Security MSPs in 2007 will face a challenging task when trying to figure out which vendor partnerships can light their path to profitability. More often than not, MSPs are aiming at a moving target because only a handful of companies seem to realize that being an MSP vendor requires more than just slapping a managed services label on their existing product offerings. But vendors with products that show a well-thought-out strategy for how they'll be used in a managed security service offering are easily distinguishable from the pack of hypesters, according to many security MSPs.
When it comes to evaluating vendors' products, those with strong remote management features and that can support enterprise methods of authentication such as Radius and LDAP in a secure manner are ones that grab the attention of Tunji Ajigbeda, director of managed security services at Atlanta-based solution provider Vigilar. "We look for how well the product can function remotely and how well the vendor has thought out how to work on the devices when you're not there. Having centralized methods of managing the device is good for realizing economies of scale," Ajigbeda said.
As the industry continues to mature, MSPs say vendors' ability to listen to resellers for ideas on additional platform functionality is becoming a key differentiator. But that's been tough to find in a space where vendors haven't always been forthcoming about the real costs of getting a managed services offering up and running, said Peter Bybee, CEO of Network Vigilance, San Diego. "We're the guys in the trenches trying to create services bundles and value propositions for customers," he said, "and I think the vendors are a bit naive about everything that's needed to make the model work."
As a result, MSPs are figuring out that just owning the platform doesn't enable them to do 24x7 managed services. In fact, an MSP platform represents only 20 percent to 30 percent of the total cost of starting an MSP business, and staffing requirements must also be taken into account because the certified intrusion analysts required to run an MSP offering don't come cheap, Bybee said.
Additional costs come from MSPs having to do their own custom integration. For example, in deploying its MSP offering, Network Vigilance had to invest in custom programming and develop a customized portal so that the services could be integrated with a customer-facing trouble-ticketing system, Bybee said.
"There's a side of the managed services business that vendors don't even touch, which encompasses tasks like operational management and change management, which are real issues with companies that must adhere to various compliance and regulatory requirements," he said.
Amid all this, industry consolidation is looming ominously for MSPs that have put in huge amounts of time and effort in forging delicate relationships with vendors. For Alvaka Networks, consolidation has already led to the end of one profitable partnership. For two years, Alvaka had a smooth relationship with a vendor that was characterized by favorable billing and contract terms and the ability for Alvaka to retain ownership of the customer. But almost immediately after the vendor was acquired, the larger firm began making unworkable demands, forcing Alvaka to end the partnership, said Kevin McDonald, vice president at the Huntington Beach, Calif.-based MSP.
"Consolidation is going to cause us a lot of problems," McDonald said. "Once a vendor is acquired by a bigger company, much if not all of the personal understanding that was part of that decision-making process is gone. You start getting edicts from the big vendors who don't understand the pricing or branding models."
Some vendors understand that pricing is crucial to MSPs and have launched channel programs to address these issues. SonicWall's Global Management System software, which provides centralized management for SonicWall appliances, forms the basis of what MSPs regard as one of the industry' best MSP vendor programs. Perimeter Internetworking and Secureworks also have gained favorable reputations in the channel.
Even if their vendor partners are flexible and channel-friendly, many MSPs still may not be able to generate enough business to stay afloat. For Network Vigilance's Bybee, being an MSP is all about surfing the uncertainties and doing what's necessary to build a customer base as quickly as possible. "Managed security services is still about long sales cyclesas long as a yearand a lot of work necessary to get new customers," Bybee said. "That's the challenge: How do you bring on customers in a short period of time to justify the investment?"
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