Managed Services: What’s in a Name?

I’m not a big fan of the term “managed services.” It’s vague and nondescript, lacking the kind of brand intrigue that has customers lining up around street corners. Inexplicit name though it is, however, managed services remains an attractive business model for channel firms to pursue and a valuable IT management option for many customers. The challenge is getting the message out there.

CompTIA’s 4^th Annual Trends in Managed Services research study takes a look at how end users view managed services today. Do they know what managed services even means? How it differs from conventional, enterprise-focused outsourcing? How MSPs and internal IT departments can and often do co-exist and complement one another? The findings in the study shed some light, capturing end user adoption habits, usage patterns, challenges and preferences. These insights should provide MSPs with actionable knowledge that helps them best appeal to and serve potential and existing clients.

Consider the following: While roughly four in 10 end users think the method in which their IT is managed is working fine as currently structured, the balance of them -- a NET 61 percent -- believe there is room for improvement, including 9 percent that said IT management methods could be significantly better than they are today. That’s a wide open door for MSPs looking to introduce customers to the concept and benefits of a managed services engagement.

What are those benefits? That’s where things get interesting with this year’s study. In the now roughly decade-long history of managed services offerings, the primary reason to adopt has been to save money on IT spending. The cost savings argument has been the lead selling point put forth by many MSPs over the years, and is the chief reason many end users took interest in the first place.

But while cost savings still attract organizations to the MSP model, it’s not the end all, be all anymore. Just 30 percent of respondents cited cost savings as a primary driver behind managed services adoption, compared with 57 percent that did so in CompTIA’s similar study conducted in late 2013. This suggests a few possible reasons. Customer expectations about the level of achievable cost savings have mellowed to more reasonable numbers, or customers are looking for benefits beyond a slimmer IT budget in their use of an MSP. The majority (54%) of customers said they expected to derive modest cost savings due to managed services, while close to a third were shooting for significant reductions to the IT budget. This breakdown rang true mainly across the board of different company sizes.

Other data reveal it’s not all about money. Twelve percent of respondents expected the move to managed services to be cost-neutral, instead to generate non-financial benefits in other areas. Nearly a quarter of smaller firms (5-99 employees) expected a cost-neutral outcome. Alternative benefits for them, for example, might include increased worker productivity. The smallest firms often lack an in-house IT staff, leaving troubleshooting and other tech chores to the employee/s with the most acumen. Putting these responsibilities into an MSP’s domain will free those employees to focus full time on their real duties.

The truth is that long-term total cost of ownership and ROI of managed services historically has been difficult to track. There are so many variables to track within an organization including the types of technology and services they are outsourcing, whether they have complementary in-house IT staff, service level agreement terms and finally the MSP’s own performance and efficiency.

The reasons to contract with an MSP are now more varied and nuanced. Some are tactical and pragmatic: Organizations are looking to improve operational efficiency and IT reliability beyond what currently achieving, for example, or they view a third party monitoring and managing their IT as a more assured path to improving their IT security. Other reasons are more strategic in nature, such as a company’s desire to take a more proactive approach to IT. Consider today’s in-house IT staffs: Unfortunately, many of them are forced to work daily in reactive mode, troubleshooting problems after they arise. This is not a competency issue, but usually result of staffing shortages and resource constraints. Proponents of managed services believe the “expert” and focused nature of an MSP provides the resources needed to get out ahead of potential IT problems, as well as to make recommendations for a technology roadmap aimed at future needs and growth goals.

Additionally, many organizations believe managed services allows them to move their internal IT staff out of network support roles and into more strategic technology projects that drive revenue and serve the core mission. That arrangement is a win-win for both the IT staff and the MSP.

Finally, the study reveals that despite the nebulous name (did I mention I dislike it?), managed services awareness has increased. Slightly more than half of respondents claim to be ‘very familiar’ with the concept of managed services, while another four in 10 say they are somewhat familiar. This compares favorably with 2013 data in which 36 percent of respondents professed a high degree of fluency. Thirty-seven percent of organizations using managed services have done so for five or more years, while 55% -- the sweet spot today – have done so between two and five years.

It’s been an iterative process of adoption for most end users and for channel firms making the transition into becoming an MSP. Maybe it’s time to rethink the name. Any thoughts?