Making Your Way Through The Maze Of Managed IT Services

March 22, 2007
Over the next year managed security services tops the purchase list with storage, backup and disaster recovery services close behind.

There seems to be no limit on the types of information technology (IT) services that can be purchased through a managed services model. Each week brings a new report, study or survey that suggests the arrow is headed upward when it comes to investment in managed services, whether by small businesses, mid-sized companies or large enterprises.

Indeed, a recent survey of managed service providers and their customers commissioned by the Computing Technology Industry Association and conducted by Harris Interactive found that both providers and customers believe the managed services industry will grow in revenue; in number of companies offering managed services; and in the scope of services available to customers over the next year.

Among nearly 200 managed service providers surveyed, 59% said the industry's revenues will increase over the next year. More than a third of these providers (35%) expect that 500 or more new companies with enter the managed services market in the next year.

Clearly managed services are poised for even broader deployment in 2007 and beyond. Yet is some ways, discussions about managed services leave one feeling as if you've fallen victim to the "Rashomon effect," where different observers to the same event produce substantially different by equally plausible recollections of the event.

What is a managed service? Is it different than outsourcing? How do I sell managed services? Can I make money selling them? What services can I offer?

One of the purposes of the CompTIA/Harris Interactive survey was to put a definitional framework around managed services. Some key phrases surrounding managed services emerged from both the service provider and customer audiences: continuousness, accountable, reliability, security, customer service, and periodic upgrades. Based on this feedback, CompTIA is proposing the following as a definition of managed services:

The ongoing management, monitoring, and maintenance of networks, software, hardware, and related IT services by an external organization.

Managed services are often marked by detailed service level agreements, which typically include provisions for performance, security, efficiency, accountability, response times, and relevant upgrades.

Service providers and their customers also expressed strong sentiments about several other issues critical to the future growth and success of the managed services market.

Most providers (74%) and end users (68%) believe that managed services providers will become more specialized in their offerings over the next three years. The four most common areas of specialization are:

  1. Targeting certain industries.
  2. Specializing in specific services.
  3. Targeting certain company sizes.
  4. Offering bundled service packages.

Regarding service specialization, current manage service providers identified more than 25 services they now offer, or intend to offer within the next year. Consulting and collaboration services topped the list, followed by security, firewall, application hosting and monitoring, and held desk functions.

The list of managed IT services that customers are interested in purchasing is just as long. Over the next year, customers will focus most heavily on managed security services in 2007 and storage, backup and disaster recovery services. Also among their top five spending priorities are Web or email hosting; network monitoring and administration; and software-as-a-service and application subscriptions.

The managed services users surveyed ranged from small businesses (1-20 employees; annual revenues of less than $5 million) to large enterprises (1,000 or more employees; $250 million or more in annual revenue); and covered a broad cross-section of industries. The mean amount spent by the companies on managed services in the past year was $243,855.

It's clear that the variety and types of managed services that are available today, or will be available in the near future, are limited only by the imagination of solutions providers and their customers.

When asked why they're choosing to invest in managed IT services, 40% of the organizations said it is because they do not have the in-house skills to manage certain IT services. Another 30% said it is less expensive for them to have an outside party manage certain IT services than if the work was done in-house; while 21% said they chose the managed services model because it allows them to focus on their core competency.

Within four specific industries, here is a breakdown on the factors impacting their decision to rely on managed services for some of all of their IT need.

Which of the following factors had the most impact on your decision to select a managed services provider instead of keeping the service(s) in-house?
Finance Education Healthcare Government
Do not have the in-house skills to manage certain IT services 48% 37% 52% 35%
Less expensive to have outside party manage certain IT services 33% 31% 26% 35%
Focusing on core competency 15% 21% 14% 12%
Other 4% 10% 9% 8%
The CompTIA/Harris Interactive survey found that the current customer satisfaction with managed services providers is at a moderate level, with room for improvement. End users assign their current service provider an average satisfaction rating of 5.1 on a scale from 1 (not at all satisfied) to 7 (extremely satisfied). The types of support end users most want from their managed services providers are technical support, reliability, knowledge and expertise in the field.

Richard Rysiewicz is vice president of services for the Computing Technology Industry Association (CompTIA), the leading trade association representing the business interests of the global information technology (IT) industry. He leads association's services section, which provides a forum and method for IT service executives to communicate, resolve issues and set industry standards strategy.

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