The San Francisco-based company had built a decent business selling its monitoring and management application, WatchTower, to the enterprise market. But as the requests for managed services capabilities multiplied, the vendor decided to oblige, said CEO Jamie Lerner.

"The move was driven by customer demand in that we had customers suffering from what I call a bifurcated model," Lerner said.

The choices solution providers had for remote management and monitoring were either applications that were too high-end, expensive and difficult to set up, or low-end tools that although they were easy to install, had limited capabilities, he said.

San Francisco-based Ispan Services was one of the providers that encouraged Cittio to develop managed services features.

Konstantin Vilk, Ispan co-founder and director of operations, said his company evaluated products such as Hewlett-Packard's OpenView and open-source offerings, but found none that suited its needs.

"We actually drove the whole push for the managed services side with Cittio because that's where we saw the value for us," Vilk said.

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Cittio got the message and in 2005 turned WatchTower into a managed services platform by adding multitenancy capabilities, which allow providers to use the product to monitor multiple sites. The company says the product is scalable to thousands of network nodes and is easy to deploy.

Vilk said WatchTower has become truly a managed services platform, as opposed to other offerings in the market that include monitoring capabilities but weren't developed with the managed services model in mind.

Over the past year, Cittio started building a network of partners that now numbers more than 50. MSPs (management service providers) currently generate more than 30 percent of the vendor's revenue, said Lerner.

To make WatchTower useful to providers, Cittio realized it had to not only add features to the product but also offer more than just the technology, Lerner said.

"The MSP is very different from an enterprise customer in that they're looking to build a business as opposed to solving a business problem," he said.

Through managed services, providers take over some or all of their customers' IT functions, billing them monthly for the service.

For channel companies accustomed to getting revenue from one-time deals, the switch to managed services presents the challenge of how to adjust the business.

Managed services platform providers have sought to address that through training and best-practices tools.

Cittio, for its part, bundled WatchTower with a package it dubbed "Business in a Box."

The package contains sales training tools and collateral, pricing advice and financing programs, said Learner.

Cittio offers channel partners the choice of either buying WatchTower for use in managing their customers' computing environments or reselling the product to those customers who would rather do the monitoring and management in-house.

In some cases, said Lerner, there could be mixed models. Customers may want to monitor their mission critical applications themselves but would rather have a service provider handle e-mail, VOIP (voice over IP) applications or desktop environments.

Some customers view IT as a nuisance they would rather outsource altogether, while others want control of their computing environments, or at least part of it, Lerner said.

And that, he said, is how the market will evolve—blended models that will allow MSPs to take over entire IT departments in some cases and limited functions in others.

For those providers that take over more and more of their clients' IT environments, they become a trusted adviser, said Lerner.

Customers turn to them not only for the day-to-day monitoring and management services but also for hardware and software purchases that in the past might have gone to the lowest bidder, he said.

Ispan's Vilk said the trend toward managed services continues to gain momentum, especially among companies that want to outsource all their IT needs because they don't have in-house expertise.

As the trend continues, at least half of the channel's business will eventually be managed services, Vilk said.

Cittio charges MSPs per node for WatchTower, for which MSPs can pay up front or finance their purchases.

At the lowest cost of entry, Cittio offers MSPs 100 nodes for $10 per month per node. The MSPs own the software after about two years of payments.

Lerner said the company is in the midst of a recruiting campaign to boost its partner ranks, hoping to push past the 100 mark within a few weeks.