Why Buy the Cow…?

Software Magazine, Dec, 2000 by Dan Kara

The trickle-down benefits of employing an MSP

AT ONE TIME THE CHOICE TO OUTSOURCE was relatively straightforward. Organizations that were fortunate enough to have a high degree of internal technical expertise often opted to go it alone, especially if the particular application or system to be outsourced was considered critical. Outsourcing was largely limited to software development and systems integration, endeavors that typically require a large up-front investment, lengthy development cycles, and the delivery of "fixed" products.

The same arguments initially applied to early Internet-related initiatives. However, the rapid evolution of the Web, coupled with the high-tech labor shortage, have changed the terms of the insource versus outsource equation.

The Web has evolved from a means of posting static marketing material and first-generation online retail systems, to a key business platform. Today's Internet and e-business systems are extremely complex, and must provide 24x7 uptime and support thousands of users, as well as deliver minimal response times. That is, they require "mainframe class" robustness, performance, scalability, and security. Anything less has the potential to damage brand equity, as well as consumer and trading partner confidence.

Companies cannot afford an underperforming Web presence, yet they are finding it nearly impossible to attract and keep the technical specialists they need to deploy and manage their e-businesses adequately. As a result, a rapidly growing number of business and technology managers now look to outsourcing as the only reasonable alternative for delivering competitive Internet-based systems.

At Your Service

Web-centric outsourcing takes many forms, including traditional endeavors such as software development and systems integration. A new paradigm, "utility computing," is a subset of generalized Web and e-business outsourcing, where third-party solution providers furnish some combination of infrastructure, applications, and services, often with the systems and critical corporate data hosted off-site. Co-location providers (CoLos) were among the earliest to offer this service. Typically this involves little more than the off-site provisioning of power, rack space, Internet access, and physical security. CoLo customers manage their own servers and applications themselves.

For critical e-business initiatives, simple co-location solutions are inadequate. While some larger CoLos are trying to diversify their offerings, many provide few value-added services, and offer little in terms of management and monitoring. In addition, to deliver a complete e-business solution, IT and e-business managers must deal with multiple solution providers, along with the CoLo. From a time-to-market and process standpoint, businesses find this unacceptable.

A second form of infrastructure, applications, and services outsourcing involves the renting or leasing of software from Web application hosting vendors. The applications are centrally managed by the hosting vendor (ASPs) and can be accessed from anywhere through the Internet, Virtual Private Networks (VPNs), or leased lines. While the early enthusiasm for ASP solutions in the form of hosted ERP applications targeting midsize companies has waned lately, a dazzling array of new hosted products and services target organizations of all sizes across all vertical market segments. In fact, the number of niche, hosted vertical applications has increased dramatically as providers seek to differentiate themselves.

Regardless of the specific application hosted, the approach can diminish or eliminate upfront capital expenditures on servers and software. Organizations can also utilize the latest software or technology on a "pay-as-you-go" basis without the necessity of finding, hiring, and retaining the IT staff to deploy and manage it.

Like ASPs, Internet infrastructure, operations, and management outsourcers offer their services on a subscription basis. Unlike an ASP, though, their primary deliverables are not business applications for end users, but rather IT infrastructure. Vendors offering these services--including Mimecon, Logictier, Xuma, Loudcloud, and SiteRock--go by a bewildering and proliferating variety of acronyms, including MSP (managed services provider), AIP (application infrastructure provider), and IIP (integrated infrastructure provider). Some of the acronyms denote real differences among the offerings, while others are simply marketing ploys. We will refer to them collectively as MSPs. Despite individual differences, MSPs as a class offer Internet infrastructure, management, and operations support delivered as a service.

The Bigger Market

MSPs differ radically from other hosted solutions providers. For example, compared to CoLos, Internet infrastructure, operations, and management provisioning is much more of a high-value, high-touch, management "service." The MSP solution requires management and operations expertise that transcend that of internal IT groups, co-location providers, and most ASPs. Moreover, this capability must cover all technologies and processes associated with operating, managing, and maintaining high-volume, 24x7 e-business sites, including infrastructure and application expertise.