MANAGEMENT SERVICE PROVIDER (MSP)

For companies engaging in e-commerce, down-time can mean missed business opportunities, lost revenue, and compromised customer service. The costs are significant; according to Business Communications Review, the Infonetics Research WAN Down-time Study put annual costs of wide area network problems at almost $8 million for organizations with more than 1,000 employees. Management Service Providers (MSPs) are third-party vendors to whom companies outsource different functions related to information technology (IT) management, usually for a monthly fee. They are able to measure, monitor, assess, and provide feedback on the performance of the many different applications and systems companies use during the course of doing business, including networks and servers (computers used to host Web sites).

Many different MSPs existed in the early 2000s. In terms of specialization, some provided service to e-businesses (relatively new companies), while others provided solutions to companies with enterprise or legacy systems. Companies falling into the latter category often have made investments over the years in many different computer systems that were not designed to work together, which can create complicated scenarios. Some MSPs were full-service, while others were self-service or somewhere in between.

Although MSPs varied in terms of focus, most were able to provide the same types of general services. These included simulating the experiences customers have when visiting a client's Web site, providing data management services, testing the security of a company's Web site, and so on. Developing adequate systems that perform critical tasks such as these can be a challenge for any company. As Business Communications Review, explained, the process involves many steps including evaluating, buying, installing, integrating, testing, and finding the right people (operators and systems analysts). For this reason, the turnkey solutions offered by MSPs were an attractive alternative for many companies, especially small and medium-sized organizations for which employing expensive IT staff was difficult or impossible. They also were valuable to companies doing business strictly on the Internet who require such expertise around the clock.

According to Information Systems Management, "Organizations have an increasingly complex, expanding infrastructure to manage. . .If sites are not as or more available than the competition, organizations are no longer in business. So companies realize that management and availability have gone from being a competitive advantage to a mission-critical necessity."

In addition to cost savings, MSPs were able to provide companies with other benefits in the early 2000s, including the necessary software to manage IT needs. Although this came at the expense of control and flexibility for some companies, staying abreast of developments in the area of network and systems management software was beyond the grasp of many organizations. Fast implementation was another benefit, since MSPs had the knowledge and skills to step in and provide immediate benefits to clients who otherwise would have to recruit scarce human resources for the same purpose. The drawbacks to using MSPs included limited capabilities and the fact that some did not offer services to fix the IT problems they identified, leaving that task to the contracting organization.

Strong growth potential was projected for MSPs in the early 2000s. Information Systems Management revealed that, according to industry analysts, by 2005 MSPs would create more than $4 billion in revenue. This was a significant increase over the $90 million analysts expected in 2000. InformationWeek cited information from International Data Corp. that predicted a similarly bright outlook for MSPs, projecting a 61-percent compound annual growth rate from 2000 to 2004.

Austin, Texas-based NetSolve was one leading enterprise-focused MSP during the early 2000s. Formed in 1995, its clients included national companies like Bally Total Fitness, Pinkerton Security, American Medical Response, and Wyndham Hotels. The company offered a suite of services under the name ProWatch that pertained to Internet security, local area networks (LANs), and wide area networks (WANs). According to NetSolve, its ProWatch services did more than just monitor its customer's networks; repair functions also were available.

As MSPs grew in number, a trade association was formed to meet their needs. An international consortium of companies called the MSP Association was created in June 2000. Based in Wakefield, Massachusetts, its mission is "to define and promote the management service provider market through education, research and definition of standards and best practices. To accomplish this, the Association will serve as a forum for discussion of issues, sponsor industry research, develop open standards and guidelines, and promote best practices, among other activities." Less than a year after it was founded, the MSP Association had more than 100 members who were able to take advantage of events, conferences, and other industry-specific resources.