Managed services is the practice of outsourcing the responsibility for maintaining, and anticipating need for, a range of processes and functions in order to improve operations and cut expenses. It is an alternative to the break/fix or on-demand outsourcing model where the service provider performs on-demand services and bills the customer only for the work done.
Under this subscription model, the client or customer is the entity that owns or has direct oversight of the organization or system being managed whereas the Managed Services Provider (MSP) is the service provider delivering the managed services. The client and the MSP are bound by a contractual, service-level agreement that states the performance and quality metrics of their relationship.
Advantages and challenges
Adopting managed services is intended to be an efficient way to stay up-to-date on technology, have access to skills and address issues related to cost, quality of service and risk. As the IT infrastructure components of many SMB and large corporations are migrating to the cloud, with MSPs (managed services providers) increasingly facing the challenge of cloud computing, a number of MSPs are providing in-house cloud services or acting as brokers with cloud services providers. A recent survey claims that a lack of knowledge and expertise in cloud computing rather than offerors’ reluctance, appears to be the main obstacle to this transition. For example, in transportation, many companies face a significant increase of fuel and carrier costs, driver shortages, customer service requests and global supply chain complexities. Managing day-to-day transportation processes and reducing related costs come as significant burdens that require the expertise of Transportation Managed Services (or managed transportation services) providers.
History and evolution
The evolution of MSP started in the 1990s with the emergence of application service providers (ASPs) who helped pave the way for remote support for IT infrastructure. From the initial focus of remote monitoring and management of servers and networks, the scope of an MSP’s services expanded to include mobile device management, managed security, remote firewall administration and security-as-a-service, and managed print services. Around 2005, Karl W. Palachuk, Amy Luby (Founder of Managed Service Provider Services Network acquired by High Street Technology Ventures), and Erick Simpson (Managed Services Provider University) were the first advocates and the pioneers of the managed services business model.
The first books on the topic of managed services: Service Agreements for SMB Consultants: A Quick-Start Guide to Managed Services and The Guide to a Successful Managed Services Practice were published in 2006 by Palachuk and Simpson, respectively. Since then, the managed services business model has gained ground among enterprise level companies. As the value-added reseller (VAR) community evolved to higher level of services, it adapted the managed service model and tailored it to SMB companies.
In the new economy, IT manufacturers are currently moving away from a “box-shifting” resale to a more customized, managed service offering. In this transition, the billing and sales processes of intangible managed services, appear as the main challenges for traditional resellers.
The managed services market is expected to grow from an estimated $152.45 billion in 2017 to $257.84 billion by 2022, representing a CAGR of 11.1%. With IT driving all business operations, the significance of aligning managed IT services with all levels in an organization has grown to ensure reliability and continuity of business goals.
Common managed services
In the information technology area, the most common managed services appear to evolve around connectivity and bandwidth, network monitoring, security, virtualization, and disaster recovery. Beyond traditional application and infrastructure management, managed services may also include storage, desktop and communications, mobility, help desk and technical support. In general, common managed services include the following applications.
|Information services||* Software – production support and maintenance
* Systems management
* Data backup and recovery
* Data storage, warehouse and management
* Network monitoring, management and security
* Human Resources and Payroll
|IT managed services provider
|Business-to-business integration||* Supply chain management
* Communications services (mail, phone, VoIP)
|Internet service provider,
Video managed services provider
|Supply chain managed services||* Supply chain planning, monitoring and control
* Sourcing and procurement
* Logistics and distribution
|Supply chain managed services provider|
|Transportation||* Daily transportation planning
* Process execution and enforcement (freight audit/accounting & payment)
|Managed transportation services provider|
|Marketing||* Marketing strategy, planning
* Integrated marketing / advertising agency services
(graphic design, copywriting, PPC, social media, web design, SEO)
|Marketing managed services provider, outsourced marketing providers|
|Media||* Systems operation and support services
* Broadcast managed services
|Media managed services provider|
|Water||* Water quality testing
* Water storage and transfer systems management
* Smart irrigation monitoring, scheduling
|Water managed services provider|
|Power||* Advanced metering infrastructure
* Smart grid deployments
|Power managed services provider|
Managed services provider
A managed services provider (MSP) is most often an information technology (IT) services provider that manages and assumes responsibility for providing a defined set of services to its clients either proactively or as the MSP (not the client) determines that services are needed. Most MSPs bill an upfront setup or transition fee and an ongoing flat or near-fixed monthly fee, which benefits clients by providing them with predictable IT support costs. Sometimes, MSPs act as facilitators who manage and procure staffing services on behalf of the client. In such context, they use an online application called vendor management system (VMS) for transparency and efficiency. A managed service provider is also useful in creating disaster recovery plans, similar to a corporation’s. Managed Service Providers tend to prove most useful to small businesses with a limited IT budget.
The managed services model has been useful in the private sector, notably among Fortune 500 companies, and has an interesting future in government.
Main managed service providers originate from the United States (IBM, Accenture, Cognizant), Europe (Atos, Capgemini) and India (TCS, Infosys, Wipro).
|Tata Consultancy Services||India||$18bn|
- ^“Introduction to Managed Services” (PDF). CA Technologies. September 2012.
- ^Palachuk, Karl (January 2013). Managed Services in a Month. Great Little Book Publishing Co., Inc. p. 208. ISBN 978-0981997858.
- ^ “An Insight Into IT Service Delivery: Traditional Break-Fix vs A Managed Service” (PDF).
- ^Nimsoft Guest (5 March 2010). “How Break/Fix Can Break Your Managed Services Business”. MSPMentor.
- ^Ron Williams (20 October 2015). “11 Things to Cover in Your Managed Services Agreements”. LabTech Software.
- ^Randy Perry (June 2013). “Business Value of Managed Services” (PDF). IDC.
- ^ Jump up to:ab Sarah Kuranda (4 June 2014). “Top Five Functions Outsourced To Managed Services”. CRN Magazine.
- ^Robert Peretson (2011). “Managed Services:The Win-Win Model for Your IT Support Success” (PDF). MSP Business Management.
- ^Wood, J.B.; Lah, Thomas. “The Case for Managed Services: A Stepping Stone to the Cloud”. Technology-as-a-Service Playbook. Technology Services Industry Association.
- ^Spencer Smith (February 2016). “Managed services companies rethink their portfolios”. TechTarget.
- ^David Linthicum (19 May 2015). “The case for managed service providers in your cloud strategy”. InfoWorld.
- ^“Making the Transition from VAR to MSP” (PDF). CA Technologies. October 2014.
- ^John Moore (May 2015). “Cloud-based service revenue lags among MSPs”. TechTarget.
- ^Steve Banker (11 February 2014). “A Holistic Approach to Transportation Managed Services”. Forbes.
- ^Adam Robinson (2 September 2014). “What are Managed Transportation Services? The Old Model vs. The New Model”. CERASIS.
- ^“MSPmentor 250 List 2014: Honorees N to P”. MSPMentor. 2015.
- ^“MSP Partners Recognizes Outstanding Contributions in Managed Services”. BusinessWire. 7 August 2008.
- ^Palachuk, Karl. Service Agreements for SMB Consultants. Great Little Book Publishing Co., Inc. ISBN 978-0976376026.
- ^Simpson, Erick (15 August 2006). The Guide to a Successful Managed Services Practice. Intelligent Enterprise. p. 320. ISBN 978-0978894306.
- ^Jonathan, Stokes. “Managed IT Services Can Spur the Growth of Your Business”. Retrieved 27 November 2017.
- ^Chloe Green (7 March 2016). “How to use managed services to overcome the top 6 app security hurdles”. Information Age.
- ^“Supply Chain Managed Services”. Deloitte. 2015.
- ^Adam Robinson (22 September 2014). “What are Managed Transportation Services? The Old Model vs. The New Model”. CERASIS.
- ^“Managed services”. Water Centric. 2015.
- ^Dan Pegan (16 July 2014). “The Growing Trend of Managed Services for Advanced Metering”. Electric Light and Power.
- ^Margaret Rouse (2015). “Managed service provider (MSP)”. TechTarget.
- ^“Top ten criteria for selecting a managed services provider” (PDF). IBM Global Technology Services. 2015.
- ^TekHattan Staff (12 March 2019). “When is it time to hire a Managed IT Service Company?”. TekHattan.
- ^Joe Panettieri (23 April 2012). “60% of Fortune 500 Companies Running ManageEngine”. MSPMentor.
- ^Casey Morgan (4 June 2015). “IT Managed Services in the Public Sector”. storagecraft.
- ^“Top 10 managed service providers”. Enterprise Management 360°. Retrieved 27 February 2018.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.