MSPs Invest in Service Delivery

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MSPs Invest in Service Delivery
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By Jeffrey M. Kaplan
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This story appeared in the July/August 2004 issue of Web Host Industry Review magazine. Click here to subscribe for free.
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July 30, 2004 — (WEB HOST INDUSTRY
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REVIEW) — The MSPAlliance and THINKstrategies recently unveiled the
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results of a joint 2004 Service Enabling Technology study for the
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managed services business, with important implications for Web hosting.
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As the industry regains momentum, market
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leaders are aggressively expanding the breadth of their service
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portfolios to win greater shares of the market. And, as the MSPAlliance
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and THINKstrategies study found, this strategy is driving service
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providers to make new investments in their service delivery
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capabilities.
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In 2003, the MSPAlliance and
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THINKstrategies published a landmark benchmark study of the managed
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services industry based on a survey of 50 managed service providers
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that reported experiencing growth of more than 50 percent in revenues
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and a nearly 25 percent expansion in customers that year.
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Participants in our latest research
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project included a broad array of MSPs, delivering a variety of remote
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management services: specialized service providers offering security,
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storage, messaging and networking services; major telecom carriers who
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are adding a new layer of management capabilities to their traditional
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transport services; IT outsourcing and service companies looking to
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offer a new set of targeted services; local/regional VARs seeking to
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offset slowing product sales with annuity services; and Web hosting
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companies expanding their managed service capabilities.
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The MSPAlliance/THINKstrategies survey
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study found the majority of these companies are planning to
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significantly increase their investments in new service enabling
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technologies that can help them more effectively serve their customers
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and manage their businesses. The survey participants reported they will
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spend 21.7 percent of their total operating budgets on new service
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enabling technology in 2004, compared with 17.5 percent in 2003.
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The 53 MSPs participating in the
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MSPAlliance/THINKstrategies Web-based survey said they plan to make new
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technology investments in the areas of help desk management,
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network/systems management, desktop management, security management,
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storage management, messaging management, application management,
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wireless network management, VoIP management, service management
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(including provisioning and billing).
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Network/systems, desktop, storage and
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security management technologies are at the top of the investment plans
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of the survey respondents. They are also making investments in
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messaging, VoIP and wireless management technologies to support their
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expansion into these new service areas.
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One of the most significant and
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surprising findings of the MSPAlliance/THINKstrategies study was that
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the survey respondents were generally neutral rather than truly
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satisfied with their current service enabling technology suppliers, and
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in many cases uncertain about whether they would stay with these
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suppliers. This should be an important wake-up call for the established
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technology vendors and may represent an important opportunity to a new
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generation of technology companies.
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The bottom-line message of the joint
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MSPAlliance/THINKstrategies studies is that the demand for managed
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services continues to grow and the companies seeking to capitalize on
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this trend are making significant capital investments in the enabling
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technology necessary to support customer requirements.
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The challenge will be better scaling and
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targeting these investments to match the true level and nature of
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customer demand as opposed to the overly aggressive build-out that
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spelled the demise of many first generation Web hosting and managed
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service providers during the dot-com boom and bust. As the Web hosting
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industry rebounds, capital investment rises and the number of mergers
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and acquisitions escalates. In response, competition is intensifying.
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Stand-alone Web hosting companies are contending with a wide assortment
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of contenders ranging from application service providers to utility
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computing solutions companies.
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Selecting, implementing and managing the
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right enabling technology to support their service portfolios and
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ensure operational efficiency and effectiveness will be a key factor
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that will determine which Web hosting providers survive and succeed.
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About the Author:
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Jeffrey M. Kaplan is managing director of
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IT strategy consultancy THINKstrategies. He can be reached at
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jkaplan@thinkstrategies.com.
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