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September 2007
As information technology (IT) continues to evolve - becoming more complex and more critically important at the same time - businesses are increasingly coping with the difficulties inherent in staying current with the latest innovations while at the same time adhering to stricter government and industry regulations.
For small and medium businesses (SMBs), the difficulty associated with staying up-to-date on their IT floors is particularly acute. The costs associated with IT maintenance and management can require a significant portion of a business's overall operating budget, with the return on investment (ROI) of that expenditure being unsatisfactory at best, and legally compromising at worst.
As an alternative to maintaining an in-house IT environment, managed service providers (MSPs) are enjoying a resurgence of interest, last seen prominently during the hey-day of the dot-com boom of the late 1990s and early part of the new Millennium.
Managed services, as they apply to IT, refer to the business practice of shifting some or all of the responsibilities of IT network management to an off-site company or vendor. Essentially, managed services can be thought of as a type of outsourcing of IT resources in an effort to improve overall operations and reduce costs and legal and regulatory liability.
"One of the main reasons companies look to managed services is an overworked IT staff or, in some case, a lack of an IT staff," said Vince Conroy, chief technology officer for San Francisco-based FusionStorm and the man in charge of the company’s managed services division. "They don’t have the expertise in-house to support the ongoing IT operations or their people don't have the skill sets to keep up with the range of technologies that are necessary to support most businesses. There are also issues of retaining IT professionals for more than a few years, and the emphasis on 24/7 availability puts a further strain on that personnel pool."
Feeling the Regulatory Pressure?
As alluring as MSPs may seem for some businesses, it's difficult for many SMBs to relinquish the idea of maintaining - and by extension, controlling - their own in-house IT environments. The growing reality, however, dictates IT costs - and the liabilities associated with inadequate IT environments and personnel - can vastly outstrip the perceived benefits of maintaining in-house IT.
"Why should a small or medium business look to an MSP to manage their IT?" asked Charlie Weaver, president of the Chico, Calif.-based MSPAlliance, the International Association of Managed Service Providers. "The assumption, with some notable exceptions, is that smaller businesses don't have the technical expertise, tools or the knowledge to properly manage their own IT. By properly, I mean they can't even make the IT they do have adequately serve their business goals, and can actually get in the way and foul up business operations. In such cases, they can even be leaking data, often without their knowledge, opening themselves up to huge legal and regulatory liabilities. This can include both civil, and I believe very soon, criminal liability."
Regulatory pressures, here in the United States, but also in industrialized and developing countries around the world, are pushing toward stronger IT security, data privacy and overall data management. Such stringent requirements can push smaller business IT shops to the breaking point, requiring far more hardware and software complexity and oversight than can be realistically expected and architected.
"Companies have fewer and fewer opportunities to say 'Oh, I'm sorry, I didn't know I had to keep this safe; or 'I didn't know I had to lock down that wireless access point,'" said Weaver. "Such options are being closed off, and it's government regulation that's pushing that. Companies that once relied on reactive IT now need to adopt a more proactive, or managed services, model to mitigate their regulatory risk and bring their IT management under control."
Considering Cost
Because of the resurgence of interest in MSPs in recent years, there are a considerable number of service providers in existence, so companies seeking an MSP to best fit their budget have a large pool to choose from. MSPAlliance, for example, has more than 1,500 member MSPs, according to Weaver.
Researching MSPs for the best provider both in terms of service and cost considerations is a good first step when moving towards a MSP IT model, and resources like those provided by MSPAlliance can assist you in that selection process. Ideally, a business should look for an MSP that can guarantee industry and government regulatory compliance. That peace of mind alone carries tremendous value.
"When a business can focus on actual, you know, business, rather than worrying about whether their IT infrastructure is up to the latest compliance levels, that's when an MSP basically pays for itself, in my opinion," said Conroy.
At an even more basic level, companies considering an MSP model should also look at the expenses associated with maintaining an in-house IT shop versus a third-party MSP solution.
If you consider a small company of 50 employees or less, for example, they may have, at most, a single full time IT professional who runs things very well, for a salary of perhaps $70,000 a year. In addition to that annual $70,000, that company will also have a minimum of at least one server, perhaps several routers, software licensing fees, possibly a couple network printers, as well as 50 or so PCs or laptops, all of which constitutes a fairly large investment for an IT infrastructure that is far from guaranteed to guard against downtime, which carries its own associated costs, both for the downtime itself and the price of getting back up and running. Additionally, this infrastructure can run the risk of corporate data leaks and security breaches.
"What's the cost of something like that?" asked Weaver. "What would be cost of hiring an attorney and law firm to protect them against an onslaught of civil litigation? What's the cost of disclosure to customers and authorities in the event of data loss, and the possible media exposure that can come with that?"
With an MSP model, a business can have access to a wide range of hardware, software, services and a team of expert IT personnel; with the added benefit of knowing the MSP is equipped to deal swiftly with downtime should it occur and protect against data loss and security breaches. Also, MSPs have the freedom to focus on creating new ways for IT to work for the company. How much a MSP charges depends on how in-depth a given solution is and what services are required.
"If I were to generalize, arbitrarily picking a median income state - not New York or California, for example - and considering the typical IT needs of a business of 50 employees, I would say they'd expect to pay somewhere along the lines of $2,000 to $3,000 a month for a MSP model - with variables, of course," said Weaver. "Considering that, you're still coming in under or around what it would cost annually for an in-house IT infrastructure, but with the added benefit of far more comprehensive coverage. You get around-the-clock support, deeper access to IT talent, a much wider scope of tools at your disposal and just generally a much better level of service."
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