Managed Services: All you need to know
What is a managed service? How does the process work?
Kevin Reid (KR), technical manager, Sureskills: “A managed service is simply defined as an area of your business where the delivery, quality and service levels are contracted and backed by guarantee and potentially penalties and indemnity. It ensures a fixed cost no matter what issues occur. “The managed service can be as simple as a provider maintaining and delivering consumables for your printers up to the situation where the business does not own any of the IT assets and pays a monthly per user fee for their provision.”
David Delaney (DD), head of managed services, Fujitsu: “An IT managed service enables an organisation to avail of the best practice capabilities of the managed service provider (MSP) to provide significant competitive advantage in service quality, responsiveness and cost. “The MSP has a narrower focus and greater depth than the customer organisation and can therefore achieve greater economies and deliver continuous improvements increasing the value for themselves.”
Mike Oavidson (MD), head of business development, Enterprise Markets, Eircom: “In Eircom, we define managed services as work linked to the development, management and optimisation of ICT (information and communication technology) infrastructure, which can be undertaken internally, but might more effectively be addressed by external providers.”
How many providers offer managed services in the Irish market and who are they?
KR: “Nearly all IT service companies offer a managed service of some description. The important questions to ask in each case are: do they have the skills that are required for the technical or business solution? If not, how would they acquire and retain them? Can they grow with the business? What is their track record in both delivering this service and in comparable businesses? “What is the cost of change to the service and how easily can it be accomplished? Do they understand how to measure business risk, downtime cost and delivery charges?”
DD: “There are a range of providers in the Irish marketplace, some specialising in niche areas such as network services, others offering a broader range of services. “Providers range in size from local Irish companies providing services to small to medium size organisations to large international providers supporting larger customers with global operations requiring multilingual 24X7 support.”
John Purdy (JP), managing director, Ergo: “This can vary from sector to sector, from people providing web hosting to security services, to optimisation of infrastructure, to software development to SAS models. The managed services concept is very wide so therefore the client needs to understand what they want from the relationship and choose the vendor accordingly, based on ability, credibility and experience.”
When choosing a suitable managed service provider, what should companies look for? What should they avoid?
KR: “One of the main areas to focus on is not necessarily the technical ability or track record but if the service provider looks at managed service contracts as a partnership as opposed to a strict delivery mechanism. “What any business needs when entering into a service agreement is clearly defined delivery levels along with a willingness to be flexible arid change as a business evolves.”
DD: “Companies choosing a managed service provider need to ensure provision of managed services is in fact the core business of the MSP. Some MSPs have developed their offering on the back of their own internal requirements and capability. “While this may be a very capable operation in support of its own requirements, the organisation needs to have the additional governance and service delivery management ex-pertise to be an effective supplier to external customers.”
JP: “Companies should look for depth, relevant expertise, relevant case studies and reference sites. They should talk to existing customers who have already engaged this specific service with this vendor. “They should avoid people who treat managed services as a transactional sale with a new name on it. It concerns the overall ownership and responsibility of the end-to-end solution.”
MD: “Successful managed service contracts are based on a clear shared understanding of the business objectives the customer is trying to achieve over time. Contracts based on rigidly standardised services, with limited flexibility to tailor and grow in line with specific requirements, can be problematic. “Most providers will perform against service-level metrics, but these must align with the customer’s business objectives to be meaningful. “Another important consideration is whether the provider is able to comply with the latest ISO and SAS process and security standards, which ensure consistent and secure service delivery – a serious risk for the customer if this isn’t the case.”
What Is the typical cost of outsourcing?
KR: “There is no typical cost for outsourcing or managed service as each business or business unit is different and the levels of service required will be tailored to the client and the business risk. “When you look at a typical solution being offered, desktop management, the cost will range from €20 per system per month up to €50 depending on what is covered and where the ownership of the hardware and software resides.”
MD: “Unfortunately, there is no typical cost for a managed network or IT service because the range of support options is so diverse.”However, at the simple end of the hosting spectrum, customers can expect to pay €6,000 to €7,000 per annum for a managed single server and between €11,000 and €17,000 per annum for a full rack with colocation support.”
What about Implementation? How long does It typically take and disruptive ts this process?
DD: “Transition management is key to the immediate and longer-term success of any managed service or outsourcing solution. Successful transitions require strong transition methodologies operated by experienced practitioners, and effective MSPs will assist client organisations in prepay ing for this process.”
JP: “A level of scoping needs to be done, as well as a stage of business analysis, to understand the requirements of the organisation. Then, implementation can happen over a very short period of time. Depending on size, you can have a big bang approach that it occurs, let’s say, over a weekend, or a gradual approach where a handover is conducted over a period of time. “Generally, on significant projects in medium to large organizations, the transition can take place over a’number of weeks to months.”
MD: “No two implementations are the same. A simple transfer of a single server and set-up of a remote access link should only take a couple of weeks. However, a complex strategic project involving a detailed ICT audit, design and build of a new network and/or IT infrastructure, contract negotiation and SLA development could take ten to 12 weeks.”
Typically, what core services can companies expect as standard? What are the optional add-ons also on offer?
KR: “Virtually all of a company’s standard operations can be delivered as a managed service. The question needs to be, what is the core of the business and how can the supporting activities be delivered cost effectively and efficiently.”
JP: “Typical areas of focus within managed services can include print, server, infrastructure, network, web-hosting, web development, software development and business functions such as accounting, HR and legal.”
MD: “Customers can expect rack space, power, cooling, alarm monitoring and access to a range of carrier options for telecommunications services. The customer then needs to decide how high up,the IT ‘stack’ support is required. This can include the database and operating system, which Eircom provides, up to management of the application, which Eircom generally provides via best-in-breed partners.”
What staffing Issues do companies need to take Into account when Introducing a managed services arrangement?
DD: “The introduction of managed services in an organisation will typically involve the introduction of new staff from the service provider. The integration of these staff together with the necessary training in the operational processes required is a key component of the transition process. “For organisations new to managed services, a service governance process will need to be established, through which the MSP will be managed.”
JP: “Typically, there is a cultural change and the vendor needs to be able to cope with the cultural differences that will occur between having the service provided internally and externally. “If relevant, the vendor also needs to ensure that they can deal with the transfer of internal staff into the external vendor’s resource pool under the TUPE legislation.”
MD: “Managed service contracts usually address the most repetitive and commoditised part of the ICT team’s work, which add little to the business in terms of competitive advantage. “As such, a significant benefit of this approach is that it enables scarce and experienced IT staff to focus on projects that add real value to the business. It is extremely important that an effective and disciplined internal communication programme accompanies the implementation of the new managed service.”
What can companies do to make sure they get value for money?
DD: “Benchmarking is typically built into contracts with the MSP to ensure that the service remains competitive during the life of the contract. MSPs actively encourage this approach as it provides an independent validation of the service quality and.cost effectiveness. “The service itself will be governed by a set of key perfor-mance indicators (KPIs) agreed between the MSP and the customer. “These KPIs are. focused on the deliverables that matter to the customer: they need to be more than just measures of the service providers internal processes.”
JP: “This is an extremely important point for consideration. If the KPIs and the metrics are not agreed, and not measured and scored regularly against that, how can you know if you are getting value for money? “We recommend that on’ each managed service engagement, there would be a quarterly business review done to measure the effectiveness of the service against the agreed KPIs and there would be an annual business review to make sure that the business objectives are being met and that the vendor understands the business issues facing the client going forward.”
