CSP, Modcomp: Another MSP In the Making?

Of the scores of companies making the jump to managed services one of the more interesting transitions belongs to Modcomp. I first came across Modcomp when the company was making minicomputers. That was back in the 1980s when VAXs roamed the earth and logos such as Prime, Data General, and Wang -- along with DEC -- clustered along Boston’s Route 128 corridor. Fast forward to the present and Modcomp is making an MSP move. Here's how.

Modcomp, acquired by CSP Inc. in the mid 1990s, has since become a reseller and systems integrator. Today, the company figures in CSP’s managed services push.

CSP this week cited managed services as an important thrust during the Billerica, Mass.-based company’s Q4 conference call. CSP is focusing on higher-margin businesses to bolster the company’s Service and Systems Integration segment, which includes its Modcomp subsidiary.

“A key part of this strategy centers around increasing out higher level managed services offerings,” said Alexander Lupinetti, chairman and CEO of CSP. “By selling more managed services we will be able to improve our margins and increase our recurring revenue stream.”

CSP aims to bundle hardware and software into managed services that can run in a customer’s data center or in CSP’s network operations center. Modcomp acquired that NOC last year in its purchase of R2 Technologies, a Miami-based MSP. R2 also brought with it experience in unified communications and Cisco Systems’ technology.

Lupinetti said the company plans to capitalize on its membership in Cisco’s managed services channel program, selling NOC services worldwide along with Cisco Unified Communications and Unified Computing systems.

The push upstream will emphasize software and professional services, as CSP seeks to avoid the pricing pressure and lower margins associated with hardware and infrastructure sales. NOC sales also provide higher margins than infrastructure deals, Lupinetti said.

Lupinetti acknowledged that the managed services transition may put pressure on 2010 sales, but said services will accelerate profitable growth in the long term.

CSP reported $18.1 million in sales for its Q4 ended September 30. That  result was essentially flat with last year’s Q4, according to the company. The company posted a net loss for the quarter of $3.6 million, compared with a loss of $328,000 last year. An impairment charge for goodwill of $3.9 million contributed to the Q4 2009 net loss, the company said.

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