it's the one in a million that doesn't.

    Think of it like going to the grocery store. You can buy anything that you want. All of the products are marked up 5%. Except for the apples, they are "at cost." Sure, customers are free to come in and buy at cost apples all day, every day. But the reality is is that every customer is going to buy more than just apples, and many customers won't buy apples at all.



  • @scottalanmiller said in How Can the FTE Model Compete with the MSP Model?:

    All that says why MSPs don't care and are willing to do it. But that doesn't explain why they'd want to do it. But that answer is easy once you notice the one thing that I said earlier which is - using a one to one pure FTE scenario is a one in a million scenario. It's basically no risk to the MSP, they could do FTE replacement all day, every day and break even.

    I don't agree with this - what about billing the customer for that MSP employee? Who's doing that? what about the tax filings and payroll filings, etc?
    As an FTE, that stuff is handled by the person who does it for all FTEs, but if you have a MSP that has nothing but placed personal, the MSP still needs their own accounting people, etc to handle that, meaning the MSP is now loosing money.


  • Service Provider

    @dashrender said in How Can the FTE Model Compete with the MSP Model?:

    I don't agree with this - what about billing the customer for that MSP employee? Who's doing that? what about the tax filings and payroll filings, etc?

    All of that is break even. The cost of an employee is the cost of an employee. As an MSP, I know that we run through this with customers and the cost is the same.


  • Service Provider

    @dashrender said in How Can the FTE Model Compete with the MSP Model?:

    As an FTE, that stuff is handled by the person who does it for all FTEs, but if you have a MSP that has nothing but placed personal, the MSP still needs their own accounting people, etc to handle that, meaning the MSP is now loosing money.

    No, where in that is there money lost? Nowhere. Because the cost of all of that is moved equally from one entity to the other.

    This only seems like lost money if you don't do apples to apples and ignore the actual cost of an employee to the company and only look at the received salary. If an employee costs the client $50K to employ, they will cost the MSP $50K to employ. It's that simple.


  • Service Provider

    You can argue that clients have better payroll rates than MSPs, but that's not the case. That is randomly comparing two business processes in two different businesses. Those rates are pretty much flat and when not flat, it is just as likely that either party has them cheaper or more expensive. There's no specific benefit to either party.



  • But that doesn't make sense. If you didn't know what the cost of the FTE was at first, and came in and charged set rates, there is a 50% chance you cost the same and a chance you cost more or less. You have to prove if you do cost more why it would be more efficient and effective to use a MSP vs a FTE (or a group of FTE).

    But it dawned on me, I think we are all trying to assume and generalize a lot of different factors which leads to disagreement.

    I can agree that if the same company hired me on as a FTE that I work for as a MSP he would be paying more to have me vs just me staying as MSP. But then would come a conflict of interest I couldn't work my real IT job as a FTE and also 2nd company as a FTE. That would be insane on my part!