SMBs Eye Managed Services

Analysts and others in the industry are predicting big things for MSPs over the next few years.

In some ways, computers were once the bane of Kelly Hoods professional existence.

In the office at Parrish Services, a Manassas, Va., plumbing, electrical, and heat and air-conditioning outfit, she was the first stop for employees with tech complaints, typically of the unanswerable variety—a computer kept locking up, a program wasnt running correctly, a worker was having problems logging on. That was about 2001, when Hood handled customer billing and accounts payable for the then 2-year-old company.

"We started out with three or four [computers] kind of networked together; kind of everything was a mess," said Hood, now the companys office manager.

Shed forward the complaints to her boss to fix. Looking back, she said, too much time was spent trying to correct problems. Enter Evolve Technologies, an MSP (managed services provider) in nearby Fairfax, Va. For the past six years, Evolve has handled Parrishs IT needs. Today, Evolve oversees the companys help desk operations, providing Hood with a respite from the questions that once plagued her days.

If necessity is the mother of invention, it soon may also be the engine of MSP adoption for small and midsize businesses. Analysts and others in the industry are predicting big things for MSPs over the next few years. Gary Chen, an analyst with Yankee Group, said a recent survey of SMBs—defined in the survey having between two and 500 employees—showed many plan to buy managed services within the next three years.

"SMBs are just beginning to become more aware of these services, and, as time progresses, the education and comfort level will become much higher, and vendors will have refined their offerings and marketing pitches as well," Chen said.

The future for managed services in the SMB market was not always so bright. "The MSPs were not selling to small environments because that wasnt in the cards financially," said Charles Weaver, co-founder and president of the MSP Alliance, a 1,000-strong organization of MSPs, in Chico, Calif.

Future growth will be driven partly by the burden of increased government regulations, data privacy laws will put a strain on IT departments and many businesses will be faced with a choice—either hire more IT staff or place their faith in the hands of MSPs, Weaver said.

Still, compliance received low marks as a driving force behind MSP adoption in a November 2006 study by In-Stat. Instead, companies of all sizes listed issues such as access to technology and a need to focus on core competencies as motivators. In-Stat analyst Jeff Jernigan said many SMBs may adopt managed services to keep up with their peers.

"Hosting is huge among small firms, and they, again … seem to be more open to outsourcing—even [outsourcing] security, which is the least outsourced function [for most businesses]," Jernigan said.

His research found midsize companies currently outsource at rates on par with enterprises, though midsize businesses are roughly twice as likely to switch from in-house performance to a managed service over the next two years as are companies of other sizes.

Most SMBs that adopt managed services want to sidestep complex tasks to focus on their core business, Chen said. "Much of the interest in managed services is for things that are hard to do and complex, such as security," Chen said. "SMBs are beginning to realize they cant effectively implement and manage these solutions on their own."

Doug Turpin, information and technology director for Atlantic Bay Mortgage Group, in Virginia Beach, Va., heads a four-person IT staff. For several years, Atlantic Bay has contracted with Web-hosting company The Planet, of Houston, to handle the mortgage companys e-mail and other critical servers. "Typically what I look for, for places to outsource, are spots where our core competency is not x," Turpin said.

Next Page: The managed services myth.