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Technology Industry

A new taxonomy for services

Communications News, June, 2001 by Bart Taylor, Dan Taylor

In the past, we all divided our world according to two categories: network and IT. Not so long ago, these were separate empires with separate management; suppliers had separate marketing with different channel relationships, and we would never go to trade shows where both were represented.

True, this historical generalization falls short of explaining the underlying mechanisms of services and products that have been around for years. For example, the Centrex and PBX business has long blended the elements of both IT and communications. Moreover, the technologies have always been common to both. Circuit switches are just big computers; only regulation kept the two realms separate.

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As we creep out from under the long shadow of half a century of regulatory barriers, distinctions have blurred. "Data services" span both IT and communications. "Voice" may one day disappear as a separate business; replacing our old-world view with a more relevant one becomes important.

For about a decade, we've listened to smooth talk about the Brave New World ahead. It started as "convergence" and "multimedia," and it has ended up today with the assumption that everything will meld into one big business. We're skeptical about that.

Services have benefited from the blending of IT and communications. As analysts, we cover the trend. In describing the world around us, however, we would rather not devolve into Blob Theory. At this point, you may expect us to get out the pointy hats and magic wands, and make the world pure again with technical analysis.

Fortunately, there is a simple distinction at hand. We propose that the newly combined IT-plus-communications world be divided according to the following categories:

* Infrastructure: This is operations for switches, routers, firewalls, servers and data centers, connectivity, storage devices, networks--in other words, hard assets mostly located at the core. In the future, services in this category will tend to look more like traditional telecommunications, and less like traditional IT outsourcing.

* Resource management: This includes operational processes that allow efficient, policy-based sharing of assets. Examples are VPN, managed server, router, firewall, storage networking and traditional managed services. Resource management services are closely tied to infrastructure--some are offered by the same companies.

* Management services providers: This is a new category, and a significant one. Many of the innovative, turnkey services in this category come from the world of IT. They include: remote network management, systems and desktop management, and managed "internal" processes, such as security audits, certificate permissions, backup and recovery, and VPN.

The business model of the supplier is different for each of the above categories. Resource management is tied closely to the infrastructure business--customers will buy these in a bundle. Both control costs associated with assets, offloading of capacity planning, life cycle management and financing risk. Service providers--companies capable of realizing economies of scale on massive asset investments--have proven competent at this.

"Management services" are different from the traditional "managed services," which are close kin to the outsourcing business. The new "MSP" is a turnkey, remote service provider that hosts and operates the management software framework for distributed computing. This includes innovative website monitoring and SLA management software, as well as traditional suites for systems, network and application performance management.

Although it is currently perceived to be a crowded field, we think it is just getting started--and there is enough variety to accommodate many entrants. Internet hosting needs a value-add. Storage companies are rushing to find a new channel. For MSPs, sophisticated remote management software is more comprehensive and more focused on service-level metrics than ever before. Customers will get better services than those they could provision internally, hiring experts in the process.

All of these services will ultimately be simpler to buy, and simpler to manage. Behind this is an assumption that distributed computing delivers services interchangeably, within the enterprise, as well as via third-party services. VPN is a perfect example of how the technology gives the customer a choice: build or buy. This transparency of choice leads to "price discovery," as economists call it. Enterprises and their suppliers will have an increasingly clearer view to service alternatives in every instance of choices.

Erroneously, some still believe this market is one big blob, with no categories to define service choices. For example, they would see "storage services" and not realize that the company offering them may just be a specialty network provider (infrastructure) with a managed services component for the backup process in an enterprise-wide SAN (resource management). If, instead, the service were an infrastructure-independent service remotely hosting and managing the SAN software and processes, then that is different--that's probably MSP.

Technology Industry

A new taxonomy for services

Communications News, June, 2001 by Bart Taylor, Dan Taylor

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