The Playbook Every MSP Runs
Every MSP in Australia — from the one-person shop to the multinational — runs the same business model. It's not complicated. It's not secret. And it's designed to extract maximum value from two sources: clients and employees.
Here's how it works.
The Three-Part Formula
Part 1: Win the Contract
The sales team promises everything: - Senior architects on the proposal - Local delivery teams - Cutting-edge technology - Dedicated account management
The client signs. The contract is signed. The sales team moves on to the next deal.
Part 2: Deliver With Less
Once the contract is signed, the reality sets in: - The senior architects are on three other projects - The "local delivery team" includes offshore resources - The cutting-edge technology is actually the cheapest option that works - The dedicated account manager has 40 other accounts
The gap between what was promised and what's delivered is called the "bid-to-delivery gap." It's not a bug. It's the business model.
Part 3: Profit From the Gap
The MSP makes money on the difference between what the client pays and what the delivery costs:
| Component | Amount |
|---|---|
| Client pays (senior architect rate) | A$200/hour |
| Actual delivery (junior/offshore) | A$65/hour |
| Gross margin | A$135/hour |
| Gross margin % | 67.5% |
That 67.5% gross margin covers overhead, profit, and the bench. The wider the gap, the more profit.
The Offshore Arbitrage Machine
This is the core of the modern MSP business model. Here's the math:
What Clients Pay
| Role | Client Rate (AUD/hour) |
|---|---|
| Senior Architect | A$250-350 |
| Senior Engineer | A$180-250 |
| Mid-level Engineer | A$140-180 |
| Junior Engineer | A$100-140 |
What Staff Earn
| Role | Onshore (AUD/hour) | Offshore (AUD/hour) |
|---|---|---|
| Senior Architect | A$75-95 | A$15-25 |
| Senior Engineer | A$55-75 | A$10-20 |
| Mid-level Engineer | A$45-60 | A$8-15 |
| Junior Engineer | A$30-45 | A$5-10 |
The Margin
| Scenario | Client Pays | Staff Earns | Gross Margin |
|---|---|---|---|
| Onshore delivery | A$200/hr | A$65/hr | 67.5% |
| Offshore delivery | A$200/hr | A$12/hr | 94% |
Offshore delivery is 26 percentage points more profitable than onshore delivery.
That's why every MSP is offshoring. It's not about "global delivery" or "following the sun." It's about margin.
The Employee Extraction Model
MSPs extract value from employees in three ways:
1. Below-Market Salaries
The average MSP salary is A$95,000-105,000. The Australian IT market median is A$128,000-138,000. That's a 20-25% gap — and it's deliberate.
MSPs know that the broad experience they offer is attractive to early-career workers. They use that attraction to pay less. "You'll learn so much" is code for "we'll underpay you."
2. The Bench
MSPs maintain a pool of staff between projects (the "bench"). These staff are paid but not billed to clients. To fund the bench, MSPs keep salaries below market.
The bench is also a retention tool: "If you leave, you might end up on the bench." The threat of the bench keeps people compliant.
3. The Restructuring Cycle
Every 18-24 months, MSPs announce "restructuring" — which means layoffs. The remaining staff absorb the work of those who left. This creates a cycle of fear and overwork.
The restructuring cycle serves two purposes: 1. It removes "expensive" staff (people who've been there long enough to earn decent salaries) 2. It creates a culture of fear that keeps remaining staff compliant
The Client Extraction Model
MSPs extract value from clients in three ways:
1. The Bid-to-Delivery Gap
The sales team promises senior resources. The delivery team uses juniors and offshore staff. The client pays senior rates for junior delivery.
2. Scope Creep
MSPs deliberately under-scope projects to win the contract. Once the project starts, "out of scope" items appear. The client pays more than originally budgeted.
3. Lock-In
MSPs make themselves indispensable through: - Proprietary tools and platforms - Knowledge hoarding (only their staff know how things work) - Long-term contracts with exit penalties - Migration complexity (switching MSPs is painful)
The Numbers Don't Lie
Capgemini Australia
| Metric | Value |
|---|---|
| Revenue | A$878M |
| Employees | ~3,000 |
| Revenue per employee | A$293K |
| Offshore ratio | 66% |
| Glassdoor rating | 4.0/5 |
| Average salary | A$113K |
| Profit margin | ~7.6% |
What This Means
- Capgemini generates A$293K per employee
- It pays employees an average of A$113K
- That's a A$180K gap per employee
- With 3,000 employees, that's A$540M in "overhead and profit"
- The 66% offshore ratio means most of that gap is pure arbitrage
NTT Data Australia
| Metric | Value |
|---|---|
| Revenue | A$1.2B |
| Employees | ~1,800 |
| Revenue per employee | A$677K |
| Offshore ratio | ~70% |
| Average salary | A$95-110K |
NTT's A$677K revenue per employee is the highest in the industry. It's not because NTT employees are twice as productive. It's because most of the work is done offshore at Indian salary rates.
What They All Have in Common
Every major MSP in Australia shares these traits:
-
Offshoring is the growth strategy. Every acquisition, every "transformation," every "efficiency" initiative leads to more offshore delivery.
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Sales promises what delivery can't. The bid-to-delivery gap is universal.
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Employees are costs to be minimised. Below-market salaries, opaque promotions, and regular restructuring.
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Clients are contracts to be maximised. Scope creep, lock-in, and the minimum viable delivery.
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The brand matters more than the product. The MSP sells its brand; the delivery is whatever's cheapest.
The Exception
Not every MSP runs this playbook. Smaller, owner-operated MSPs sometimes prioritise quality over margin. But as they grow, they face the same pressures: PE investment, quarterly targets, and the gravitational pull of the offshore arbitrage model.
The exceptions prove the rule: the MSP business model is structurally designed to extract value from employees and clients. The only question is how aggressively each company chooses to do it.
This analysis draws on financial data from IBISWorld, Glassdoor, PayScale, and public disclosures from Capgemini, NTT, DXC, Datacom, and other major Australian MSPs.
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