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
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.
This was first published in March 2002