When you do the math, it’s easy to understand why a growing number of companies are using Managed Service Providers (MSP) to fully or partially manage the branch office.

The average number of branch offices is growing by 11% annually. But in 2007, the average growth in IT budgets is 4%. What’s more, more than half of organizations expect to see a decreasing or flat IT budget this year. With more locations to manage, and an IT budget that can’t afford the proportionate number of additional IT staff, we’re finding IT executives turning toward third parties to manage the branch offices.

Those of us who have spent time making, meeting, and … well, exceeding the budget know it’s easier from a financial standpoint to assign budget to outsourcing than it is to secure budget for additional head count.

That’s not to suggest the decision to outsource is a simple one. IT decision-makers are spending significant time and effort determining how to strategically outsource any combination of the network, systems, training, and application support for remote locations. They’re determining whether to hire third parties for design and engineering, installations, ongoing maintenance, management, troubleshooting, and so on.

The wrong combination of services, suppliers, or functions could be disastrous. That’s why it’s key to fully evaluate MSPs, which include several types of providers, such as carriers; vendors; systems integrators; value-added resellers; and traditional outsourcers.

In 2005, about 27% of organizations used MSPs to manage their branch locations. This year, that figure has increased to 46%. “That is something we're really considering,” says the IT director of a global nonprofit organization. “We’re really leaning towards that way because the market is maturing and pricing is becoming reasonable, especially in the United States.”

Just because companies use MSPs doesn’t always mean they offload everything to them. In some cases, they will have the MSP handle the WAN services, and the internal IT staff oversees infrastructure and applications. In other cases, the MSP will handle troubleshooting and installation, but internal IT addresses ongoing management and monitoring.

Either way, participants of Nemertes’ latest benchmark, Building a Successful Virtual Workplace, were diligent about determining when and where it makes sense to use a third party. The associate vice president of an insurance company says, “The decision was based on several factors, including economics, architecture and relationship. Is there a supplier out there capable of providing the services we want? Do we have the skill set? Are the economics there?”

Robin Gareiss is executive vice president and senior founding partner of Nemertes Research. Click  here for the newsletter archive.