Sourcing Approaches

In managing their IT environments, organizations have traditionally focused on enterprise tools, purchasing them via perpetual license, and taking advantage of volume discounts. The tools range from point products to comprehensive management frameworks, providing the entire range of systems management functionality. In addition, organizations often augment their tool purchases with vendor-supplied implementation services.

The MSP offers an alternative model that takes different forms. For example, the MSP might sell directly to enterprises, or it might package its offerings with another service provider, such as an application service provider (ASP) or Internet service provider (ISP).

Some organizations have turned to the "legacy MSP." Here, the management service provider functions as a layer between the complexity of an enterprise management framework and the user. The MSP takes traditional enterprise software, installs it, and runs it for the organization, with both the customer and MSP operating the software. Characteristically, there is dedicated hardware for each customer.

For example, MSPs such as TriActive might run the Tivoli environment for a user, wrapping their technical expertise around it. In this hosted model for enterprise software, the customer gets the benefit of the framework, while being shielded from its complexity, and attains faster implementation of the software, and lower up-front costs than with a software-based approach.

However, there is a higher cost of entry than with other types of MSPs. While users pay on a monthly basis, they must commit to the cost over a longer period of time. In addition, users are still limited by the inherent disadvantages of frameworks, including the software's functionality, complex deployment, and scalability. After all, these are classic client/server products that have been extended to the Internet and tend to focus on such processes as network node management and software distribution, rather than offering service level agreements, application management, or performance management.

The turnkey MSP, which might be considered a variant or subset of the legacy MSP, is a service whereby the MSP installs products on the client site and remotely manages the infrastructure. Such MSPs will manage entire systems, an entire application, or an entire management process, such as the help desk. The turnkey MSP is subscription based and process focused, although enabled by tools — which generally come from traditional software vendors.

When these MSPs provide a holistic end-to-end systems strategy, they might be considered to be "Tivoli in MSP format." However, while the MSPs are now selling Tivoli capabilities, they could change vendor, because they all work with numerous vendors. The product partner of the moment is unknown to the end user, who just gets the required management reports or service delivery.

Turnkey MSPs that offer a complete enterprise system management solution include SilverBack, TriActive, Totality, and InteQ. For its part, StrataSource manages an entire application. While such providers get much of their technology from traditional vendors, such as Micromuse, BMC, and Computer Associates, the MSPs add value through their technology and processes.

While the software is often installed at the client site, the MSP vendor is responsible for implementation, maintenance, and ongoing use. In most cases, the MSP staff is located off-site, with secure connections to customer hardware.

Small and medium-sized enterprises with 50 to 300 servers are best suited to turnkey MSPs. Larger organizations would find them too costly because they have greater scalability and customization requirements, which bring high failure potential. However, for small and mid-sized businesses, turnkey MSPs will likely expand their offerings to include Internet- enabling infrastructure functions such as load balancing, cache management, and content distribution.

For its part, the Internet MSP is a subscription service of three, six, or nine months, whereby companies pay a monthly service fee for the management of a specific aspect of systems or applications, such as Internet monitoring or content delivery. This is what most people refer to when talking about a management service provider. Designed to manage and run over the Internet, these quick-to-install MSPs provide high functionality, although they are not appropriate for all functions. As their name implies, Internet MSPs primarily focus on managing Internet-based applications. They offer such functions as monitoring, storage, security, end-user self- help, and marketing.

These MSPs tend to sell to two camps. The first, classical example, is that of mature companies that understand what they do not know, as well as what it takes to run an IT organization, including hardware, and a network infrastructure. Here, MSPs are dealing with technical folks. The second customer camp consists of dot.coms, which are small, or do not realize they cannot do it themselves. In this case, business rather than technical people are generally involved.

Internet MSPs usually offer a service that is based on point tools that target a single management concern. Internet MSPs use brand-new technology and applications that were built to exploit the Internet. They target E- business applications, and require little or no technology to be deployed internally. Because customers need not buy and install large frameworks or applications, Internet MSPs offer a low barrier to entry, and low cost.

Internet MSPs offer specific services. For example, Keynote, Freshwater, Luminate, and Mercury Interactive provide infrastructure monitoring and testing. They can generally view application performance from outside, simulating the users ' perspective. Internet MSPs also provide security testing, software maintenance, and external storage networks for storing and managing data.

As for the disadvantages, Internet MSPs are "very niche"; that is, all the functionality is not there yet. While they provide application and server management, they do not offer software distribution or help-desk functions, although broader functionality is expected in the future. In addition, use of a framework limits the number of vendors with which a company must work. Because the MSP space is new, companies might have to deal with more vendors, for example, to attain network performance functions in addition to infrastructure monitoring.

Some analysts anticipate the development of "integration MSPs," which will allow ISPs and ASPs to share real-time infrastructure events and alarms with their customers. If, as some believe, data gathering is becoming a commodity, MSPs must differentiate themselves from competitors. To do so, MSP vendors such as Ganymede, Luminate, and Manage.com are giving away a tool or service to gain customers. The free tools monitor an element or process, allowing IT departments to try them out. The MSPs hope that these organizations will then become customers and start using their other services, such as data integration.

Another approach to MSPs is that offered by service providers, which add management tools to their contracted service offerings. Operating on a subscription basis, these providers focus on performance monitoring, and delivering to service level agreements. However, flexibility is an issue because they only offer a few standard configurations.

As ISPs and ASPs become commodities, they must distinguish themselves from the competition. To do so, some are looking at offering customers services that are similar to MSPs, whereby the ISP acts as middleman. Other ISPs have acquired MSPs because of their management value; for example, Exodus Communications acquired Service Metrics to provide response time management. In general, analysts anticipate MSP consolidation, with ISPs and ASPs acting as the primary consolidators.

Partnerships are becoming common, for example, those between Keynote and Digex, and between Keynote and UUNet. ASPs are also partnering with tool vendors and MSPs to provide management services similar to those of ISPs; for example, PeopleSoft with Qwest, and Corio with Marimba. From their side, organizations must gauge whether these management services are sufficient, or if they should be supplemented.

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