MSP market to grow among SMBs, professional services 12 April, 2007 By Patricia Pickett

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"MSPs came up very strongly with a large percentage: at least 50 per cent of customers came back and said they were interested in learning more about how the MSP scenario would work for them," said Carboni. Respondents also indicated that the network performance-monitoring piece is extremely important to them, and if the MSP model works well in that scenario, they are willing to entertain other managed services down the road, he said.

The service provider market has experienced slow, albeit steady growth over the last several years. However, over the last six to 12 months the frenzy has died down somewhat; customers have started educating themselves on what they really need from service providers and "growth has actually levelled off a little," Carboni said.

According to Carboni, MSP growth has been stunted because barriers to entry have been too high. "I believe the MSP market is a very fragmented business," said Carboni. "A lot of resellers that have historically sold hardware and software converted at least part of their corporate mission to become MSPs." With so many of them out there, each MSP ended up only managing two or three devices in a small number of offices, which made it difficult to recoup their initial investments.

Some service providers in the last few years have experimented with different pricing models, such as charging on a per-device basis, which in theory is supposed to speed up the recovery of MSP solution costs.

However, the concept can be confusing to end customers. If budgets are tight, "end users may end up debating with service providers about which devices are more important," and may choose to have only a couple of their most critical servers monitored, Carboni explained. "However, they fail to recognize that the ones they choose to monitor are highly dependent on other devices that need monitoring. You'll never achieve the service levels you want that way," he said. Carboni suggested MSPs charge a per-site fee instead, which makes the service more flexible for customers that are expecting to grow in the future.

Lack of customer education has also been a barrier to growth for MSPs. "What our studies are saying is that there is a great need for these services but the market is still so uneducated about how to properly sell the services, and on the end user side about how to contractually buy those services." Small and medium business (SMB) customers, in particular, require education around why their network is important and how their devices will be monitored, he said.

Despite these barriers, Carboni maintained that the MSP market is entering a different evolutionary stage that signals the end of expensive, cumbersome solutions, opening up opportunities in certain segments, such as SMBs.

According to Paul Myerson, senior channel analyst with the Enterprise Strategy Group in Milford, Mass., one of the hottest MSP markets today that could be of special interest to SMBs is storage backup.

"In talking with many end users, they constantly are challenged by the architecting and deploying of a solid recovery model," wrote Myerson in a January research note titled, To MSP or Not to MSP: That is the Question. "Rarely do they have to pull the trigger to recover, but when they do it is big and they are left to deal with a difficult challenge." Signing on with an MSP that specializes in the storage backup field "is almost a no-brainer," he said.

On the vertical side, MSPs should also expect increased opportunities with small companies that provide technology or services, including professional services such as doctors' or accounting offices and law firms, said Carboni. "There are a lot of little companies that have a low number of employees but they have a tremendous amount of value and dependency on their networks, so there is a great amount of opportunity there."