Death of industry association is bellwether for managed services market

On Dec. 30, the Strategic Sourcing Advisory Council closed its doors, shut down its Web site and ceased operations. Although the news will be hardly noticed by those unfamiliar with the SSAC – and will come as no surprise to those who are – it is perhaps a harbinger of coming events in the managed services market.

The SSAC, better known as the Managed Service Provider Association, was founded in 1999 as a forum for defining best practices in using and operating MSP services. The MSP Association was supposed to be the place where a burgeoning number of MSPs could congregate to set standards, and IT managers could get advice on how to use and administer MSP services.

Needless to say, the bottom dropped out of the MSP market not long after the association was formed. Many MSPs were acquired by larger, more established outsourcing providers, and many more simply went out of business. Struggling for survival, the MSP Association last September was renamed as the SSAC in an effort to bring in a broader audience of outsourcing users and providers. The effort failed, and so did the SSAC.

Given the state of the MSP market, the SSAC’s demise could hardly be considered a surprise. But in its epitaph are some signs of the outsourcing industry’s future directions. Let’s look at a few of them.

* The MSP market, once viewed as a target for start-up providers, is now dominated by traditional outsourcing vendors such as IBM Global Services and EDS. The poster child for the MSP industry, LoudCloud, is now a part of EDS. It is clear that enterprises want to purchase their managed services from established providers with deep pockets and long track records. Outsourcing users have a low tolerance for risk.

* Some pure-play MSPs will survive, but only by playing niche roles and partnering with larger outsourcing companies. Some MSPs, such as Avasta and InteQ, are staying afloat by offering innovative services that can be marketed and supported by traditional outsourcing players. This is a viable strategy, because the smaller companies can develop and innovate services more quickly than their larger counterparts while taking advantage of the channels and infrastructure of the more established players.

* Enterprises must develop their own best practices for dealing with MSPs and other outsourcing providers. The SSAC was working on some standards for defining services and measuring outsourcing service levels, but that work is done. It is possible that some of the SSAC’s work will be taken up through the IT Infrastructure Library (ITIL) organization, which is defining some standards for service management. But enterprises considering MSP services will no longer have an independent source of information for evaluating those services.

* Outsourcing standards and best practices are unlikely to move far ahead in the coming year. In its final press release, the SSAC stated that its member organizations – including some larger outsourcing providers – no longer can commit the resources needed to develop industrywide best practices for service management. For the near future, outsourcing companies likely will be in “every man for himself” mode, and industry groups and guidelines will suffer.

The SSAC’s demise won’t cause a shakeup in the outsourcing industry, nor will it be a surprise to those who follow the MSP market. But when it shut its doors, the association gave enterprises one less resource for evaluating and managing their outsourcing service providers. It will be missed.