How to Choose the Right Service Provider for Your Needs - Part Two
March 12, 2012

Antonio Piraino

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In Part One of this series, I covered the different types of service providers to help businesses that are considering outsourcing their IT make sense of the changing landscape. In this post, I cover how your size and end-customer type do matter: Both are important factors in determining what type of managed services you need.

How does the size of a business affect the degree to which a business should (or could) use managed services?

The size of the business can, arguably, be more important than the vertical market they are in as an indicator of the need for a service provider. Small startup businesses, especially brick and mortar businesses, will typically be far more limited in budget, in-house IT expertise, and in the complexity of their IT infrastructure deployment. This means that having the basics of a website and e-mail system might suffice, and hence a shared hosting provider is enough.

As that business grows, or does more of its business online, the need to have a billing and chargeback tool, a backend database, a customer relationship management (CRM) system and firewall services becomes increasingly important. Larger retailers would also be looking for PCI-DSS compliant service providers to handle their transactions. The level of support needed for the migration and continued management of these more complex systems means that a Managed Hosting Provider (MHP) or Managed Service Provider (MSP) become more appropriate to those needs.

On the flip side are some fairly sizable and complex independent software vendors (ISVs) and Software-as-a-Service (SaaS) providers that are looking for far less management and far more of an ecosystem within which to manage their infrastructure as well as “bolt on” missing applications or components (such as billing systems). That’s where the attractiveness of an Infrastructure-as-a-Service (IaaS) or Platform-as-a-Service (PaaS) provider becomes appealing, with more usage-based pricing.

However, accessing this infrastructure takes more of a technical acumen than, say, an employee using a user-friendly interface to manage their financial application/SaaS. Admittedly, there are certain verticals, namely the financial, healthcare and federal sectors, that have more stringent regulatory parameters that need to be addressed. Therefore, a service provider meeting SOX or HIPAA compliant infrastructure from a disaster recovery, security or archiving perspective is going to naturally be more appropriate to that business.

What managed services are better for smaller companies vs. larger companies?

Smaller companies are going to be more inclined to use their local IT professional, whether an employee or IT shop down the road, to assist them in setting up their IT infrastructure. Naturally, the cost of labor vis-a-vis their IT needs can be quite disproportionate, and hence using a local outsourcer for setup and change requests is often more financially appealing. 

Similarly, using a dedicated hosting environment or cloud computing platform has serious timeline and cost advantages for that same IT shop. If that company has specific applications to deploy, such as a hosted voice PBX system, a video conferencing application or a content management system, then making use of a local MSP or ISV is most appropriate.

The more commoditized the infrastructure, operating system or even application (especially email), the better the economies of scale by leveraging the infrastructure of an MHP. For large organizations, the benefit of using a data center for colocation services, and a second MSP to manage some of the more bespoke architectures within that colocation facility, are very common.

It is important to remember that generally speaking, all forms of outsourcing should (and typically are) less expensive than having full-time expertise and infrastructure in-house. Having said that, with increasingly complex systems there is always going to be a need to retain an in-house IT expert as well as leverage service providers, which eases the pain and increases the time available to that IT employee for more critical functions.

Does the consumer type matter?

The short answer is yes. No matter what the size of the organization, telco, networking and ISPs continue to be the right answer for those requiring simple connectivity to the internet, needing voice access, and looking to support a highly decentralized workforce with smartphones in hand. These are not the specialties of the average hosting provider today.

Having said that, the advent of centralized desktop virtualization management from MHPs is slowly gaining traction. This is due in part to the battle originating from the changing culture of end consumers, who are increasingly relying on browsers for access to all of their day-to-day business tools.

In addition, larger businesses tend to have larger security concerns, where a firewall does not suffice. However, with increasing Intrusion Detection (IDS) and Intrusion Prevention (IPS) solutions in place by hosters, the level of assurance has, in many cases, become higher in the outsourced world.

Finally, consumers with a penchant for hard-core usage of online applications have turned increasingly toward SaaS as the answer for small and large businesses alike. For years managed email (especially exchange) services were the first applications to be outsourced, with the supplemental collaborative applications (i.e., calendaring and shared document apps) an inevitable next step, especially among smaller businesses. Then came with its game-changing CRM application in the face of the monster on-premise deployments. This set the stage for all business productivity applications to be considered through an outsourced and cookie cutter model. Today, human capital management, business intelligence and ERP solutions are increasingly being modeled through SaaS environments to all businesses alike.

In the third and final installment of this series, I’ll discuss what factors are most important when selecting a service provider.

Related Links:

How to Choose the Right Service Provider for Your Needs - Part One

How to Choose the Right Service Provider for Your Needs - Part Three

Antonio Piraino is CTO of ScienceLogic
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