The main advantage Managed Service Providers render to businesses is 3rd-party maintenance and monitoring that is put in place to check any unwanted disturbance in system availability.

These days, managed services model offers a great chance to businesses and helps in enabling system integrators and value-added resellers to counterbalance dwindling margins of product sales. In addition to that it helps in attending to increase in customer demand for managed IT services.

Factors that prevent MSP providers to get maximum advantage of present opportunity are listed below:

  • End-user anxiety
  • Lack of experience
  • Reseller uncertainty
  • Tepid economic recovery
  • Growth in newer technologies

Meaning and Importance of Managed Services:

An MSP (Managed Service Provider) helps its customer in monitoring and maintaining the IT system on daily basis. The service is usually offered at a monthly fee as per the contract. The main benefit thus offered by MSPs to their customer is prevention of unexpected and unwanted hiccups in system availability. As a result, system uptime is increases which lead to business productivity, ultimately leading to profitability in longer run.

Few common traits of Managed Services are listed below:

  • Predictability of income

  • Consistent utilization of skilled technicians

  • Prediction of problem at early stage

  • Remote monitoring and maintenance of systems

  • Availability of basic to extensive packages depending upon needs of business

  • MSPs may offer services such as disaster recovery, help-desk response, technology/hardware upgrades, software upgrades, document profiling and management, restoration of operations, intrusion detection, etc.

  • Acts as a strategic IT advisor for the business

  • Helps in providing recommendations for technology needs of future

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This also clears out the difference between an MSP and a VAR. While Value Added Reseller primarily focuses onto selling the system, MSP stresses on selling the service which is required for running the system post installation.

Nowadays, sometimes customers demand for more specialized managed services which is attributed to the fact that technology is becoming more embedded with business functions e.g. Electronic Medical Records. This has made MSP’s services much fundamental to businesses. The modes of IT service delivery are also evolving at a great pace. Managed service providers must also keep evolving while keeping their basic function to the core which is to manage and maintain customer’s system on regular basis for a monthly fee.

Growth of Managed Services Despite Uncertainty

Some customers remain doubtful whether they can trust third party for their business-critical functions especially when they are unaware about quality of service provided by an MSP. The uncertainty is challenged by costs of maintaining an -in-house IT department and costs related to the same. The opportunity cost of IT staff being diverted from their core business functions also adds up to the total cost.

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Some interesting facts to know:

  • Sixty-two percent of the organizations surveyed for the report, “CompTIA: Trends in Managed Services, 2011”, reported plans to increase their spending on managed IT services in the next two years.

 

  • In 2011, the technology research group ISG registered a record number of outsourced IT service contracts worth $25 million or more, with a collective value of $95.4 billion.

 

  • IDC predicts the global IT outsourcing market will reach $133 billion in 2015. The success of service arrangements, CompTIA found, was the specificity of the service level agreements (SLAs) in place. The most critical SLA elements are response times, 24/7 support, and data and systems security.

Factors that lead to customer’s preference for managed services are as listed below:

 

  • Increased complexity of the technology universe, including rapid development of new mobile devices and applications that quickly erode the relevance of their current technology.

 

  • The desire to save money by transforming capital expenditures (CapEX) into operating expenses (OpEx), which also provides more flexibility for nimble system upgrades.

 

  • Federal laws and regulations with stringent record keeping and reporting requirements, which are beyond the capacity of most in- house IT staff.

 

  • Concern over security from theft, intrusion or exposure of sensitive data, especially when so many devices used to access the information are mobile.

 

  • A preference for putting in-house IT experts to work on revenue- producing functions, rather than business-supporting functions.

Benefits of the managed services model for resellers include:

 

  • The ability to compete in a market in which hardware is becoming less relevant than software applications.

 

  • The ability to offer a product and services mix that sets them apart from the competition.

 

  • Higher profit margins and increased revenues, due to a richer mix of services and products. Lower costs related to growth.

 

  • Easier availability of financing; bankers love recurring services contracts.

 

  • The potential for higher value when it’s time to sell the company or merge.

 

  • Predictability and consistency of revenues, as well as better utilization of technicians’ time.

 

Factors holding back customers and/or resellers from creating managed services contracts include:

 

  • Fear of security breaches on the part of end users.

 

  • A wait-and-see attitude by both parties regarding developments, especially in cloud computing, that might positively or negatively affect managed services agreements.

 

  • Anxiety or uncertainty by resellers about what the managed service business model is, what it might cost to implement and whether they have the skills necessary to carry it off successfully.

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