Ovum senior analyst Christina Kasica dissects the sprawling managed
service provision market
Users and service providers are paying a lot of attention to
managed service provision (MSP) as they look for ways to add value.
However, different providers define the term in different way and
offerings range from the very limited to the very broad.
Hundreds of providers now describe themselves as MSPs.
At the lower level of the market many do not expect to be around
for long. Their exit strategy is to be bought by larger
providers.
However, as a value-added service, MSP could be added to a number
of broader service offerings. These range from boutique systems
integrator shops, telecoms hotels looking to move up the value
chain, Web hosts, through to large consultancies that want to
develop an on-going outsourced offering.
A managed service provider delivers a range of outsourced IT
operations, usually via an IP network. All MSPs remotely manage
network infrastructures on an ongoing basis. Some extend their
offerings to provide and manage application infrastructures.
In today's market, three main types of MSP can be
distinguished. They differ in terms of the range of services
offered; the amount of responsibility they take for a client's
business; and their scope or the size of the MSP and the size of
their target customer.
The low-level, pure-play MSPs
This group of MSPs
describe themselves as "
management service providers" rather
than "
managed service providers". Many members of the
year-old MSP Association
 | | "At the lower level of the market
many MSPs do not expect to be around for long" | | | | | |
| | Source: Ovum | | |
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fall into this category.
These MSPs assist client companies in managing network
infrastructure. They limit themselves primarily to monitoring the
performance of the network and the applications running over the
network.
They deliver service either remotely via an IP network or by
gathering data from a client's site via a networked server placed
on-site. Services that include watching uptime, performance and
availability are the central value propositions of this type of
MSP, although many in this category are expanding into extended
infrastructure services, such as security, storage and
testing.
This kind of MSPs takes little, if any, responsibility
for a client's business. If they offer an service level agreement
(SLA), it is likely to be for the uptime of their own monitoring
process, not for the client's Web site. Their activities might be
limited to reporting and alerts if a Web site experiences problems,
or might extend to generating and tracking problem reports. For
example, if they extend their offerings to include security and
storage, their responsibility level may increase accordingly.
Low-level MSPs tend to be small, with between 50 and
300 employees. Their clients will be SMEs with IT departments that
are either understaffed, taken up with major projects, or focused
on non-infrastructure core competencies. Clients tend to engage a
low-level MSP for one aspect of infrastructure monitoring, and
then, if the relationship develops satisfactorily, add other
services over time.
MSPs such as TriActive, Totality and Jefferson County fall into
this group. This level of MSP is attempting to make the MSP concept
work as a business model, which will have short-term success at
best.
The mid-level MSP as a value-added service
Mid-level
MSPs describe themselves as "managed service providers" and offer a
broader range of services that take greater responsibility for a
client's business.
They may move beyond performance monitoring and
reporting to software patches, installation and upgrades, and
application infrastructure provision, which require them to be
proficient in Web application servers such as webMethods or
BroadVision. An MSP at this level will take pride in offering as
wide a range of services as possible.
Mid-level MSPs also differentiate themselves by
assuming greater responsibility for the functioning of a client's
business. If a site goes down, they will work with the client to
restore functionality. SLAs reflect this level of
responsibility.
MSPs at this level can be quite large, as managed
services will be folded into other service offerings, such as Web
hosting or network provision. They target the Fortune 500 or 1,000
companies, although many also serve mid-level clicks-and-mortar
companies.
Web-hosting providers such as Exodus and Digex offer MSP at this
level as a value-added service to their core service provision,
which is hosting Web sites. Major telcos such as C&W and FT
(via Equant and GlobalOne) also offer MSP as well. Loudcloud is
probably the best-known example of a pure-play MSP that has grown
its business successfully in recent years, although it is currently
struggling to make the concept work in an inhospitable
economy.
The high-level, outsourcing IT operations
These MSPs
allow clients to outsource their entire IT operation if they so
desire and offer true one-stop shopping. They will also provide
lower levels of service, similar to that provided by mid-level
MSPs.
MSPs at this level offer a full range of traditional
managed services, and add aspects of application handling, such as
integration, and even application hosting, which Ovum defines as
"one-to-one remote custom outsourcing of applications".
SLAs in this segment will be customised to reflect
differing levels of responsibility available to clients, depending
on how much they want and are willing to pay. This type of MSP can
be the mythical xSP that shapes the technological identity of the
client, choosing its hardware, storage, level of security, packaged
application suites and so on.
Small and large providers co-exist in this space,
serving different constituencies. Systems integrators and
consultancies compete in this space. Boutique shops such as Xor and
Inforonics serve SMEs, and large providers such as EDS, IBM Global
Services and PricewaterhouseCoopers serve large multinational
companies and, increasingly, medium-sized enterprises - competing
with smaller shops in these cases.
Further information
Ovum:
www.ovum.com