5 Ways PSA Complexity Is Hindering The Growth Of Startup MSPs

The PSA (professional service automation platform) has always been at the heart of the tech stack for most MSPs. In fact, one could argue that you can’t truly call yourself an MSP if you don’t have one. Since the product fit in this category is nearly 100%, the companies that were first to market with a PSA have come to dominate the industry.

As these products have matured over the past decade, they’ve needed to accommodate every variation of the Managed Services business model. In the early days, only a limited number of companies identified as MSPs. If the product wasn’t suitable for all of them, the developers would essentially be putting a cap on their potential for growth. This prompted PSA providers to continuously add complexity to their products over the years, ensuring they would accommodate both a 5-technician MSP and a 500-technician MSP, as well as everything in between.

However, the businesses on each end of this spectrum are far from identical. Even with customization options (which we’ll delve into later), it has become evident that these products have outpaced the startup MSP. In fact, a glance at their minimum seat counts reveals that they are already aware of this. It doesn’t mean they are inferior products; it simply indicates that they are better tailored for MSPs of a particular size and scale.

For startup MSPs feeling uncertain about this landscape, rest assured there are alternative options available. Before we explore these, it’s worth elaborating on why adopting one of these traditional PSAs prematurely and attempting to “grow into it” could actually be detrimental. Here are a few reasons why I believe the complexity of these PSAs can hinder the growth of startups that use them: 

Over-Customization

From my vantage point, to expand their addressable market, legacy PSA providers have persistently built in the direction of customization. This approach seems to suggest, “we don’t know precisely what you want, so we’ll give you the tools to craft it yourself.” To be fair, at times, this is ideal, especially when a company matures and needs to automate business processes that might be non-traditional or even serve as a differentiating factor.

The challenge arises when startup MSPs, who are not yet at this stage in their journey, face these options. Many haven’t managed a service organization before, let alone automated one. Consequently, presenting them with a blank canvas can be overwhelming. They require guidance and direction on best practices for SLAs, queues, reporting, and contracts. While many eventually find this education outside the tool, wouldn’t it be better if these insights were integrated into the product itself?

You can’t learn to ride a bike by reading a book or watching a video, you have to just hop on and ride it. Now imagine that the bike comes in a box of a hundred pieces, with no instructions on how to put it together or a picture of what it should look like after you do. This is essentially what you get with a traditional PSA. Startup MSPs are simply looking for the quickest transition from walking to riding, and this approach doesn’t facilitate that. 

High Learning Curve 

What we’ve established is that service automation presents a steep learning curve, especially when tailored to fit the Managed Services business model. This challenge has given rise to a secondary consulting market, aimed at easing the learning curve and accelerating the setup process for MSPs. While we can appreciate the fact that these resources exist, I firmly believe they shouldn’t be necessary for startup MSPs in particular. We shouldn’t expect lean organizations to engage in substantial consulting contracts just to execute basic functions intrinsic to all MSPs. Similar to the issue of over-customization, this feels like an heavy-handed solution to a relatively straightforward problem. 

I look to other industries to observe how they tackle these challenges. Hubspot in the marketing automation sector stands out as an example. Hubspot serves as an excellent tool for mid-market businesses keen on developing an advanced marketing strategy. For SMBs not yet at that stage, there’s Mailchimp, offering fewer features at a reduced cost. Referring back to our earlier metaphor, it’s like the beginner’s bike that arrives pre-assembled, complete with training wheels. If SMBs only had Hubspot as an option, many would forgo marketing automation entirely. This underscores Mailchimp’s value, even if it doesn’t match Hubspot feature for feature.

In the same vein as Mailchimp’s relationship to Hubspot, Canva is to Adobe, and Zoho is to Salesforce. While one might argue that Zendesk or other complimentary service automation platforms can fill this niche, it’s essential to note that  they aren’t tailored for MSPs, leading to a mismatch in product fit. The industry is in dire need of an entry-level PSA that’s purpose-built. This might not have been a priority when the sector was still evolving, but now it’s clear.

Poor Reporting

While wearing the “operations” hat at our IT company, I likely spent thousands of hours merely managing our PSA. This involved building contracts, overseeing dashboards, generating reports, updating our resource profiles, and more. Although these tasks seemed essential at the time, in retrospect, I recognize how much time and energy they actually consumed. My regret stems from the realization that the data within the system wasn’t reliable from the start. Even if we had set up the reports as I’d initially intended, my decisions would have been based on flawed data feeding those reports.

This is where the product’s complexity truly exacerbates the issue. It appears that the more room there is to deviate from core functionality, the greater the risk of compromising data quality. Without realizing it, we did just that. We built out automations to address immediate issues (simply because we could), without fully grasping how these changes might affect our reporting capabilities down the line. At the same time, technicians adopted “shortcuts” to streamline system use, further muddying our data.

If given the chance to start over, I would have preferred software that came pre-configured and just worked out of the box. I would willingly sacrifice customization for a solution guaranteeing reliable business intelligence. I was aware our configuration wasn’t ideal, but this only because we had no idea what a good configuration looked like. This is the predicament many MSPs encounter, and it underscores the difficulty they experience when extracting reports from their PSA.

Employee Fatigue 

If you’ve ever operated a service desk, you’re likely familiar with the challenges of capturing time-tracking data for your technicians. This issue not only contributed to the reporting problems I alluded to earlier but also became a point of contention between engineers and managers. Although we tried to consistently enforce time tracking, engineers resisted, asserting that the process was too cumbersome and lacked tangible benefits. We even tried incentivizing employees with bonuses if they achieved certain utilization rates, but this merely introduced more operational overhead and further highlighted our inability to report activities accurately.

We eventually recognized the pivotal role of ease-of-use in a PSA. We put an immense amount of pressure on our team to rectify these bad habits, failing to see that the intricacy of our tools was sabotaging our efforts all along. This isn’t exclusive to time entries; it also applies to tasks like taking notes, managing queues, and updating ticket statuses. If these actions aren’t straightforward and intuitive, they often fall by the wayside. Over time, it becomes increasingly challenging to point fingers at the operator.

Technicians are engrossed in the PSA throughout their workday. If they come to despise this experience, it essentially translates to discontent with their job. For startup MSPs, this is a critical point as retaining employees is vital during these formative growth phases. When a technician departs, it burdens the remaining team members, culminating in a diminished customer experience. That’s why startup MSPs simply cannot afford to introduce unjustified complexity in their tool selections.

Restrictive Agreements

The complexities of traditional PSA platforms extend beyond just the feature set and user experience. The billing and contractual agreements associated with these products might be suitable for mature MSPs, but for startups, they border on predatory. Why? Consider the minimum seat counts as an example. Most vendors mandate the purchase of at least 5 seats, with some even demanding 10 or more. So, if you’re an MSP Founder with only 2 technicians on your team, you’re likely paying nearly double the rate to meet this minimum. While some vendors might allow exceptions to this rule, they often come with a substantial onboarding fee, which many startups find prohibitive.

But this perpetual game of “seat count poker” doesn’t stop there. Even after surpassing the minimum seat requirement, Account Managers often pressure you to overcommit on licensing. They might entice you with “discounted rates” should you decide to increase the number of seats in your contract. Since most of these vendors don’t publicize their pricing, figuring out whether you’re getting a fair deal or not becomes challenging. What is obvious, however, is that these tactics always ensure that your next bill exceeds the previous one, which ultimately reveals their primary motivation.

You might wonder, “Why do we tolerate this? Why doesn’t anyone push back?” The issue lies in how the system strategically strips away any leverage the customer might have. When enticed to overcommit on seat counts, pay annually in exchange for another “discount”, and lock into a 3-year term, you relinquish any control you might have once had. To be fair, this issue isn’t unique to PSAs; many SaaS companies outside the IT Channel have similar practices. However, the limited competition within the PSA category amplifies the problem, given the scarcity of alternatives.

A New Breed Of PSA

While this may all sound daunting for startup MSPs, there’s good news: help is on the way. A new breed of PSA products is currently entering the market, and these are simpler and more flexible than their predecessors. Will they surpass the competition and emerge as category leaders? Probably not. However, that’s precisely the point. The global MSP market has grown sufficiently large to accommodate niche and entry-level products that don’t need to dominate to justify their existence.

One such PSA alternative is Zest, a product I’ve been helping to bring to market. It was created by an exceptional group of MSP Founders, tired of the unnecessary complexities inherent in their PSA. When they decided to take action, many called them crazy. But that’s often what it takes to disrupt an industry, which is why I believe they’ll succeed. More importantly, they’re catering to a market segment—startup MSPs—that has been largely overlooked and marginalized by the establishment.

If you’re an MSP that’s tired of dealing with these complexities, much like Bobby Lind and the Zest team, I urge you to make a stand. Complacency only reinforces the status quo, stalling change. Whether you’re exploring alternative products or pioneering something new altogether, rest assured you’re contributing to the solution rather than perpetuating the problem. That’s precisely what I believe our industry sorely needs.