System Performance Issues Keeping You Awake at Night?
MSPs say: Let someone else do it!
Riding the wave of success in the growing ASP market, some software vendors and service providers are looking to carve out a new niche – as tends to happen in a rapidly growing market – to provide a type of application they hope every enterprise needs: systems management. There is some skepticism about whether or not the Management Services Provider (MSP) model can work, but proponents of the service say it is only a matter of time before people come to see systems management products as the most valuable and vital type of application hosting service available to their business.
“The way I describe it is we deploy the ASP model to bring to market management tools,” explains Bob Seebold, CEO of 2nd Wave, an early MSP pioneer. “Primarily, we go into the market and get the IT management tools our customers use.”
For a service that clearly targets a niche market, the participants can hardly be said to fit any precise niche. Both on the provider side and the user side, companies can be large enterprises or dot-coms, industry leaders or small start-ups, household names or brand new ventures. While the vendors range from large ASPs to tiny firms specializing strictly in management services, the companies being served by MSPs are even more diverse, and can include ASPs, ISPs, small businesses with no in-house IT operations or huge corporations who need some extra help managing their systems.
Despite its less-than-exact focus, the market for MSPs is growing at an impressive rate. In a study released last June, International Data Corporation (IDC, Framingham, Mass.) estimated worldwide revenues of $78 million this year for MSPs, and predicted that number would grow to $524 million by 2004. That same month, 19 companies joined together to form the MSP Association, the first professional consortium focused on this growing market, whose stated goal, along with sponsoring new research, is to promote better awareness and understanding about the kinds of services their members companies offer.
What is an MSP?
|"Companies that are focusing their attention on providing IT infrastructure management services on a subscription basis to multiple costomers over a network."|
Part of the goal of the MSP Association is just that fundamental task: composing and disseminating an accurate definition of what its members do. This is no simple task. With widespread skepticism about the ASP market in general, communicating the role and value of an even newer, more narrow segment of that market is difficult. The problem is even further complicated by the fact that not all the stakeholders in the MSP market agree on how to define their services.
According to Yash Shah, co-founder, president and CTO of InteQ Corp. (Burlington, Mass.), which claims to be the first company to use the term Management Service Provider, even some vendors “call themselves an MSP, but really aren’t performing MSP functions.”
Officially, the MSP Association describes the industry it promotes in the following way:“companies that are focusing their attention on providing IT infrastructure management services on a subscription basis to multiple customers over a network,” says Linda Shannon-Hills, MSP partner program manager for Hewlett Packard (Palo Alto, Calif.), and an official spokeswoman for the MSP Association.
Shah describes his business somewhat less formally: “Applications, databases, Web sites, performance and availability – our job is to monitor any place where there’s potential damage that can be done if performance slips.”
For Seebold, the concept of MSP developed gradually, as a natural step from 2nd Wave’s IT consulting services. Seebold says after his consultants returned from getting a client’s system up and running, they would often get called back weeks or months later for additional services, to add features, or to fix problems.
“And it got very expensive for us and our customers, to keep calling us back,” Seebold says. “We basically stumbled on the fact that we could do – everything we did on site – we could do it remotely through a VPN connection. And at that, tons of light bulbs started going off.”
A central point of disagreement in defining MSPs is determining exactly how much those services should include. On one hand are those who view systems management as strictly monitoring and alerting in-house administrators when a problem is discovered. InteQ falls into this first category, offering only monitoring services rather than hands-on involvement in customers’ systems.
Shah says the reasoning behind keeping this distance between the service provider and the actual nuts and bolts of the system stems from the hesitation on the part of IT departments to allow major decisions to be made off-site. In fact, Shah says, this is what differentiates the services his company provides from those of a standard Application Service Provider.
“I think MSPs are very, very different from ASPs,” Shah says. “You really want to run your business applications where you can keep control over them. What we’re doing is helping businesses focus on a high level of value. People don’t want to do this – they don’t want to deal with the day-to-day administration of their systems. But we’re not taking their business decisions out of their hands. Our customers have the people to fix the problem – they just want to make sure they’re not wasting their time day after day looking for the problems.”
Candle Corp. (El Segundo, Calif.), a major systems management software provider as well as an MSP, falls into the other camp as far as the extent of their service is concerned. Aubrey Chernik, chairman and CEO of Candle, says he agrees that it is important not to take decision-making power away from in-house staff, but says management is often pleased to see some of these maintenance issues outsourced. In line with that view, in addition to monitoring services, Candle provides products that will pinpoint a problem and suggest a solution. In some cases, the client and the MSP can arrange for certain common or reoccurring system and performance glitches to be solved by automated tools.
“Often at the technical level, the IT guys want to do this in-house, but from a high level, from a management level, there’s so much to do, the management is just glad to get rid of some of this stuff, and let somebody else take care of it,” Chernik says.
What can MSPs offer?
One area in which all those involved with MSPs can agree is on the necessity of platform independence. Ray Paquet, a vice president and senior analyst with GartnerGroup, (Framingham, Mass.) sees this as absolutely essential if an MSP hopes to be successful, because the growing number of heterogeneous environments is one of the primary reasons why systems management concerns are coming to the forefront.
Chernik agrees, and says he sees Candle’s platform independence as a key element of their value proposition as an MSP.
|"To actually buy the software and implement it yourself, you're faced with hiring a dedicated team to go ahead and install the software, then you have to have a number of IT staff on hand to manage that on a day-to-day basis."|
“In our service-level approach, we don’t care what the back end is. Mainframe, AS/400, NT – we don’t care if it’s connected to an abacus,” he says.
Alltel Information Services (AIS), a division of Alltel Corporation (Little Rock, Ark.), recently formed an alliance with Seebold’s company 2nd Wave, through which 2nd Wave hosts the systems management software, which AIS provides to its customers via the Web on a subscription basis. 2nd Wave provides the management application, to which Alltel adds its remote services for its clients, such as data center management, firewall services, load balancing, and a host of other services. As both a user and provider in a sense, AIS is in a unique position to analyze the potential value of the MSP model.
2nd Wave provides AIS with management software from Tivoli Systems and BMC Software, which Alltel uses to design, implement and manage the technology infrastructure of a company's Internet- and intranet-based applications. In this arrangement, Alltel reaps the benefits of both a provider and an end-user. AIS manages its clients’ IT systems with best-of-breed tools, but is able to avoid the long timeframe and high costs of installing and implementing the tools on its own system.
“To actually buy the software and implement it yourself, you’re faced with hiring a dedicated team to go ahead and install the software, then you have to have a number of IT staff on hand to manage that on a day-to-day basis,” says Susan Rodgers, senior segment marketing manager for AIS. “The other side of it is to actually install a software tool like that in your enterprise, there’s a long lead time, and we were driven by the desire to get to market quickly.”
In this unique relationship, AIS customers pay on a subscription basis, as AIS pays 2nd Wave. That subscription-based model is the standard arrangement for providers in this space. Customers can pay a flat rate for the basic service and are charged additional fees for extra services, such as those AIS adds to 2nd Wave’s Tivoli and BMC offerings. Seebold explains why he believes it necessary to offer a wide variety of services: “We do this for a reason,” he says. “For example, if an e-business application crashes, 75 percent of the time it’s not due to the e-business application, it’s due to all the underpinnings.”
Shah agrees that his company has to provide a broad range of services in order to be a serious player. The other crucial element, he says, is guaranteed uptime and proven scalability, along with status reports available to customers via an online portal, so that clients can feel they are still in control of their own systems.
Who is using MSPs?
Not many people – yet. “But,” Chernik says, “we’re seeing a lot of interest in this model, I can tell you that.”
Not everyone agrees with that assessment, however. Many analysts say there is some question about whether in fact companies will want to “let somebody else take care of it”, as Chernik says, when “it” is a process that can reach every corner of their business.
“In our research we really haven’t seen an interest on the part of users to use ASPs for those kinds of activities,” says John Knapp, senior industry analyst for Andrews Consulting Group (Boston). “Customers are still very wary of the ASP model in general, and for now they’re using it in terms of such mundane things as e-mail serving.”
However, GartnerGroup’s Paquet disagrees. The shortage in qualified IT professionals, he believes, means that it is precisely this kind of sophisticated function which might require a specialized outsourcing service.
|"For us there's a couple things -- for one, there's certainly the excitement over the e-business model, the e-commerce model and the ASP model."|
“For one thing, there is a very, very high rate of failure with management software,” Paquet says. “One of the ways to eliminate this failure is to hire people who only get paid once the system is up and running.”
Most of the companies who dub themselves “MSPs” have been offering the service for only a matter of months, and therefore have accumulated a handful of customers to date. However, among those subscribers who have signed on, their needs are fairly consistent.
In fact, says InteQ’s Shah, his company does not separate their network, server, Web or other monitoring services precisely because customers, regardless of their size or IT infrastructure, usually look for across-the-board management solutions.
“We don’t really segment ourselves in terms of specific applications or systems. From a high-level perspective, everybody wants to keep tabs on the same things,” Shah says. “We’re probably the only MSP who even has a focus on the enterprise infrastructure along with the Web – we don’t really differentiate.”
For the most part, the earliest customers to sign on with MSPs are not looking for someone just to manage their e-commerce application, or some other new, unfamiliar addition to their business. Many are high-growth small to mid-sized businesses who are more interested in devoting resources to increasing their revenue and market position than to managing their infrastructure. For those businesses, an MSP is an opportunity to eliminate the headaches involved with systems management, but without the risks associated with ignoring it.
“Most of them don’t have a lot of operating capital to do this, or the expertise,” says Shannon-Hills, of the MSP Association. “This allows them to focus in on their business, on what they’re doing. At the same time, they can sign agreements in terms of percentage of uptime, tolerance levels. It gives the customers an opportunity to be more proactive instead of reactive with potential system problems.”
Is there a future for MSPs?
If there is one factor that will ensure MSPs’ future success, all those concerned agree, it is skills – or more to the point, a lack of skills.
“Everyone is facing a critical shortage of IT staff, and IT staff that is competent in their core applications,” Alltel’s Rodgers says. “If they can offset some of their cost of getting that, they appear to be happy to be able to do that.”
Candle’s Chernik believes staffing requirements are key, along with some other immediate needs created by the new market and greater reliance on IT.
“For us there’s a couple things – for one, there’s certainly the excitement over the e-business model, the e-commerce model and the ASP model,” Chernik says. “For another, all of these systems now are moving into second- and third-generation deployment stages, which means there’s business-critical problems when they go down. The third thing is, very simply, the skills shortage.”
While the convenience is a huge benefit, analysts are quick to point out that there are definite drawbacks as well. For one thing, says Paquet of the GartnerGroup, MSPs will never eliminate on-site systems management entirely, because there will always be some things that have to be done manually – installing new software, for instance. Therefore, the need for a well-trained specialized IT staff will continue to be a problem even for companies who outsource. And, unless the leading companies show themselves to have incorruptible reliability, as well as the ability to cope with difficult remote tasks such as change management, MSPs may prove to have a short shelf life.
Seebold recognizes these issues, but says the current state of IT in business all but guarantees the model’s success.
“Like anything new, there’s an adjustment period, and we’re at the forefront of that. But the value proposition is simple, it’s very easy to explain to customers,” Seebold says. “It used to be that you were able to sweep IT problems under the carpet. With Internet business, now everyday anyone can see how poorly your IT shop is run. IT is no longer competitive advantage, it’s a must-have. You can’t afford not to have all those ducks in a row.”
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Related Information:MSP Association (new window)2nd Wave (new window)InteQ Corp. (new window)Alltel Information Services (new window)Candle Corp. (new window)