Like the ASP, the decision to use an MSP comes down to a classic build-versus-buy choice. But unlike applications, managing data centers and networks is not usually a strategic focus for most organizations. "You have to compare the expertise the MSP brings with the cost of hiring that level of expertise. Even if you already have a management tool in-house, you probably are not taking advantage of it to the depth that an MSP goes to," says Michael Coffield, president of the MSP Association in Wakefield, Mass., the MSP industry's trade group.
"It becomes a question of how we allocate our resources. We know we can't provide world-class service alone," says Tom Gildea, CEO at Paperhub Co., a Downers Grove, Ill., online exchange for the paper industry. Paperhub turned to MSP NuClio Corp. for data center and network services. NuClio, based in Oakbrook Terrace, Ill., not only manages Paperhub's systems but also monitors the actual applications. "It will generate alerts or take appropriate actions whenever there is a problem," he says.
BuildPoint Corp., an online marketplace for the construction industry based in Redwood City, Calif., turned to nearby iSharp Inc., also of Redwood City, for managed performance testing after growing dissatisfied with in-house testing tools. Although the company's developers continue to use testing tools in house during development, "we use iSharp for final large-scale testing," says Chris Corzine, director/information technology. "It is a huge cost saver, by an order of magnitude."
For a small monthly fee, the MSP will point sophisticated management tools at a company's systems, usually running in an Internet data center, and keep officials instantly abreast of what is happening. "Just look at the cost of installing something like Tivoli or Unicenter to manage your systems. You could easily spend $3 to $6 million to acquire and implement a tool like that, and 75% of the implementations still fail," Ferengul says.
Many managers are jumping at the cost savings. "Can you imagine what it would cost us if we were to try to staff a data center for 24x7 operations? That is a minimum of five skilled people. SiteRock [Corp. of Emeryville, Calif.] costs us the equivalent of one person," says Jim Hannan, general manager/free dial access group at 1stUp.com. "And, I don't have to manage employees or absorb any of the overhead associated with hiring and HR." Cost is important to 1stUP.com, a financially struggling CMGI company that provides private label Internet access to organizations that want to offer free Internet access.
The majority of MSP customers are coming from the e-business ranks where 24x7 performance is essential. They include both young dot-com startups and e-business initiatives within established conventional companies. "It is pretty easy for a company to make the leap to an MSP," Ferengul notes.
Typically, there is no initial set up cost, implementation is straightforward, and results are almost immediate. "MSPs are ideal for a startup. It lets you amass a lot of talent instantly," says Paperhub's Gildea. The downside of MSPs is loss of control. But many organizations, especially startups, never had control of their systems and networks to begin with, Ferengul adds.
A company doesn't, however, have to be a startup dot-com to benefit from an MSP. Cleveland-based Marconi Medical Systems Inc., for example, puts medical imaging systems into hospitals worldwide. It installs and maintains hardware and software, and sells the disposable supplies, such as media, that go along with imaging systems. Until it discovered the MSP concept, "we relied on one guy to handle the network and fix problems," says David Wither, manager/network infrastructure. It didn't take much before he was overloaded.