The Productization of Managed Services

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Like the fabled phoenix who comes back to life after dying in a burst of flames, a new model of IT managed services is rising out of the ashes of yesteryear’s outsourcing model. But unlike the legendary ostrich-like phoenix, this new Managed Service is not being reborn as a lumbering prehistoric phoenix but more like a flock of nimble starlings.

IT outsourcing – the blanket contracting out of IT service management and IT staff – has not burned away completely. Although it’s still a smoldering concern for some, fewer organizations today are contemplating it as an option for two primary reasons:

1. The implicit risk in shifting responsibility to a third-party – the gamble in handing over day-to-day operational management to a service provider managing many other customers; and

2. Higher than expected costs – outsourcing is often more expensive than expected because of the high cost of change imposed by the provider and the need for internal IT resources to shadow the outsourcer.

Unlike its broader predecessor, this new emerging model of managed services is a smaller and more focused alternative. Providers who package their offerings to address very precise and commonly experienced problems (e.g. gaining control over sprawling wireless networks), give customers a less-risky option that is usually more affordable and usually for a much shorter contract term. They get the value of contracting-out but with much less of the risk.

The customer simply chooses a pre-established bundle of features and service levels, typically a choice of three service plans or SKUs e.g. Basic; Standard; and Premier. The logic here is simple. If 80% of potential customers for a service want a particular line-up of features, why not just offer those and take away some of the variability (too much choice can be an irritant). This approach makes it easier for both the customer and the provider. Simplify. Simplify. Simplify.

Under this arrangement, a change that is important to all customers is implemented across the board and the cost either shared by all customers or paid by the provider. What we are really talking about is the productization of IT service management.

What is driving this change in Managed Services? You guessed it – it’s the same factors influencing all IT: namely, the adoption of cloud and “as a service” models. In an IT world where compute, storage, and network resources are available with a simple click, and can scale almost instantly, decision risk – the potential harm to the business from a bad decision or an unforeseen occurrence – is reduced significantly. As a result, a customer’s initial venture into managed services can be a test-run or a simple service-sampler. I’ll try it and if I like it, I’ll buy some more.
Here are some recommendations for those interested in relooking at managed services with this in mind:

1. Look for providers who offer a suite of services with a common foundation e.g. governance. This is important because you’ll want to avoid ending up with a roster of multiple service providers. Once a provider has proven its worth, you’ll probably want to stick with them and add more services from their suite over time. But, to do this gracefully they will need to fit together like Lego blocks. Define your preferred starting point but look for providers with a suite of services so you are not entrapped by a one-hit wonder.

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Angel Cloud, copyright Nicolas Raymond

2. Seek out a service provider who has cloud management and/or cloud brokerage services, and cloud experience. Even if you’re not ready for cloud services now, you will be at some point, and because limited management is available from a public cloud provider, a partner who can bring you this experience can be a huge asset

3. Don’t feel compelled to choose a long-term partner too early. In other words, don’t choose a partner through a procurement process. Instead, make that potential partner earn that position with you by proving their value one step at a time.

4. But, don’t take your first step into managed services too lightly. Select a provider who has the potential to be a true partner, not just a supplier. Choose a provider who emphasizes business outcomes, not just technology or labour. Research their background in managed services and meet their leadership team (VP Managed Services; CTO). And finally, ask the provider if they are running internally the service you are considering buying from them. If not, find out why not.

5. Confirm that the provider has the resources, knowledge, and experience to deploy the solution you are considering, as well as manage it. It’s not only important that they can do both well, it is also important that the two services (implementation and ongoing management) are tightly coordinated so you deal with one partner in this venture, and not two under the same name.

Outsourcing may be the right option for you and your organization. If so, choose carefully and keep the contract term short. If outsourcing is not for you, you don’t necessarily have to build up your internal IT team. Today, there are many managed service solutions rapidly rising out of the ashes of outsourcing that offer similar value but with far less of the risk.

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