A managed services provider (MSP), is an information technology (IT) services provider, who manages and assumes responsibility for providing a defined set of services to their clients either proactively or as they (not the client) determine that the services are needed.

How Does a MSP Work?
Many MSPs now provide many of their services remotely over the Internet rather than having to perform on-site client visits, which is time consuming and often expensive. Most MSPs bill a flat or near-fixed monthly fee, which benefits their clients by providing them with predictable IT support costs.

History of MSP
The business model behind managed services was commonplace among enterprise level companies, provided by large IT support companies such as EDS (Electronic Data Systems), IBM Global Services, and Centerbeam. The model was later adapted to fit small to medium sized companies by the value-added reseller (VAR) community as their existing model of reselling hardware and software continually provided lower profit margins.

One major challenge that MSPs faced was in changing from the reactive break-fix model to which they were accustomed into the new proactive managed services model, particularly because a hybrid solution was needed, since many times clients still required on-site visits, which the MSP had to either provide or contract.

Why Use a Managed Service Provider?
- Customer peace of mind. MSP's monitor networks on 24x7x365 basis proactively.
- Single point of contact for all network issues
- Single supplier instead of multiple vendors
- Defined Service Levels (or service delivery)
- Known costs for management & fixed price contracts
- Avoid costs of building your own management & reporting systems
- Lower Total Cost Ownership (TCO) for client

Common Services
- Managed Voice Access and Networking
- Managed Integrated Access
- Managed Remote Access
- Network Monitoring
- Network Management
- Fault & Performance Management
- Configuration Management
- Managed Router Service
- Managed Server Service
- Managed VPN / IP-VPN
- Managed Wireless LAN (WLAN)
- Asset Management
- Managed IP-PBX & Applications
- Hosted IP-PBX & Applications
- Managed Voice Security
- Managed Firewall
- Managed Intrusion Detection
- Vulnerability Scanning
- Incident Management
- Anti-Virus & Spam Management
- Secure Messaging/E-mail
- Threat Assessment Monitoring
- Managed Business Continuity Service
- Software as a Service (SaaS)

Source: Wikipedia