CIO — A management service provider (MSP) is a vendor that remotely manages and monitors enterprise applications?anything from ERP, CRM or firewalls to proprietary e-business applications?or network infrastructure. These vendors make their money by charging businesses on a subscription basis?per device, servers, PCs and so on.

MSPs claim to be an improvement over the ASP model because they permit companies to outsource the maintenance of their applications?making sure they’re up and running, providing fixes when they’re not?without outsourcing the applications themselves, thus providing a relatively cheap, easy and unobtrusive way for a company to prevent outages and malfunctions. Meanwhile, because MSPs provide 24/7 monitoring, companies don’t have to worry about staffing up to handle that nonrevenue-producing task. And if the MSP suddenly shuts its doors, as has happened all too often in the ASP world (and recently in the MSP world too), the business can continue because it still has its applications.

"MSPs are a little easier to stomach [than ASPs]," says Corey Ferengul, an analyst who covers IT services outsourcing for Meta Group in Stamford, Conn. "You can tell yourself, ’Oh, I’m just having someone monitor my applications.’ That’s not nearly as intrusive to an organization as having someone take over your applications."

That sounds good, but if you’re thinking about using an MSP to take some of the load off IT, you should be aware of some potential problems.

First, many MSPs are no more stable than the ASPs were (see "Boy, That Was Fast," Nov. 15, 2000), and that’s saying something. According to Giga Information Group ASP Analyst David Friedlander, a year ago there were an estimated 300 ASPs. Today, about 50 of them have gone out of business and another 100 have changed their business models so radically that they can no longer be considered ASPs. By comparison, there are an estimated 200-odd MSPs right now, and according to Ferengul there are simply not enough customers to keep them all afloat. In fact, several?including i-Sharp, ManageIT and Intira?have already folded.

Also, not all MSPs are alike. Some aren’t as scalable as others, which at a critical time might leave a company waiting in line for service as the MSP takes on new customers. And certain MSPs are limited in the platforms they support, which means that if a shop runs a variety of platforms and technologies, it may have to contract with a number of MSPs to meet its various needs.

Finally, the MSP market is in its very early stages, which means that pricing could be unstable during the next year or two as the market matures.

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