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Managerial art is highly in demand
Sunday, September 07, 2008
As the credit crunch and economic slowdown force numerous Irish-based companies to engage in careful trimming of their budgets, the area of managed services is still expanding, writes Dermot Corrigan.

With many Irish-based organisations looking to tighten their belts due to the current economic slowdown, the area of managed services looks set to continue to expand.

John Casey, sales manager with Datapac, said that while IT budgets seemed to be tight, Datapac's managed services offering continued to grow in popularity.

“While other areas of our business have slowed down a bit due to tightening of budgets in a lot of customers, the one part of our business that is increasing rapidly is managed services,” said Casey.

“Even if there is a recruitment freeze, IT departments still have to deliver a service to the business. That means they outsource to somebody like us, so maintenance and managed services have been the success stories over the last five or six months.”

Paul Wilson, head of managed services at BT Ireland, said that many organisations viewed managed services as a means of getting the best value out of their IT outlay.

“In the current economic climate, many companies are looking at managing their cost base aggressively and a managed services play can actually significantly increase the bottom line for client organisations,” said Wilson.

“Clients know about their core business, they are the experts, but often non-core areas like IT can be more efficiently managed by MSPs [managed service providers]. Economies of scale from having multiple skills on multiple contracts grouped together in managed service centres are an attractive proposition.”

Paul Lynch, sales and marketing director at Hosting365 said that businesses faced with economic difficulties tended to look to managed service providers for assistance in fighting through them.

“The motivating factors that drive customers towards managed services tie well into an economic downturn,” said Lynch. “If people want to bring in additional services, or complex processes, there are obvious cost constraints in a downturn situation. This can find a way to deliver those additional or improved services, and drive excellence in the business, with minimal up front capital expenditure or labour costs. We have seen demand increase hugely over the last few years, and it is accelerating rather than slowing at present.”

Organisations facing restrictions in hiring new IT staff could find dealing with an MSP a more affordable and efficient option, Casey said.

“You cannot compare the cost of the managed services agreement with the cost of actually hiring somebody to do that job,” he said. “It is difficult to find the right person, keep him there, manage him and pay his salary. Invariably we are able to provide parts of all, or all, of our managed services solution at a very competitive rate, as we have the economies of scale.”

Wilson said managed services providers were often able to partner with a company to improve processes and design strategies that could have benefits not only in the running of its IT department, but throughout the entire organisation.

“In choosing a managed service provider, clients can often benefit from consultancy on both business processes and technology to help determine the correct roadmap for managed services,” he said.

John Staunton, Accenture's head of outsourcing for Ireland, said that Irish companies had been slower than their international competitors to embrace the idea of managed services.

“The outsourcing and managed services business in Ireland is stil l at an early stage of development, relative to other countries,” said Staunton. “There is a great opportunity now for Irish firms to take up these services, to become more competitive in their markets and create further value for their shareholders and customers.”

What are managed services?

Like many terms in the IT universe, managed services can be difficult to define. In the broadest sense, they include all the elements of the IT function, according to Interxion's managing director, Tanya Duncan.

“In general terms managed services is the transference of day-to-day management responsibility as a strategic method for improving effective and efficient operations,” said Duncan.

“From a data center perspective, this is the management of the ICT infrastructure of a client. There are many different levels of managed service; at the lowest level standard monitoring of the health of the infrastructure and reporting on any abnormalities is the norm. On the other end of the scale, a fully managed offering would incorporate proactive monitoring, system health checks, troubleshooting and fixing issues, consultancy. The list goes on.”

Jason Boyle, professional services manager with PFH, said that managed services was sometimes used as a “catch-all term'‘.

“It is used in multiple industries to mean just about anything the person offering the ‘service' wants,” said Boyle.

“However, we tend to focus on what we deliver, which is essentially services that manages our customer's computer systems and networks which are either located on the customer's premises or at a third-party data centre.

“Corporate IT teams are constricting with demands from the business increasing, so a lot of day-to-day management tasks are not properly catered for leaving potential large weaknesses in the operation. For the SME, managed services is about leaving the company to focus on what the business is, as opposed to being drawn into IT issues that they can often be ill-equipped to deal with.”

Casey said that today's managed services offerings had grown out of traditional maintenance and support agreements.

“Managed services started for us 20 years ago, when we started selling maintenance contracts on networks or equipment that we supplied,” he said.

“That was the first level of a managed service, it was reactive, people who were not maintaining their own equipment were outsourcing it to a company. Now managed service means you are proactively managing equipment - whether it is servers, routers, even PCs.”

Lynch said managed services now often meant the MSP taking over al l responsibility for the hosting of a company's IT hardware infrastructure.

“Al l the hardware can be taken out of someone's comms room and hosted centrally in a facility with high availability, power and internet access,” he said.

“The labour and skillset that enables all applications to run on that hardware is then managed on behalf of the client. That allows the client to get on with their own business, be that selling f lowers or hosting websites.”

In Lynch's opinion Irish companies should concentrate their internal resources on their business goals and strengths, rather than worrying about maintaining IT hardware or updating anti-virus software on all their PCs and laptops.

“I do not think that any professional services company, whether it sells houses or do accounting, needs to own any IT hardware. I cannot see what benefit they can get from that,” said Lynch. “They are fil ling up square expensive square footage in their offices, and driving up expensive power usage and driving up their ESB bills. If they sell houses they should have their labour concentrating on selling houses, why do they need to have a Microsoft engineer in-house? However, they do need 100 per cent up time, and they need to be able to deliver their core business function.”

Staunton said Irish companies were also increasingly outsourcing software and applications.

“We provide a wide array of application management and development services under flexible arrangements, managing custom or packaged software applications - including Microsoft, SAP and Oracle - over their complete development and maintenance life -cycles,” he said.

“The services include al l aspects of management, development, testing and support.” Many basic, labour-intensive IT functions can also be taken out-of-house, according to Joe Molloy, sales director, managed services with IT Force.

“Managed services typically are the mundane tasks that need attention on a ongoing basis,” said Molloy.

“They consist of proactive monitoring of servers and applications installed on these servers such as managing space, backup, anti-virus etc, and general IT help desk service and troubleshooting.

“As you go up the value chain or the size or complexity of the business, other activities can be promoted as managed services ,such as network security, monitoring and management, and the monitoring of the internet connection and liaison with the telecoms provider.”

Molloy said it often made business sense for companies to hand over responsibility for one whole element of their IT function.

“Print management is being promoted as a managed service,” he said.

“This would be the provision and usage monitoring of paper, toner and printer maintenance.”

Disaster recovery and IT continuity managed services were also available, according to Molloy.

“Data management services such as ensuring data is not just backed up locally in the clients site but routed to a offsite data vault where it is monitored and protected on a 24/7 basis,” he said.

“Businesses have the assurance that their data is secure, protected and always available. Linked to this is the provision of a managed service to ensure your key application and/or servers are duplicated.”

Molloy said there were occasions when managed services or outsourcing arrangements were not the best option.

“If your business is a small or medium sized operation that has a bespoke software application or complicated piece of technology that you find you have the internal knowledge on, then this should be kept in house,” he said.

“If your business is a larger operation that has an IT department and you feel your users need a quicker and higher level of service because of this third party application or technology then this too should be kept in house. Other industry standard tasks or functions should be out tasked.”

Freeing up staff Lynch said the requirement to access skills and expertise in a cost-efficient manner was an important driver for organisations entering managed services agreements.

“People assume that the biggest single expense in providing an IT function is the hardware to deliver the applications,” he said.

“That is not the case. The biggest cost is the labour cost. In order to offer the best quality SLAs [service level agreements], they need to have every flavour of engineer - Microsoft, networking, system administrators - available all day every day to fix issues as they arise. That adds up to hundreds of thousands of euro in annual labour costs. With managed services, you can take those costs off your bottom line.”

Staunton said taking the responsibility for labourintensive tasks out of the hands of your internal IT team generally saved money for organisations.

“Cost savings can be achieved by providing selected services from the outsourcer's network of lower cost locations across the world,” he said. “Partners in locations including India, eastern Europe, Latin America, China and the Philippines can deliver high-quality, cost-effective services to Irish firms with less risk and more predictability.”

Some managed services agreements allowed larger companies to remove some or all of their IT staff from their payroll, Wilson said.

“Outsourcing ramps up the potential benefit to the client by allowing a professional IT services organisation to take on the entire day to day running of the clients IT estate,” he said.

“Often staff transfer to the service provider and a contract is typically negotiated that provides not just for service penalties if things go wrong but additional profit if the service over performs. The blue ribbon of outsourcing is where the service provider provides business process transformation - not just delivering IT to support the current processes but actually working with the client to transform processes yielding both improved customer experience and cost benefits.”

Casey said a managed services arrangement precluded smaller companies from having to take on an expensive full-time IT expert.

“It is borderline whether a small to medium-sized company with 30 or less users should have their own dedicated IT staff member,” he said.

“They can make a decision to outsource the whole thing in a fully packaged managed services agreement.” MSPs were often able to offer access to highly skilled IT professionals to companies that would otherwise struggle to attract them, according to Staunton.

“IT outsourcing enables a client to get access to skills and resources that are often in short supply in the Irish market,” he said. “Providers have access to these both in Ireland and in other global locations.”

That is not to say that IT staff should worry if they learn their employer is considering a managed services agreement. Casey said that these arrangements typically freed up IT staff to engage in more strategic tasks.

“These people do not need to be checking if back-ups have been done or if anti-virus patches are up to date, or whether the servers are functioning properly,” he said.

“We can do that for them, which frees up the internal IT resources to take on more strategic positions. Having internal IT guys just fire-fighting all day, every day, is a waste of a highly-skilled, well paid resource.”

Molloy said that dealing with spam was an example of a task that often tied up internal IT staff in exhaustive and unproductive labours.

“Depending on the size and complexity of business email usage, this can be very labour-intensive,” he said.

“Out-tasking this to a managed service provider will save a business lots of time, but also give a better level of email to the business, therefore making the business more efficient.”

Wilson said managed services arrangements allowed IT staff to look at ways in which IT could bring about large-scale improvements in a business's internal processes and profit margins.

“All organisations would like to ensure that all their staff is adding most value to their organisation,” he said.

“Conversely, a large number of client IT staff are involved in the handling of incidents, problems and ensuring the change process actually maintains the IT infrastructure at a supportable level.

“Little time is left over to actually develop the IT infrastructure to actually meet the business needs of their organisation. This should allow the client's internal staff to focus on more strategic issues. The key question, however, is: do the internal staff have this capability and aptitude, or will some re-skilling or recycling of internal staff be required?”

Building the Relationship

Boyle said companies considering entering into a managed services contract should make sure they get what they want, not what the MSP specialises in.

“Crucial to a properly defined managed service for any customer is identifying what it is that is actually needed and putting a structured service level agreement [SLA] around that service,” he said.

Molloy said clients should scrutinise an MSP's experience before committing to a managed services deal.

“Their track record in the managed service market and in particular their level of expertise in what areas of IT,” he said.

“If you are looking for a print managed service, then going to a managed service provider who specialise in security may not be best suited. A potential client should make sure they have a high level understanding of what you are really looking for and what they want out of a managed service agreement.

Following this, interrogate their reference sites.” Wilson advised companies comparing potential managed services partners to look for relevant standards and certifications.

“How the service will be managed is equally important as the technology,” he said. “Professional managed service organisations can demonstrate managed service centres running service management tools and platforms. A typically ITIL [Information Technology Infrastructure Library] compliant provider will be running all the incident, problem and change process required to deliver a reliable service. Security will typically be accre dited to ISO standard, such as ISO 27001, and outstanding managed services companies will have a security culture built into their DNA.”

One challenge to managed services arrangements is that they can introduce unfamiliar processes and behaviours into an organisation, according to Boyle.

“In a lot of environments, people tended to react and deal with particular problems differently,” he said.

“This would have built up a way of working that will now essentially change, as there is a different structure put in place to deliver that service. An effective management relationship between the customer and the MSP will ensure that difficulties are dealt with as they arise.”

Wilson advised ensuring managed services SLAs included a certain amount of flexibility.

“This is the foundation of the service and additionally clear processes need to be defined around change controls,” he said.

“In any contract no-one has a crystal ball to predict the changes required over the next say five years. It is in the interests of the client and the provider to set out clear ground rules on how change will be handled, the time to initiate and the cost model for change.”

Security was an issue that needed close attention when agreeing a managed services arrangement, according to Wilson.

“Security is typically seen as a big issue for the client and the provider,” he said. “Providers should be able to demonstrate both a track record of dealing with sensitive information but also the security qualifications and accreditations to back up the contract.”

The best managed services relationships are based on good communication, according to Casey.

“We would be in constant contact with the client,” he said.

“It is part of a business partnership that we would have with the company. There would be daily contact between the two.

“Our clients would re ceive a daily e-mail with their managed service checklist, saying all that has been done that day.”

Duncan said both parties in the relationship had to trust each other.

“The main challenge in making a managed services partnership work is ensuring there is trust between all parties,” she said.

“The client must trust that their managed service partner can deliver on commitments. If the operational guidelines are set correctly, there should be no difficulties.”

However, getting the arrangement down on paper was of paramount importance, Boyle said.

“Most MSP companies will provide a binding SLA,” he said.

“This is a very important document as, legal jargon aside, it should define the exact services to be provided.”

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