Managed service providers (MSPs) looking to extend their reach may find a ripe niche in managed WAN optimization. Here are some observations.

Michael Leonard, manager, Market Management Application Networking Services, at Cisco Systems, said he sees increased demand for WAN optimization services. A Cisco whitepaper predicts the worldwide market for managed application-acceleration services will hit $1.3 billion in 2011. In Cisco’s case, the service is built around the Wide Area Application Services network module of its Integrated Services Router (ISR).

The target market? Organizations looking to consolidate branch office servers and centralize applications in the data center — while hoping to preserve LAN-like performance.

Leonard views managed WAN optimization as a logical step for networking-focused services providers. He said many service providers offer WAN links, then managed routers and managed security. WAN optimization lets MSPs build upon those services. And when MSPs help with application performance, they get closer to their customers’ core business, Leonard explained.

So, essentially, managed WAN optimization provides a bridge that helps networking-oriented MSPs cross over to the applications side. But service providers with a server/application focus can also offer WAN optimization to their customer base, Leonard noted. He said the service providers that get into WAN optimization are either managing the network link and the router or have a practice around application management.

Cisco has nine publicly disclosed partners offering managed WAN optimization services. But the company, naturally, isn’t alone in pursuing ties to service providers in this space. Blue Coat Systems, Juniper Networks , and Riverbed Technology (among others) also cultivate MSPs.

Contributing blogger John Moore covers Master MSPs, Web hosts and emerging opportunities. Follow MSPmentor via RSS; Facebook; Identi.ca; and Twitter. And sign up for our Enewsletter; Webcasts and Resource Center.