Microsoft 365 promises to take security off your plate. They says: “We’ll handle all your security, compliance, and user management you just focus on your business.” Sounds easy, right?

For many Managed Service Providers (MSPs), however, delivering a reliable Microsoft 365 managed service is far from simple. Managing security, compliance, and user access in the cloud often proves more complex than traditional IT setups.

In this article, we’ll explore why MSPs struggle with providing effective Microsoft 365 managed services and share practical strategies to overcome these challenges.

Microsoft 365 managed services

The Core Problem: Old Security Thinking Doesn’t Work in the Cloud

Imagine you own a physical store. For decades, security was straightforward: strong doors, cameras at the entrance, guards at the gate. Your job was to “control who walks in.”

Now picture moving to an online-only business. There’s no physical store anymore. Customers come from everywhere, and you need a different approach. You now need to verify: “Are you really who you claim to be?” “Are you allowed to buy that?” “Is the data you’re sending me actually secure?”

That’s exactly the shift from on-premises security (company servers) to cloud security (data somewhere on the internet).

The problem? Most MSPs still use the “protect the physical store” approach they learned years ago they just try to apply it to the online world. No wonder it doesn’t work well.

The Problem of Too Many Tools

When customers use Microsoft 365, they get a pretty good set of security tools built-in from Microsoft. But MSPs have been using third-party security tools from other companies for years.

The result? Customers end up using both creating a messy situation:

Security Need Tools MSPs Usually Use Tools Built Into Microsoft 365
Detect threats on computers Crowdstrike, Sophos Microsoft Defender
Filter dangerous emails Proofpoint, Mimecast Microsoft Defender for Office 365
Control who gets access Okta Microsoft Entra (Azure AD)
Prevent data leaks Symantec, Forcepoint Microsoft Information Protection
Manage devices MobileIron Microsoft Intune

Looking at this table, you can see the issue: almost everything is duplicated. Customers pay for Microsoft 365 to get these features, but MSPs say they need additional tools anyway.

This creates several problems:

  • Money Wasted: Customers pay for Microsoft 365, then pay again for third-party tools. That’s money down the drain.
  • Confusion and Mistakes: With too many tools, nobody knows which one to trust. If one tool detects a threat and another doesn’t, how do you know which one is right?
  • Alert Overload: One security tool finds a problem, another tool finds something else. Alerts come constantly. People get tired and start ignoring them which is dangerous.
  • Data Scattered Everywhere: Each tool keeps its own records. When something goes wrong, the MSP has to check five different tools to understand what happened. That takes time, and time means risk.

Not Enough People With the Right Skills

Let’s be honest: most MSPs don’t have staff specialized in cloud security. They have people who are good at managing servers, managing networks, but cloud security is completely new territory.

To manage Microsoft 365 security well, you need to understand:

  • How to verify real users not just username and password, but smarter ways
  • New types of attacks criminals attack cloud differently than they attack traditional servers
  • Compliance regulations GDPR, HIPAA, and dozens of other rules about how to handle data
  • Searching for evidence of attacks like a detective, going through logs to find traces of bad activity

Training staff takes time and money. Hiring new people who are already good at this? Very expensive. As a result, many MSPs have only 1-2 people with Microsoft 365 security knowledge, and they’re stretched too thin.

Everything Is Off By Default

Here’s something surprising: Microsoft 365 has lots of security features, but most of them aren’t turned on automatically.

You have to turn them on yourself:

  • Advanced email filtering
  • Data leak prevention
  • Access control rules
  • Activity logging

Each one has dozens of options to configure. If you don’t set it up correctly, it will either:

  • Be too strict (blocking legitimate users), or
  • Be too loose (letting the bad guys in)

The problem? Many MSPs rush through setup, using generic “standard” templates without customizing them for each customer’s actual needs. Result: customers think they’re protected, but they really aren’t.

Too Much Data, Too Little Attention

Microsoft 365 creates a massive amount of data:

  • Millions of records every day
  • Hundreds of potential alerts
  • Users logging in from all over the world
  • Emails getting blocked as suspicious

To find the real threat in all this noise, you need:

  • Who’s watching 24/7? Security doesn’t sleep, but most MSPs do. Most only “look” at security data during business hours. If an attack happens at 2 AM on Sunday, who notices?
  • Knowledge about current threats what are hackers doing right now? What types of attacks are common? Many MSPs don’t stay up-to-date.
  • Automated response if a threat is detected, does the system automatically react? Or does someone have to be notified first? Automation is better, but building it isn’t easy.
  • An incident response plan if you get attacked, do you know what to do? Who to contact? How to isolate systems? How to recover? Many MSPs don’t have a clear plan.

Regulations and Audits: Very Complicated

If your business works in areas like:

  • Healthcare you have to protect patient data
  • Banking/Finance you have to protect customer money
  • International companies you have to follow GDPR (European law)

Then you have to follow a lot of regulations. Microsoft 365 has tools to help, but getting it set up correctly is hard.

If you configure it wrong, the consequences can be:

  • Heavy fines
  • Loss of customer trust
  • Loss of business license

The problem? Most MSPs don’t have experts who understand all these regulations.

Making Money from Security Isn’t Easy

From a business standpoint, providing security services can be a real challenge for MSPs:

1. Complex Licensing: Microsoft 365 comes in multiple plans (Business, Enterprise, E3, E5…), each offering different security features. Explaining to clients why they need one plan over another can be time-consuming and exhausting.

2. Hidden Costs: Delivering effective security often requires additional investments:

  • Extra third-party tools
  • Additional cloud services
  • Threat detection and monitoring solutions

These extra expenses add up quickly, and clients can easily become frustrated by rising costs.

3. Low Profit Margins: Configuring security or building a comprehensive security strategy takes time and skilled staff. Meanwhile, clients often pay a flat fee. The longer the work takes, the less profitable it becomes.

How Smart MSPs Are Solving This

But not all MSPs struggle. The ones that are successful are doing things differently:

1. They Think Differently

Instead of “the old way to protect servers,” they start with “cloud is different, let’s protect it the cloud way.” This means:

  • Use Microsoft’s tools instead of constantly adding third-party tools
  • Focus on “who is this user?” because in the cloud, users are the main target
  • Build security from the start don’t add it as an afterthought

2. They Invest in People

They hire or train staff who specialize in cloud security. They have a whole team of experts, not just 1-2 people.

3. They Use Automation

Instead of “sitting and watching” millions of alerts, they use tools that:

  • Automatically detect problems
  • Automatically respond to common threats
  • Automatically generate reports

4. They Sell Security as a Service

Instead of “charging by the hour,” they sell “security packages” at a fixed price, with 24/7 monitoring and guaranteed results.

5. They Specialize

Instead of trying to do everything, they focus on one area (for example: healthcare, or just security, or just small companies). This helps them understand deeply and serve better.

6. They Integrate Everything

They don’t just protect Microsoft 365 they protect all the customer’s other systems too. Security across the board, not in isolated pockets.

Questions You Should Ask Your MSP

If you’re working with an MSP now, or thinking about choosing one, ask these questions:

  1. Do you have a dedicated security team? Or is security just done by general IT people?
  2. Why do you use this tool instead of another? Can they give you a clear answer?
  3. Who’s watching my security at 2 AM? Is there 24/7 monitoring?
  4. Do you have experience in my industry? (Healthcare, banking, etc.)
  5. If I get attacked, what’s your plan? Do you have a clear, documented plan?
  6. What tools do you use to automatically detect threats?
  7. Do you keep up with the latest attacks? Do you follow current threat information?
  8. Can I see my own security data? Or do I have to depend on you for all information?

The Bottom Line

Managing Microsoft 365 security is no easy task. Many MSPs struggle due to outdated approaches, lack of specialized cloud skills, too many overlapping tools, and business models that don’t incentivize investing in security.

However, MSPs that rethink their approach focusing on cloud-native strategies, investing in skilled teams, automating threat detection, and integrating solutions are not only protecting their clients effectively but also building stronger, more profitable relationships.

If you’re looking for a partner who truly understands the challenges of Microsoft 365 security and can provide end-to-end managed services with expert guidance, Onext Digital has the experience and tools to help MSPs thrive in the cloud era.

FAQs: Microsoft 365 Managed Service

Q1. What is a Microsoft 365 Managed Service?

It’s a service where MSPs handle setup, configuration, monitoring, and security of Microsoft 365 for businesses so companies can focus on their core operations.

Q2. Why do businesses need managed services for Microsoft 365?

Because managing security, compliance, user access, and cloud apps can be complex. Managed services ensure everything runs smoothly and safely.

Q3. How do MSPs improve Microsoft 365 security?

By configuring built-in tools properly, automating threat detection, monitoring activity 24/7, and responding quickly to incidents.

Q4. Can managed services help reduce costs?

Yes. By optimizing Microsoft 365 features and reducing the need for multiple third-party tools, businesses save money while improving security and efficiency.

Q5. What industries benefit most from Microsoft 365 managed services?

Healthcare, finance, legal, and any company handling sensitive data anywhere compliance, data protection, and uptime are critical.

Q6. How do managed services ensure continuous support and updates?

MSPs provide ongoing monitoring, regular updates, and proactive maintenance to keep Microsoft 365 secure, compliant, and fully operational at all times.