Understanding “Managed Services” from multiple perspectives
More and more organizations are realizing that while “IT” forms the backbone, they should focus on their strong area – namely the business and leave IT in the hands of the IT service providers. This approach of “IT Services” trend is enabling organizations to focus on “CTB” (Change-the-business) rather than “RTB” (Run-the-business).
The change can be “felt” at all levels – for example, earlier when doing product evaluations / comparisons, I gave elaborate comparisons (read graphs and pictures!) and opinion influencing the decision but left the final decision to the Customer. Now the customer expects and more importantly accepts that the consultant would make the decision and give the next steps to be taken – either product shortlist or a product PoC or a selected product implementation to go ahead and use the underlying data only to justify the recommendation.
The concept of “Managed Services” has been making steady progress for the past 4 to 5 years driven by the “IT as a commodity” trend. Economic factors, pressure on CxOs to show cost reduction, improving technology trends, long relationships with service providers (who essentially have been managing IT, though with less control and ownership) are some of the factors that pushed “Managed Services” to the forefront. Frameworks like ITIL, CMMI-SVC and standards like ISO 20000 serve as a means to ensure Service delivery capability.
There are various definitions and perspectives as to what “Managed Services” mean:
- BusinessDirectory.com – Management, typically by an outside third-party, of an organization’s services and equipment related to computers, networks, or software. Web hosting providers and internet service providers are examples.
- Wikipedia – Managed services is the practice of transferring day-to-day related management responsibility as a strategic method for improved effective and efficient operations inclusive of Production Support and lifecycle build/maintenance activities. Typically, the client remains accountable for the functionality and performance of managed service and does not relinquish the overall management responsibility of the organization or system.
- HCL – Managed Services can be generically defined as running a service for a customer by a vendor on the agreed outcome measured as Service Level Agreements (SLAs) and Key Performance Indicators (KPIs) for a fixed price. The service is managed by the vendor pro-actively with minimal management overhead of the customer. The key value proposition for Managed Services is to deliver ‘predictable services at a predictable cost’ with continuous improvements and proactive value addition.
- CMMI-SVC – Broad definition for Services (not limited to IT) – “A service is an intangible, non-storable product”. There are seven process focus areas – mainly looking at it from the Service provider perspective – Addressing Capacity and availability management, Service continuity , Service delivery, Incident resolution and prevention, Service transition, Service system development, Strategic service management processes.
- ITIL Framework – Service Management is a set of specialized organizational capabilities for providing value to customers in the form of services. A service is a means of delivering value to customers by facilitating outcomes customers want to achieve without the ownership of specific costs and risks. E.g., A remote access service that enables reliable access to corporate sales systems from sales people’s laptops. Interesting to note that in ITIL, “Managed Service” is one of the three service provisioning model and in this context, the definition for Service Management is more relevant.
As can be seen in the definitions, “Managed Services” truly is a broad area – and covers all facets of IT as well as ITeS – Infrastructure as well as Applications, and a key step towards “IT-as-a-Service”. Customer no longer buys a product, but a service that provides business value.
From the IT Service provider perspective, the changing trend from Staff Augmentation → Fixed Price → Managed Services, implies a increasing level of ownership and control. This definitely is expected to lead to Win-Win situation with the customer getting the service at a pricing based on outcome with minimal risks, the service provider gets the flexibility of controlling the underlying components, arriving at economies of scale due to shared services.
There has been some teething issues when organizations tried to move towards Managed Services and the solution can be summed up as “defining and communicating the details and responsibilities in managed outcome relationships is necessary to improve the quality of the outsourcing engagement, enhance business alignment, and reduce exposure to risk – Forrester”. A new breed of Sourcing & vendor management (SVM) professionals are expected to play the crucial role in making the Managed Services approach to work effectively – meeting its objective of “getting business values without having to own the resources or risks”.
For Managed Services to be successful, both the customers and the providers need a mindset change. The classic anecdote about two people doing the same job with one viewing it as “laying bricks” and the other “building church” truly explains the concept of “Managed Services”.