I.T. OUTSOURCING - Management Service Providers Say They'll Do It All for You

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  • Negotiate an exit strategy. If your MSP goes bust, it can be a headache to find a replacement because you’re not only losing time and labor, you’re losing people who know your network and your apps. Those can’t be replaced; they have to be rebuilt. "You have people familiar with the care, feeding and idiosyncrasies of your applications and how to fix them," says Russ Lewis, executive vice president and CIO of GFInet, the online arm of New York City-based financial services company GFI. Lewis is concerned about avoiding that particular pain. Lewis uses White Plains, N.Y.-based Metromedia Fiber Network (MFN) to manage his ERP system and Web applications. He says employing MFN saves his company $1.6 million a year. The worst-case scenario, he says, occurs if the MSP is also providing hosting or colocation services?as it does for GFInet. In that case, "[the MSP people] shut their doors, you can’t get at your hardware, and your customers are connected to them via their network," he says. "You’d have to reroute your traffic, take out your applications, put them on new hardware, and get it all up and running."

    Consequently, when Lewis evaluates an MSP, he’s as interested in how it will transition his company away from its services as to its services. He looks to see that the MSP will document the services it has performed so that he has something to give either the new MSP or people he has assigned internally to monitor his apps. Lewis also wants to be sure that it keeps a full inventory of hardware and routers so that those successors know what they’re working with. And to help move his business to a new MSP, he demands an articulated process with provisions for a gap analysis?in which the MSP examines the differences between its own monitoring tools and those of its successor.

  • Get references. There’s no better indicator of how an MSP will handle your business than how it handles others’. But different customers have different views on what to look for. Guetzloff of R.R. Donnelly looks for big Fortune 500 customers because, he figures, if the MSP can handle those companies’ monitoring, they can certainly handle his. "I especially look for telecommunications companies because telecom is highly regulated and [they] can face penalties" from the FCC for failing to provide certain levels of service, he says.

    But Dennis Upton, CIO of business-equipment manufacturer Brother International in Bridgewater, N.J., looks for recommendations from midsize customers, where the MSP is likely to be the sole provider of services. Upton, who uses Alpharetta, Ga.-based SeventhWave Technology to monitor his SAP system, believes that a recommendation from a customer dependent on the MSP is more significant than one from "the GMs and the Citibanks; they probably have 50 firms working there in one way or another."

  • Look for standardized processes. A lot of MSPs are very new and immature, and you want to make sure they’ve really established how they operate, says Meta Group’s Ferengul. For example, if you ask what they do for server maintenance or what they do when you need a patch applied, and they respond, "What do you want us to do?" it means they don’t have standard operating processes and you can’t be sure what you’ll get out of them. Giga’s Schatt adds that these processes should be automated. Without automation, the MSP won’t be able to scale up and your company will be doomed to service problems down the road as the MSP takes on more and more customers.
  • Sign on short term. MSPs bill at a per-device fee on a monthly basis, and service contracts are generally for one, two or three years. But given the volatility of the MSP space, it’s wise to get the shortest contract you can, says Schatt. He adds that MSPs will likely not agree to contracts shorter than one year, as it takes them almost that long to recoup their setup costs.
  • Shop around. As prices vary widely from MSP to MSP, it’s quite possible to play them off against each other to get yourself the best deal possible.

Looking Ahead

Observers of the MSP space predict a huge shakeout during the next year?a shakeout that’s already begun as Comdisco and others have fallen by the wayside.

Ferengul points out that right now MSPs are servicing only about 3 percent to 5 percent of their potential marketplace. At the same time, more than 200 vendors are trying to establish themselves. This means that a lot of management service providers are going to go out of business in the near future, and analysts predict that the pure plays?which just monitor applications and networks?are likely to be the first to go. Those that survive will be the ones that form alliances with huge colocators or hosting companies, such as Digex, Exodus and Verio, rebrand the MSP services and sell them as their own. Meanwhile, traditional outsourcers such as Accenture and Perot Systems appear to be making a move toward the same market, offering MSP-type services in an MSP manner, says Schatt.

Ultimately, management service providers will be seeking midsize customers as their target base because larger companies have the resources to handle their monitoring and management in-house, Schatt says. And traditional outsourcers, such as Accenture, CSC, IBM Global Services and Perot Systems, that want to take advantage of the MSP market will have to devise a new business model that’s more friendly to midmarket enterprise.

So what does all this mean to the user? It means a lot of pricing instability in the future. So go on and consider the MSP?it can save you a lot of money.

But keep the Dramamine handy. The coming year promises a bumpy ride.

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Copyright © 2001 IDG Communications, Inc.

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