As the managed services provider market matures, CIOs should resist the urge to go with the lowest-cost provider in favor of partners that understand your business and can help you achieve strategic goals.
Leaning on a managed service provider (MSP) for a subset of your IT services can be a boon. More than just tackling a specific domain such as email hosting or customer relationship management, having an MSP as part of your IT mix can free up internal IT staff for more strategic projects.
But establishing a strong, strategic partnership with your MSP is essential. Here we take a look at the current state of managed IT services, where companies are employing the MSP model and how to get the most of your MSP partnership.
Managed services growth is steady
Managed services comprise the second-most popular business model in the channel today, according to IT industry trade association CompTIA’s Fifth Annual Trends in Managed Services study. Three-in-10 MSPs surveyed by CompTIA ranked managed services as the leading generator of revenue in the previous 12 months, second to the 44 percent that pointed to IT solutions (such as projects incorporating hardware, software and services), but ahead of other business model choices like value-added resellers (VARs), IT support, and held desk and consulting services.
The study, authored by Carolyn April, senior director of industry analysis at CompTIA, found that the rate of growth of managed services is continuing, but more or less at a steady pace.
“I think the managed services space is moving slowly at sort of the same pace as we’ve seen over the past five years,” April says. “Where we’re seeing more momentum right now is the channel that’s growing around SaaS applications and SaaS ISVs.”
“A lot of these SaaS players are actually MSPs themselves: They’ve either been born in the cloud or they are existing MSPs that are adding a SaaS component to what they sell in their portfolio,” she adds.
Resist the urge to bargain shop for managed IT services
Organizations are continuing to turn to MSPs to handle elements of their IT needs as part of a collaborative arrangement with the internal IT department, according to CompTIA’s research. Companies have become more familiar with managed services and are turning to them for certain IT functions, particularly email hosting, customer relationship management (CRM) applications, storage, backup and recovery and network monitoring.
However, CompTIA is also seeing commoditization occurring because of oversupply, especially at the lower end of the stack. April says this may tempt CIOs to bargain shop for managed services, but they should resist the urge.
“Look for MSPs that understand your business and that speak less about the technology,” she says. “I think that’s important across the board. You want a partner that can talk about business outcomes and how their services are going to help further your goals from a business perspective, not a technology perspective.”
Here, April says a proven track record is key — especially customer testimonials from existing customers. She warns that it should be a red flag if an MSP offers you a cookie-cutter service-level agreement (SLA). It’s a much better sign if they seek to craft a customized contract based on your business and needs.
Top MSPs extending their reach to meet demand
Strategic MSP use doesn’t have to be confined to commodity IT services. Many CIOs, says April, are looking for MSPs that can deliver advanced services, including cloud infrastructure management, application management and business process outsourcing.
April also notes increased demand for services around data analytics, business intelligence (BI) and advanced application monitoring. And while some upper echelon services are offering managed services to meet those needs, most MSPs have yet to extend beyond their heritage in managing network infrastructure and basic software infrastructure.
“I think mobile is an area where the channel is getting some traction but they’re really not tapping the full opportunity there,” she adds.
Partners, not replacements
It is also important to note that while companies are increasingly relying on outside providers for part of their IT needs, MSPs generally complement rather than replace internal IT.
“Very few of these companies get rid of their IT staffs just because they join up with an MSP,” April says.
Instead, especially in larger companies, bringing an MSP into the mix frees up existing IT staff to focus on more strategic projects.
“It elevates the IT staff and brings them out of the shadows within the organization,” she says. “It allows them to focus on a custom app dev project or cloud initiative — something highly strategic. I think that’s a win-win for your IT staff.”
That also highlights that the reasons that organizations turn to MSPs have begun to change. In the past, April says, cost savings were seen as the primary benefit of MSPs. Now, she says, cost benefits are considered table stakes and customers are looking for additional benefits like generating revenue and helping the company become more efficient. Even security has evolved from being considered a roadblock to using MSPs to a reason for doing so.
April explains that companies have shifted their views over security as it has become clear that security problems are often the result of human error by internal staff.