Would Managed Services Combat Recession? Article

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Would Managed Services combat recession?

Managed Services are similar to the outsourcing but here the difference here is, offerer remains accountable for the functionality and performance of managed service. lets find out whether the arena finds its way in the recession.

Author: Amarpreet97

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Managed services are the practice of transferring daily responsibilities as a strategic method for improved effective and efficient operations.

The organization whose system has been managed is called as the offerer or customer and the organization that provides the managed service is regarded as the service provider.

In the above process, the offerer remains accountable for the functionality and performance of managed service and does not surrender the overall management responsibility to the service provider.

Common managed services

Common IT managed services include backup, storage, network management, user management, systems management; Supply Chain Information Services; Communication Services, which includes Internet and Telephone.

Managed services provider (MSP)

A MSP is typically an IT services provider, who manages and assumes responsibility for providing a defined set of services to their clients. Most MSPs bill a fixed monthly fee, which benefits their clients by providing them with predictable IT support costs.

The benefits for the Key customer are peace of mind for the customers as monitor network on 24x7x365 basis proactively, single point of contact for all network issues, single supplier instead of multiple vendors and defined service levels for service delivery. The organization knows its cost for management and fixed price contracts, which avoid costs of building own management and reporting systems, that means lower Total Cost Ownership (TCO) for the clients.

Similarly, the benefits for the Key Service Provider are extended longevity with business contracts, increased ‘stickiness’ and average revenue per user (APRU). They also have the opportunity to interact with and influence customers at a business decision making level, which protects vital carriage revenue by de-commoditizing & value adding.

Managed Services Commoditization

The managed services market is still relatively immature as a technology delivery and under-distributed in terms of providers to potential customers.

For avoiding managed services as a commodity, the MSP has to stop leading with price because managed services are about value and professionalism. Also, the providers should confirm that offerer, who always pressurizes them to reduce price in order to keep the deal alive, must confront the clients. Further, in the arena, large vendors are entering and they will bring a lot of positive attention to all the MSP community.

At present, MSPs are asking themselves; what is the best way to build a managed services practice that provide infrastructure support in a more scalable, predictive and profitable manner, and how to stay ahead of the commoditization curve and invest in services which will improve revenue and gross margins over the long term?

To build a managed services business is more than merely taking a fix business and renaming it. New solution providers, who enters the market will find themselves faced with an age old IT decision, build the capabilities or buy them from a larger service provider. As each business is unique, with different access to capital, business models, technical capabilities, vendor relationships and customers, which determine the true managed services practice.

In the current business scenario, practically every industry and market sector feels the pricing pressure. There are a number of factors that have increased the impact of commoditization in the IT services industry, including the consumerization of IT, the reduction in telecommunications costs and the associated increased opportunity for global delivery. However, commoditization in IT services is inextricably linked to commoditization in the hardware and software markets.

Conclusion

For IT services providers, operating in sectors where commoditization is evident, success is often achieved through driving the movement of the commoditization force and therefore staying ahead of competitors in terms of market pricing and taking advantage of increased addressable market.

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Would Managed Services combat recession?