Weekly Column
Are MSPs Tech Companies? No. And the Confusion Is Costing Them.
I used to tell students there are three types of jobs you can have when you grow up. You can have your name on your shirt, your name on a desk, or your name on a building. Wear the shirt, you take orders. Sit at the desk, you manage other people who wear shirts. Own the building, you own the business.
It's a tidy little framework for jobs. Businesses have their own version, and it's just as tidy: retail, manufacturing, and service. That's it. Three categories. You sell things, you make things, or you do things for people.
Notice what's missing. "Tech" isn't in there. Tech isn't a type of business. It's a tool a business uses, or a market it sells into. A company that builds software is a manufacturer, it just manufactures code instead of chairs. A company that hosts a platform is running a service business with better margins than most. "Tech company" gets used like it's a fourth category, and it isn't one. It's a vibe.
Which brings me to MSPs.
Are managed service providers tech companies? Ask an investor and the answer is yes, functionally. MSPs get valued the way tech companies get valued, not the way service businesses get valued. Sell a normal service business and you might get twice your annual gross if you're lucky. Sell an MSP with decent recurring revenue and healthy margins, and buyers will pay something closer to four times gross. That's a tech multiple slapped onto a business that, underneath the multiple, is answering phones.
Because that's what an MSP actually does most of the day. Incoming calls. Tickets. Alerts. Somebody's VPN is down, somebody's printer won't authenticate, somebody clicked the wrong link at 4:45 on a Friday. It's reactive, it's relentless, and it is, structurally, a service business. You're not building a product once and selling it a thousand times. You're selling the same labor, over and over, to a thousand different clients who all think their problem is the only one that matters right now.
So why does the market price MSPs like they're shipping software?
Partly it's the recurring revenue model, which does look like SaaS on a spreadsheet even when the underlying work looks nothing like SaaS. Partly it's proximity bias. MSPs sit next to technology all day, so people assume some of that tech-company magic rubs off. It doesn't. Managing someone else's network is not the same business as building the tools used to manage it, even when the same acronyms show up in both.
I once interviewed at an MSP that proudly showed off its game room. Foosball table, the works. I remember thinking: any MSP where employees have enough downtime for a foosball match probably has a layoff list already drafted. Support work does not leave room for foosball. If your techs have time to play, either your ticket volume just cratered or you're about to right-size the team that was handling it.
Compare that to a digital agency I worked at, which also had a game room. Also a full bar. And we actually used both, regularly, because nobody on that team had to answer a phone. The agency built things on its own schedule. Deadlines existed, but they weren't screaming at you in real time from a ticket queue. That's the difference between a business that occasionally gets to breathe and one that's structurally never allowed to.
None of this is a knock on MSPs. It's a correction. Call yourself a tech company if you want the multiple, fine, that's a valuation strategy and a reasonable one. But run yourself like one, and you'll misjudge everything from headcount to culture to what your people actually need to do their jobs well. MSPs win by being excellent at service delivery: fast response, low friction, people who actually pick up the phone. That's not a tech company's job description. It's a service company that happens to be very, very good at technology.
Know which one you're building. Your P&L already knows.
Daniel