It's fair to say that most MSPs have grown their businesses by taking one step at a time away from traditional break-fix businesses. Many keep at least a part of their old hardware businesses intact.
But a growing subsegment of MSPs have all stopped dirtying their hands with hardware and have launched MSP businesses that manage only the software and operating system layers. The basic building blocks of this approachnear-ubiquitous broadband connectivity and secure VPNshave made this model ever more feasible.
This tier of MSPs might have called themselves ASPs six or seven years ago but now prefer not to be associated with the ASP boom and bust of the late '90s.
Take Everon IT. Targeting businesses with 20 to 100 employees, Everon monitors and manages the full network and software stack for a monthly fee, becoming their customers' outsourced IT department, said Mike Cooch, CEO of the Boston-based company.
Everon's toolbox includes Citrix Systems' remote-control and LPI Level Platform's monitoring software. The monthly charge are $49 per PC for PC management, $299 per server for server management and $299 per company for network management.
Another MSPNavisiteis a pioneer in running customer applications from Microsoft, Oracle and other companies.
MSPs in this app-hosting mold are "coming up the stack, doing more rather than less management, moving more toward Software-as-a-Service and less software licensing," said Doug Mow, vice president of marketing at Navisite, Andover, Mass.
Software from many established vendors is still not designed to fully enable the subscription SaaS modeit doesn't run apps for multiple customers on shared infrastructure. Such "multitenancy" however, is a foundation of Salesforce.com and NetSuite's SaaS offerings.
Older companies such as Microsoft are adding multitenancy capabilities and a hosting partner like Navisite can participate in both models. Navisite could now run a dedicated server for a customer's CRM implementation, but as the software gains multitenancy, it could then move the customer to that new platform later, Mow said.
Skyytek Worldwide, Miami, built its business on NetSuite's hosted ERP. It is an implementation specialist using NetSuite's ERP infrastructure-in-the-sky to grow into a national presence, said Ray Tetlow, chairman and CEO of Skyytek.
"When we started three to four years ago, we were a small outfit out of Miami but were able to service companies in California. Now we have nine or 10 offices," Tetlow said.
Tetlow could be the poster boy for NetSuite CEO Zach Nelson's partner mantra. The SaaS model enables VARs "to service customers anywhere," Nelson said. "Just as using an application like NetSuite allows customers anytime, anywhere access, it also allows VARs to deliver anytime, anywhere services. The geographic constraints imposed by solutions like Great Plains and Sage are lifted, and VARs can move from regional to national and even global without investment."
Nelson and Salesforce.com CEO Marc Benioff have at times been pressed to explain why their SaaS model could be a boon to solution providers rather than a disintermediating force that kicks them to the curb. Both companies have said that ISV partners can use their platforms to develop and sell specialized software running on their services. But for VARs, many of which are used to big-bang license sales, SaaS has proven a nettlesome issue. Forward-thinking VARs realize that even services-in-the-cloud often need customization and integration with existing customer infrastructure.
Tetlow estimates 30 percent of his business is in license sales, while integration and customization represent a small part of his revenue. For him, implementation is the big-ticket item. "For every $50,000 we make in license sales, there's $100,000 in implementation," he noted.
Craig Tribuno, vice president of operations at Systems Engineering, an MSP in Portland, Maine, is bullish on the model. "We do on-premises work and remote management, and it's been interesting to watch the reapportioning of resources" he said. Basically, the sometimes huge one-off fees are now counted into a subscription model. Systems Engineering uses Autotask for scheduling and billing its work and becomes the IT system for customers.
Solution providers said it is now easier than ever to convince customers to use an MSP.
"The ubiquity and reliability of broadband, of VPNs, have made all of this possible. Another driving force is the pressure on businesses for uptimethat's really loosened the purse strings as has the focus on security," Tribuno said.
