Old Enterprise Dogs Learn New MSP Tricks

Managed service providers that focused on enterprise customers from day one feel confident as they watch their cohorts run through a quick and painful dot-com–to-enterprise-customer conversion.

This is a longer, online version of the story that appeared in the Septermber 3, 2001 issue of Interactive Week.

Managed service providers that focused on enterprise customers from day one feel confident as they watch their cohorts run through a quick and painful dot-com–to-enterprise-customer conversion.

The time and money spent three years ago learning to help large companies run complex back-office applications such as Enterprise Resource Planning (ERP) gives them plenty of lead to trump competitors that dawdled over understanding Web site maintenance, the hard-core enterprise MSPs say.

And indeed, they have managed to attract network personnel from companies such as Electronic Data Systems and Nasdaq, and are the only MSPs that have managed to get funding during the "nuclear winter" of the first half of this year. InteQ raised $57 million in May, in a second round of financing led by Merrill Lynch & Co. affiliates. SevenSpace gathered $45 million in February, also in a second round of financing. Some MSPs are already fully funded through scheduled profitability — as Totality is, to the tune of $122 million. Investors are confident enough to fund these companies in a rapidly shrinking sector, because these MSPs are in a business that is rapidly expanding and are trading on their track records and, in some cases, unique expertise. In a sense, these MSPs are filling in the blanks for larger consulting and services integration companies, including Accenture and EDS.

"We go all the way from the network to the application layer," says Sharmila Shahani, Totalitys vice president of marketing and business development. "We are not talking to any Internet plays, so all of the systems we are managing are very complex on the back end, with the e-business aspect being the simpler piece. The security and legacy ERP integration makes it complex."

Shahani should know: Totality integrated American Airlines online reservation function with its massive ticket reservation system, Saber. Totality touts its ability to go into a corporate data center as a big advantage, since most companies are hesitant to move their mission-critical applications into third-party installations. Many Totality engineers come from EDS.

Part of Totalitys solution is a custom-built monitoring and management software system that allows companies to outsource and insource certain corporate applications. Competitor SevenSpace says a custom build is an unnecessary expense.

"The tools we are using are familiar to enterprise IT," says Bill Phelps, SevenSpaces senior vice president. That, he says, goes a long way toward establishing a relationship of trust with corporate IT and easing back-end integration.

SevenSpace employs numerous former Nasdaq networking division workers.

The big challenge in the enterprise MSP space is channel relationships. The last thing businesses going the outsourced route want is finger-pointing by data center owners, MSPs and network operators in the event something goes wrong.

"Our customers are asking: Who is going to take accountability?" Phelps says. To avoid conflicts of interests, SevenSpace partners with Web hosting companies to offer their services in a bundle, and works through escalation scenarios so that customer calls get to the right people on the first try. Totality also did a large scale partnership with a large Web hoster Conxion recently.

Competitive differences aside, enterprise MSPs also have their track records to rely on.

"We have references," says Santhana Krishnan, InteQs CEO. "We have been around for six years, and in the beginning, we were the only