John Richardson (UK) - The Role of Managed Services in the Downturn

Although fears of a double-dip recession in the UK are being downplayed, cost-cutting is likely to remain an important business objective for some time to come. As IT departments increasingly look towards outsourcing to help achieve this, managed services will begin to play a bigger role in a wider range of business areas. In this article, John Richardson at GlassHouse Technologies explores which areas of business will be impacted and the steps organisations can take to ensure their managed services strategy is correct.

The current unprecedented growth in managed services has been driven by the economy in several ways. The need to cut costs is the most visible sign - IT shops have had to cut headcount and keep salaries of the remaining employees in check. Replacing headcount has been difficult, especially for highly skilled positions like storage area network (SAN) administrator, which may not be a full FTE (full time employee) for many organisations.

A managed services approach offers these organisations a cheaper alternative to in-house management and helps them to avoid expensive new hires. IT executives are determining that operations and support for many functions are not core to the business (even if they are business-critical) and can be outsourced to gain a more flexible and manageable model. In addition, many are finding that the 24/7 services offered by most providers, including robust monitoring and reporting, is preferable to expensive manufacturer's residencies.

However, the economy is also driving managed services in another, more subtle way: organisations are depending more on IT infrastructure to reduce business costs, while IT is consolidating and virtualising at historic rates to maximise asset utilisation in tough times. This combination of high dependence and high asset utilisation raises the bar on infrastructure management: higher skills, better processes and advanced tools are now needed to meet the business' need for performance and reliability.

During these challenging times, IT shops are adopting managed services to deliver this new level of management more quickly, cost-effectively and with far less risk to the business. Whether it's managing complex infrastructures, delivering performance against specific service level agreements, security, proving compliance, building a service catalogue or industrial-strength reporting, managed services providers have an unfair advantage over in-house efforts.

Managed services also provide insurance as the economy recovers: the most skilled IT resources, such as SAN administrators or skilled virtualisation administrators, are the most likely to depart for higher salaries. External providers protect enterprises against the sudden loss of skills or dramatic wage inflation.

What this means is that managed services are helping enterprises address the challenges of the economy in several areas: basic operations and support, but also higher end areas of SAN, security and virtualisation. The benefits are clear to see, but how will organisations assess which outsourcing strategy is best for them? Larger enterprises will use the IT strategy consultants they've used for decades to help decide how to leverage their considerable market power. For smaller organisations, though, the choices are fewer. While the IT manufacturers all have consulting arms, their advice is often highly aligned with their sales pitches. Instead, midmarket enterprises should consider seeking some unbiased advice from a vendor-independent consultant who can help assess the business' needs and current assets before determining what level of outsourcing and managed service is right for them.

 John Richardson is a Principal Consultant in the Managed Services group at GlassHouse, where he is the Delivery Executive for a service partnership with a major outsourcing provider.



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