Reaching Out For Management

Strategic outsourcing is looking better every day as companies try to find ways
to manage the thickening layers of technology they must adopt in order to remain
competitive in today’s business environment. One solution is partnering with a
Management Service Provider (MSP), as a way to ease the burden of managing the
enterprise LAN and WAN.

Aware that it could no longer afford reactive network monitoring and management
practices, Commercial and Architectural Products Inc., dba Marlite, a Dover,
Ohio-based manufacturer of specialty systems and related interior building
products, now contracts for network management services with Intellinet Corp., a
business technology services company. Atlanta, Ge.-based Intellinet, a business
partner of MSP, Silverback Technologies Inc., provides the manufacturer with on-
line monitoring, reports, software patches and a pager system that contacts
Intellinet any time of the day about network-related problems.

“We’re a mid-size company but have the same network issues of a Fortune 1000
company. However, we don’t have the resources to purchase network and systems
management software or hire the expertise to administer the network,” says Gary
Zell, MIS manager at Marlite.

So, instead, for a monthly fee of $2,200, or about $26,400/year, Marlite gets
proactive network management without having to make a hefty up-front capital
expenditure or assume reoccurring costs for staffing, training, software
updates, etc.

Prior to signing up with an MSP, Zell reports that the corporate network was
sluggish. He admits that the company didn’t have any good management tools to
monitor the health of the network. “We just didn’t make network management a
priority until there was a problem,” he says.

Marlite, a company with 300 employees has a primary manufacturing site and about
five remote locations, or distribution centers, located nationwide. The
corporate network consists of a Frame Relay network, hubs, routers, four servers
and an internal network running 10/100Mbps Ethernet. The IT staff consists of
three people.

Not having the expertise on staff to optimize the corporate network, outsourcing
makes good business sense to Marlite. Today, Zell uses Silverback’s web-based
portal to get a view of the network or gather historical data. Silverback’s
InfoCare service gathers information about Marlite’s network and downloads the
information in a database at the vendor’s site. InfoCare delivers information on
faults, assets, performance and security across networks, systems and
applications, according to the company, via a software-based solution.

Filling A Need
MSPs, vendors who offer management services on a subscription basis where the
vendor assumes certain authority and responsibility for the network,
applications and systems, provide businesses with a good tactical solution to
their management needs, according to Cory Ferengul, senior program director at
the Meta Group. “As an outsourcing option, MSPs give customers a good chance
succeeding,” he says, compared with more traditional outsourcing where clients
outsource everything.

In fact, a management strategy that includes MSPs can help companies achieve
specific goals while containing costs.

The City of Santa Clara, for example, located in one of the most high-tech
intensive states, has good reason to outsource–it avoids having to compete for
scarce and expensive IT talent. “The city has always preferred to outsource
because it’s very difficult to us to find technical staff in Silicon Valley,”
says Walter Shipilov, IT director with the city.

While the local government entity has been outsourcing IT functions for a least
a decade it was only nine months ago that it signed on with a MSP for network
services. In fact, about 18 months ago, the city put together its first IT
department in order to look after its own interests.

“We always operated in reactive mode and had to field complaints from users,”
says Shipilov. Another Silverback customer, the MSP monitors the well-being of
the City of Santa Clara’s network infrastructure, including 40 switches and 40
servers. About 1,000 employees support a host of traditional city services.
Three full-time IT staff oversee the IT infrastructure including network and
applications. All other IT functions are outsourced, i.e. help desk, network
support, application development and operations.

“If there’s a problem on the network, Silverback sends an alarm to the help desk
and we can fix it before it impacts the users,” says Shipilov. This type of
proactive management not only improves the end-users IT experience but it eases
the burden on the help desk, as well.

Looking at the cost proposition of using an MSP was a no-brainer. If the city
government IT department were to assume responsibility for network monitoring it
would have to invest in network and systems monitoring tools and hire at least
one additional person with network management expertise. That one additional
staff person alone would cost at least $60,000 to $70,000 per year. By contrast,
the service that the city contracts for with Silverback costs about
$2,500/month, or $30,000 annually. “We also get 24×7 coverage,” says Shipilov.

What many selective outsourcers like about service offerings is that they’re
flexible. “We signed a two year contract but we’re not locked in. We have an
optional out after one year,” says Marlite’s Zell.

Mark Nicolett, vice president of research and director at the Gartner Group says
that selective outsourcing makes sense for companies deploying a new application
type or system in a new infrastructure. “To me, turning to an MSP is very much
an application by application decision,” he says.

An affiliate of Fidelity Investments, Insurance.com is an online insurance
marketplace offering advice, quotes or rates, shopping, as well as, a portfolio
of insurance policies. Launched in March 2000, the company uses a highly
outsourced model, turning to service providers for web hosting, web site
development, web site monitoring, and marketing.

“We knew that the network infrastructure needed monitoring and that we didn’t
want to buy the tools and expertise to have a 24×7 shop,” says Paul DiNicola,
vice president of operations at Insurance.com, noting that building versus
buying wasn’t cost-effective for the company.

After shopping around for an MSP, the company turned to InterOPS Management
Solutions. InterOPS provides Insurance.com with monitoring of its hardware,
application availability and server availability. “We get notification if
there’s a problem and InterOPS knows how to escalate it to us or a partner if
the need arises,” says DiNicola. The online insurance company colocates its,
more than one dozen web and database servers, at an Exodus facility. The MSP
also provides its customer with weekly reports.

Sorting Through The Confusion
As is the case in many emerging markets, potential customers will find dozens of
vendors playing in the MSP space. The market is comprised of many well-funded
start-ups, as well as, more traditional IT players like IBM Global Services,
network and systems management vendors like BMC Software and Internet
performance monitoring companies such as Keynote Systems Inc. Some of the newer
players include Silverback, Nuclio Corp., InterOPS, Totality Corp and SevenSpace
Inc., to name a handful.

Shoppers can also expect to see the MSP market consolidate over the next 12
months.

The good news, according to Gartner’s Nicolett is that MSPs are maturing
offering more solid sales packaging and automated processes.

Still, companies are advised to mitigate their risks by checking out the
finances and viability of any company they’re thinking about doing business
with. “We had to get references and find a partner we can trust,” says DiNicola,
adding that, “after all, they’re an extension of our team.”

Lynn Haber writes on business and information technology from Norwell, MA.

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