The New MSPs

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November 14, 2005 (Computerworld) -- If you're working at a midsize company, you probably depend on a valued-added reseller, or VAR. If you happen to be at a small business, your VAR might just be your entire IT department. So, in some cases, your reseller is a trusted business partner; in others, it's your business lifeline.

But despite your long-standing relationship with your VAR, its business model is wobbling on the edge of a cliff. The margins on the hardware and software that VARs install for you have collapsed to almost zero.

So, no matter how dependent you are on your VAR, now is the right time to evaluate its business model. Is it the old-fashioned VAR -- delivering and configuring systems, handling backups, troubleshooting your network on-site? Well, if the market dynamics continue the way they're going, you might not be working together much longer. At least, not unless your VAR has plans to morph into a managed service provider, or MSP.

Gartner's research indicates that as many as 40% of the nation's VARs could go belly up if they don't change their old business models of charging you a small premium to install your PCs, servers and routers and billing you by the hour to do problem resolution. What your VAR needs to do, Gartner suggests, is become an MSP and charge you a small monthly fee to manage your IT infrastructure among other services.

Luckily for VARs, you are becoming more interested in subscribing to MSP-style offerings. And not just those of you who work at large, corporate IT shops and are accustomed to outsourcing anything and everything. Forrester Research polled 869 IT decision-makers in small and midsize businesses (SMB) and learned that 12% are ready to outsource the management of their entire infrastructures. Doesn't sound like much, but it's up from a mere 8% in 2004. At the same time, 26% of SMBs are willing to offload at least the PC part of their infrastructures to an MSP, versus only 18% last year.

If you're working at a big company, you might think SMBs are small potatoes. But you'd be wrong. Forrester estimates that they will shell out nearly 50% of the $785 billion IT dollars spent in the U.S. this year. And while large corporations and government are spending 6% more year over year, SMBs are growing at 8% annually.

However, SMBs shouldn't blithely assume that their friendly VARs will be able to smoothly make the trip to MSP land. At the very least, to do the job right, your MSP will need a network operations center of some sort. Pay it a visit, if you haven't already. Does it

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