The Future of Managed Services

• By theWHIR.com , April 26, 2004

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The Future of Managed Services

Charles Weaver, MSPAlliance

Special to theWHIR.com

April 26, 2004 -- (WEB HOST INDUSTRY

REVIEW) -- There has been much written about the managed services

industry in the last several years. The flood of opinions and material

written about managed services has been no less than staggering, and

much of it extremely pessimistic about the longevity of the managed

services model. Yet, here we are in almost mid-2004 and the managed

services/IT outsourcing industry has arguably never been better.

The advent of utility computing has

brought another wave of scrutiny upon the managed services sector.

Claims that this new business trend could spell the end of the Managed

Service Provider (MSP) model have been circulating for months now. But

the success or failure of utility computing, at least in the estimation

of this writer, is immaterial to the future of managed services. The

MSP market, if it continues to trend in the same direction it has been

going, should offer MSPs (and end-users) a great deal of security and

piece of mind.

Trends Driving Managed Services

During the heady days of the dot-com

phenomenon, MSPs were basking in the limelight of the tech media,

analysts, and venture capitalists. The business model made sense, the

technology was available (albeit expensive), and the demand was

present. And then the bubble burst. The economic stagnation of the new

millennium, shrinking corporate budgets, and the increasing reliance of

everyday business on IT made life difficult for everyone. But with new

adversities come unforeseen blessings.

The last several years have seen a

remarkable convergence of trends that bode well for the future of

managed services. The first, which I already mentioned, is the

continued reliance of everyday business on information technology. The

1990s saw an era of "let's build it because we can," whereas the 21st

century has kicked off with a resounding "let's only use it if we have

to." And believe me, a lot of companies have to use it. There are very

few industries today that can claim complete independence from

information technology. Virtually everyone, whether directly or

indirectly, comes into contact during the course of their day with IT.

This trend will almost certainly continue.

The second trend has been the increased

level of government regulation, both at the state and federal level, in

industries that rely heavily on IT (most notably financial services and

healthcare). Partially due to the slew of notorious hacking jobs

exposing the vulnerability of many IT network defenses and partially

due to other factors (including the corporate financial scandals)

government has never been more interested in making sure that data

flowing through IT networks remains private and secure.

The last trend is more abstract, but

nevertheless quite important. The lunacy of the dotcom era is

thankfully behind us. That period, while foolishly exaggerated at the

time, now seems to have taught us some important lessons. Most notable

of these is the lesson of focus. Companies are no longer enamored with

technology for technology's sake. Gone are the days when technology

spending ran rampant throughout corporate America with little or no

thought as to the strategic value that technology brought to the

company.

Today, a new and better approach to

technology reigns supreme. How does technology help me run my business

better? This is the new question of the day. Unfortunately, it's not

always an easy question to answer, but the there are people who can

help. Enter the MSPs.

The MSP Doctor

There was a time when physicians,

accountants, and lawyers held unquestionable positions in society

(insert your favorite lawyer joke here). That period also saw less

government regulation in those industries. Over the years as government

has obtained more oversight in those areas, the more vital and

indispensable those professions became. Today, the thought of

performing even routine healthcare procedures on oneself, or asserting

your own legal rights without a lawyer, or doing your own taxes, has

become inconceivable. The role of lawyer, doctor, and accountant has

been cemented in our culture. The same is becoming true of MSPs.

With laws such as the Gramm-Leach-Bliley

Act, the Health Insurance Portability and Accountability Act,

Securities and Exchange Commission Regulation 17a-4, the Sarbanes-Oxley

Act of 2002, and others, more and more executives are turning to MSPs

to better understand how to cost-effectively ensure that their

corporate IT networks do not run afoul of such regulations. Most

notably, MSPs focused on the financial services and healthcare

industries have seen a tremendous amount of growth during the last year

and a half as a result of regulatory compliance pressures. Many MSPs

have even begun to partner with national law firms to combine legal and

technical talents as one offering to companies.

The trend of legislating the privacy and

security related to financial and healthcare data will most certainly

continue in years to come. And with the increased flow of affected data

through various networks the role of the MSP as a trusted advisor and

solution to this problem will also likely increase.

So the next time you think your company's

IT network is suffering from legislative overkill, take two pills and

call your MSP in the morning.

About The Author

Charles Weaver is president of the MSPAlliance (mspalliance.com), a global

trade group for the managed services/IT outsourcing industry. He can be

reached at cweaver@mspalliance.com.

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