Rise In Outsourcing Could Benefit MSPs

With many clients in the IT space and a ready command of PC technology, company owner David Politis felt comfortable for several years acquiring technology products and services on his own. What he wasn't good at was cobbling everything together in an elegant fashion, he says.

"Although I work in high-tech and have taken programming classes, I'm no engineer or developer," Politis says. That became a problem, he adds, despite his best attempts to have outside consultants get all his PCs and networking gear to work efficiently together.

After completing an IT inventory two years ago, Politis discovered his small enterprise comprised six different makes of PCs, equipped with six different brands of network interface cards. Worse yet, he had a mix of Windows 95 and 98 systems, a printer that predated 1994 and a network that barely ran at 10 percent of its capacity. That's when he decided to do a "rip and replace" and go with all new systems. Rather than plunk down tens of thousands of dollars on a new setup, however, Politis did what a growing number of companies are doing: He turned to a managed service provider (MSP) to solve his problems. In this case, that was DirectPointe of nearby Lindon, Utah.

The plucky start-up,run by entrepreneurs CEO Michael Proper and executive vice president of sales Dan Atkinson,installed an all-Compaq-based system that uses both a wireless LAN and a wireless link to the Internet. Instead of a mishmash of software, the company recommended an up-to-date Microsoft-based setup. Better yet, the entire solution was delivered as a service, saving Politis Communications up-front investment costs and a ton on depreciation. The latter point is helping to fuel a boom in IT services outsourcing, according to experts including Gartner Dataquest.

In a new report on the North American IT outsourcing market, Gartner Dataquest researcher Bruce Caldwell expects that, when all is said and done, the North American IT outsourcing market will have reached $101.6 billion in 2001 (see chart, above). That's an 8 percent increase over 2000 and a sizable jump, considering the sluggish economy.

One key driver, notes Caldwell: IT utility services sold to SMB customers. That market niche will mature within the next two years, he says, as additional SMBs realize the potential benefits of outsourcing. That will benefit MSPs, a growing list that already includes companies such as CenterBeam, Everdream and MindShift.

"We got into this business%85because we recognized small businesses increasingly want to buy IT solutions as leased services that are both easy on their wallets and beneficial to day-to-day operations," DirectPointe's Proper says.

That model has certainly eased the financial burden on Politis Communications. "Because it's a leased service, we don't have to treat the purchase as an asset on our books that we have to depreciate," Politis says, "but, instead, as a business expense, which is a huge benefit to a company our size."