An MSP in Your Future? - Industry Trend or Event

Outsourcing infrastructure management software gains favor

THE CONCEPT OF THE APPLICATION SERVICE PROVIDER (ASP) has attracted considerable attention lately. The idea of renting business applications hosted outside the company as a service seems--on the face of it--to be quite attractive in some circumstances. So it seems natural to ask, "Why not deliver applications to manage systems and networks in the same way?" This has formed the basis for the Management Service Provider (MSP) concept.

But as the MSP idea gained momentum, entities started to incorrectly label themselves as MSPs. IDC uses a precise definition: "a company or division of a company that delivers subscription-based IT infrastructure management of some type as a bundle of management tools and services that are used by the customer to manage the infrastructure." In other words, an MSP is an ASP for system and network management.

A community of MSP-related organizations is now emerging. In particular, there is the recently formed MSP Association (www.mspassociation.org), which has around 100 members, not all of which are MSPs, but MSP "groupies."

The key to the concept is that the MSP is enabling the use of system management software so that its customers can manage their own IT infrastructure or get help from their MSP when needed. The customer still manages the systems just as before, but does not run the management software in-house.

This should be contrasted to another business model--the AIP or Application Infrastructure Provider, which provides professional outsourcing or managed services on a one-to-one basis. An MSP also differs from the Data Center Provider or the Managed Network Services Provider. In these latter cases, the customer cedes the day-to-day control over the network and systems to the provider.

IDC has identified three major types of MSPs according to the origins of the system management software tools:

MSP Channels. These are business units or business operations formed by existing software vendors as new channels to market their own software through MSP subscriptions. The central characteristic is that the software vendor sells its own software both through traditional licensed software sales and through MSP subscriptions that include the license fee as well as the hosting service. Some examples of this model include Candle Corp. (with eBA), Compuware Corp. (with PointForward), and Mercury Interactive (with ActiveTest).

MSP VARs. These are MSPs that license software from other vendors and resell it on an MSP subscription basis. Many MSP VARs come from consulting services organizations that wish to extend their business offerings by selling MSP-based system management software subscriptions. Examples include TriActive Inc. and 2ndWave Inc., firms that resell software tools licensed from vendors such as Tivoli and BMC; and Center 7, which operates as an MSP for Computer Associates' Unicenter TNG software.

Pure-Play MSPs. These are vendors that sell their own software almost entirely on an MSP basis. Often, pure-play MSPs will have designed their offerings from scratch to be delivered on a hosted, subscription basis. Some examples of pure-play MSPs include Keynote Systems, iSharp, and Silverback Tecimologies.

Of course, it is possible to have combinations of these forms, but the approximately 60 companies that IDC has so far identified as true participants all fall into one of these categories. IDG expected to see about 80 such companies by the end of 2000.

What's Manageable?

In principle, it is possible to provide the full gamut of system and network tools via the MSP model, but some of these seem better suited than others. As the management application itself is hosted outside the company's premises, this means that the most appropriate tools are those that are truly distributed architecturally and that permit the use of "fat," scalable, and robust server components and fairly simple "thin" client agents on the company's systems.

For this reason, the idea of backup software, for example, being hosted externally would seem unlikely--in the MSP model, the tape drives would still be on-site whereas the backup software would be off-site. If the customer really wishes to outsource the management of storage, a better solution might be to go all the way and have the data itself hosted externally (as in the Storage Service Provider model).

But the use of a rented, externally hosted application for monitoring the systems' performance and traclting uptime using thin agents on the managed systems seems much more attractive, as the technology to do this is relatively straightforward and the need pressing. It is not surprising, then, that this is one of the most popular applications offered. Another is the management of hardware and software assets, where the MSP's application performs all the discovery and provides detailed reports on assets and how they are being used.

An even more compelling application is to use the MSP model to gain an external view of the systems from outside the customer's premises. Such is the case when there is a need to monitor and track the performance and availability of the company's Web site from the perspective of the external user. In that case, the fact that the monitoring application is hosted externally is more than desirable; it is an absolute necessity.

The first and most important attraction of the MSP model is the promise that the system and network management application can be up and running in a short time, and with no effort on the part of the user. All the customer needs to do is learn how to use the application. The MSP worries about how to install and configure the tools, how to integrate them into the customer's environment, and how to operate them at maximum effectiveness. The MSP looks after the product patches and upgrades and frequently provides templates to assist the customer in using the tools.

Another advantage is in the way in which the customer pays for the management capability. Instead of paying up-front for the management software licenses and the systems to run them on, the business pays a monthly fee for the whole thing. This makes IT costs predicable, and allows management to tailor those costs to its needs. If the future needs are unclear, IT management doesn't have to invest in more software and hardware than what is currently necessary. If growth is rapid, increased management capacity is just a phone call away. Similarly, an organization may start by implementing just one management function (for example, monitoring the server OS) and later add database and applications monitoring.

ISV to MSP

The MSP model offers a software company a new opportunity, both by providing a new channel for existing software and by providing a different manner of delivering the software to new customers. Many customers hesitate to buy software because they are unsure of the eventual success of the implementation. With the MSP method, the customer can "try before buying" and limit its up-front commitment. This should lower the barriers to acceptance of the software.

On the other hand, this can mean a less assured revenue stream for the ISV than with conventional software licensing. For this reason, most MSPs are implementing contracts that commit the customers for guaranteed time periads or for minimum levels of usage.

Another difference is that MSP pricing is typically based on the number of infrastructure elements being managed (such as the number of Web servers being tracked), the frequency and extent of MSP-supported actions (such as load tests), and the variety of system management disciplines being supported (single function vs. full "framework" management). In this way, the software provider can offer a cheap entry point for a new, emerging company and then participate later in the customer's growth.

The development of the MSP business form, its market acceptance, and hopes for revenue growth for MSP subscriptions are still in the early stages of development. It is important to recall that it has taken several years for the ASP business model to become generally accepted and for significant revenue to start ramping up. The same pattern is expected for the MSP.

R. Paul Mason is group vice president, International Data Corp., Framingham, Mass. He directs all system infrastructure software research in IDC's Software Research Group.

COPYRIGHT 2001 Wiesner Publications, Inc.
COPYRIGHT 2001 Gale Group