Customers vague on what "managed service provider" actually means

"MSP" can mean so many different things that some say it means nothing. Analysts, industry experts and managed service providers weigh in on what the MSP buzzword is all about.

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Ask analysts or vendors what's hot in the channel right now and any that will stop talking about the small-business market for five minutes will heap praise on managed service providers (MSPs) and the growth expected in that market for the next year and beyond.

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But dig a little more, and it becomes clear that even the MSPs themselves aren't clear on what an MSP, or the "MSP market", actually is.

"Wow, that's a loaded question there," said Dean Avery, owner of Redwood IT, LLC, an MSP in Winona Lake, Ind., when asked what the term means. "We run into the same thing all the time, trying to define what it is."

Redwood specializes in network security and makes about two-thirds of its money on managed services, Avery said, with the rest coming from consulting for larger, long-term IT projects. That distinction between long-term projects and regular IT work is at the core of an MSP's role, he said.

"It's when a client or network decides to outsource the management and day-to-day operations of their network," he said. But when he talks to clients, Avery tries to avoid the "trendy" MSP label and instead focuses on the specific services Redwood can offer.

"Nobody really identifies themselves as an MSP anymore," said Daniel Golding, vice president and senior analyst at Tier 1 Research, a division of the New York-based 451 Group. "One of the reasons nobody uses it anymore is that nobody knew what it meant. It was a boom-time euphemism for someone who does managed services for people."

The MSPs themselves know exactly what services they're offering and what the market is wiling to pay, but there are so many definitions of what constitutes a "service" that defining the market itself is difficult.

The most common definitions describe MSPs as channel companies that offer continuous outsourcing of an IT function -- they work on a recurring revenue model; they monitor and fix things proactively; and they do all this over the Internet, rather than having to work hands-on at a client's office. Depending on one's perspective, any or all of these could be the core definition.

These days, Golding said, companies market their specific service -- managed network monitoring, software as a service (SaaS), managed data hosting -- rather than using the less specific term "MSP."

Not surprisingly, MSP trade associations beg to differ about whether MSPs can be labeled as such.,

"Do I think the term 'MSP' is generic?" asked Charles Weaver, president of Chico, Calif.-based MSP Alliance. "Yeah, it does have a lot of different meanings. But it's no worse than the term 'doctor.' I can talk to 50 doctors in a room, and they all do different things." An MSP, Weaver said, is "a company that's proactively monitoring and managing their client's infrastructure."

Amy Luby, founder of the MSP trade association Mobilize SMB in Omaha, Neb., said "an MSP in general is anyone supplying any level of service for a monthly fee." Mobilize SMB focuses on smaller MSPs -- most with 10 or fewer employees, Luby said. Many of those are trying to make the transition from being a traditional break-fix business to being a provider of more complex, higher-value services.

While it makes sense to identify MSPs within the IT channel since the group may face similar issues and business models, customers don't generally recognize the term, Luby added.

"I don't know any of my peers who are actually going out and selling themselves as an MSP," she said. Luby is also a principal at Mobitech Inc. in Omaha, which focuses its integration and remote-monitoring and utility computing services on SMBs.

But MSPs have enough characteristics and business interests in common that it makes sense for them to band together in organizations like the MSP Alliance, which strives to push the idea of managed, proactive services to the marketplace, according to Chris Zawacki, partner at Greenhouse IT, LLC in New York. Grrenhouse IT provides security, technical support and remote monitoring services.

Instead of talking about "managed services" with leads, Zawacki talks about specific services and emphasizes the company's flat-fee pricing.

It's not only confusion among customers that makes the term unpopular with some service providers, however. Some shun the term to avoid being grouped with discount shops that use it in their marketing materials, but whose services don't qualify as what other providers consider "managed," Avery said.

Weaver said it's important to separate true MSPs from companies that have simply set up the basic managed-services infrastructure but have not changed over their business model or processes.

"If you're a plumber and you write a book, and you make less than 1% of your revenue from your book sales, I wouldn't really call you an author or a writer. You're a plumber," he said. "How you deliver your service is what defines you as an MSP. It is not the fact that you bought technology."

In the end, managed services are just another step in the evolution of outsourcing, said Eric Goodness, vice president of research at Stamford, Conn.-based Gartner Research. Responding to fears about outsourcing, especially security concerns, the industry invented managed services as a form of "outsourcing without the transfer of IT assets or IT personnel," he said.

Instead of having to put one's hardware in another firm's hands, he said, MSPs allow clients to build and keep control of their infrastructure, but hand off responsibility for its daily maintenance.

Goodness said that far from being a meaningless buzzword, end-user surveys have shown that customers know about and want managed services. Indeed, he said, that's what's driving the MSP market.

"There is no doubt in my mind that SMBs and large enterprises are much more aware of and much more in sync in their thinking of what a managed service is," Goodness said.

Let us know what you think about this story; email: Yuval Shavit, News Writer.

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