MSPs: The Next Generation

Then last year, Coastline Micro discovered solution provider Alvaka Networks. Today, with the help of Alvaka's managed service offering, AlvakaNet, an advanced network monitoring service, Coastline Micro is able to stop problems before they even start. "AlvakaNet is an enterprise solution at [small- to midsize-business] prices," said Vertucci. "It is a great way to enhance our value and extend our reach into our customer base and see opportunities we would not be enabled to see [otherwise]."

As basic services such as power and ping have become commoditized, solution providers like Alvaka have become fledgling managed service providers. Some of these pioneering MSPs resell the services of a larger network management provider; some offer their customers services via various hardware appliances. Others buy the hardware, write their own software or buy it from vendors such as BMC Software or Patchlink, and build their own data centers to provide security, server and application solutions that are lighter, cheaper and more flexible than old network management frameworks.

Technology integrators have responded overwhelmingly to these new alternatives, embracing them as new solutions entirely or transitioning from the exhaustive network management implementations of years past. A recent benchmark study by Thinkstrategies and the MSPAlliance indicated that the vast majority of MSP partners saw their revenue grow in the past 12 months, and predicted that this trend only will increase as utility computing becomes more prevalent. While executives at network management firms such as Computer Associates International and Hewlett-Packard insist their technologies are still relevant, others admit that smaller, not bigger, actually might be best.

"When customers need managed services, they want to be able to know they can solve their problems in hours or days, not weeks or months," said George Hamilton, senior analyst in enterprise computing and networking at the Yankee Group. "In today's IT environment, lighter, smaller managed service offerings just make more sense."

Variations on a Theme
The history of MSPs reads like a biography of Madonna-every page, there's another reinvention. In the early days, executives referred to the MSP model as outsourcing or remote network management and farmed out for network services on an as-needed basis. Over time, the model was tweaked to address different market realities.

Today's MSPs fall into two major categories: those that offer channel partners a cornucopia of network services and those that offer services a la carte. In the first category, companies such as Lindon, Utah-based DirectPointe and Barbedwire Technologies, Tracy, Calif., feature a variety of managed services for one per-user monthly fee. In the second category, firms such as San Francisco-based MicroMenders and Intermountain Technology, Boise, Idaho, offer customers the options of choosing--and paying--per service.

"Our solutions are targeted, but by being targeted, we're minimizing the variables that our partners have to deal with," said Dan Atkinson, who is executive vice president of marketing and alliances for DirectPointe, but also acts as chairperson of a nonprofit organization called the Global MSP Network (see sidebar). "When you're a reseller and you have customers with specific needs, that's exactly the kind of solutions you want to provide."

Then, of course, there are the appliance models--vendors that offer managed services through hardware that channel partners peddle and support. Procuro, a tiny startup in San Diego, offers network management through the Procuro Instant Management Messenger (PIMM), a monitoring device that appears as a system tray icon and outlines every visible device on a network in a format reminiscent of an instant messaging buddy list. Oculan, based in Raleigh, N.C., boasts the Oculan250, a device marketed as "the purple box" that offers similar functionality in a more traditional reporting medium.

Typically, MSP solutions like these cost a fraction of framework-level solutions such as CA's Unicenter and HP's OpenView. Hamilton, the Yankee Group analyst, notes that the newer MSPs don't charge more than $5,000 for their appliances or basic services, and adds that few monthly service charges or subscription fees exceed $25,000 a year.

In contrast, most enterprise-level solutions start at $50,000 and can top out at well more than $1 million annually when all is said and done.

Faced with numbers like these, many solution providers say the choice is clear. Granted, margins may be better on some of the bigger solutions, but integrators say they can notch more sales with products that are cheaper and more flexible.

Tim Patwell, vice president of sales at Paladin Business Solutions, a Procuro partner based in New York, notes that PIMM costs clients "less than a pizza a day," and adds that when he sells the monitoring solution, he sets it up and lets the device speak for itself. "The best things about [PIMM] are that it's dirt cheap and easy to set up," Patwell said. "I can have a customer up and running in less than a day--you think they can get that kind of usability from an enterprise solution? Not even if they had $1 million."

Other Takes
There are other spins on the trend toward MSPs, attempts by established companies to sell value-added services through sales channels and partner programs they have groomed for years. In the realm of network security, Austin, Texas-based NetSolve boasts the ProWatch Secure solution to monitor everything from intrusion detection to vulnerability and firewall performance. In remote network access, Milpitas, Calif.-based GRIC Communications offers a variety of services to manage secure connections for employees outside corporate offices.

Hosting companies have gotten into the game, too. Tom Stock, managing partner at TSE Enterprises, Phoenix, lauds the way Atlanta-based hosting aggregator Interland manages HTTP servers for one of his client sites, the blog Tech Central Station. "Some of our customers generate substantial Flash traffic," explains Stock. "There's no way we could afford the technology necessary to support it, but with Interland, we can tell our customers not to worry."

Despite this rampant growth of MSPs throughout the network management industry, there remain the die-hards--the integrators who insist that frameworks solutions are better than ever. Kevin Barker, for instance, managing partner at Independent Technology Group, La Canada, Calif., admitted that products such as Unicenter are "tough sells" in today's changing MSP environment, but said his company manages to score enough deals to make its partnership with CA worthwhile.

At Logicalis, an HP OpenView partner in Bloomfield Hills, Mich., Director of Support Operations Wayne Kiphart said OpenView boasts just as many capabilities as some of the solutions from smaller MSPs. Whereas smaller managed service options might require custom coding to overcome a particular problem, OpenView offers tools that tackle most problems with minimal manipulation, or even right out of the box, Kiphart said. "A lot of the different MSP products out there today don't have the quick plug-in abilities that OpenView does," he said. "Just because you're not an enterprise-level company doesn't mean you don't need an enterprise-type application."

What's Next
Yankee Group's Hamilton says that as HP continues to refine OpenView and CA makes good on its promise to sell Unicenter through the channel, MSPs will face increased challenges from rival MSPs partnering with the industry's largest vendors. In fact, just last month, IBM unveiled a new service based on the company's proprietary Universal Management Infrastructure that remotely automates, manages and supports a customer's data center.

Still, at least ostensibly, MSPs are undaunted. On a micro level, more vendors are jumping into the MSP market every month, launching new ventures in bleeding-edge areas such as identity management, spam filtering and utility computing. Others are helping to enhance the market, following the model pioneered by Billerica, Mass.-based SilverBack Technologies of providing network management software platforms that help others get into the MSP fold.

"Customers don't care what kind of managed services we sell as long as [the services] meet their needs," said Joe Young, president of Pembroke, Mass.-based Global Data Systems, which abandoned Unicenter for SilverBack's proprietary Datacenter solution last year. "At the end of the day, [customers] are buying us, not the technology."

On a more macro level, MSPs are banding together to find strength--and indirect sales--in numbers. The fledgling Global MSP Network is thriving, and larger firms such as Interland and SilverBack have expressed interest in getting on board. What's more, companies such as Huntington Beach, Calif.-based Alvaka have drummed up interest in the channel with new efforts that encourage cross-partnering among affiliates to spur MSP business for everyone.

Just last month, Alvaka CEO Oli Thordarson unveiled an informal "master agent" program that spreads the wealth on sales with compensation packages for each partner who influences a deal. According to Kevin McDonald, the company's vice president of business development and a self-proclaimed "MSP zealot," the strategy is similar to viral marketing in that once it catches on, it can't help but spur growth. "The more we compensate at every level of a sale, the more sales we'll notch," McDonald predicts. "These are the kinds of initiatives that will keep the MSP model thriving for a long while."