It's now ten years since the Australian government, whipped into a frenzy by the fever of regime change, dived headlong into whole-of-government outsourcing. It's also around nine years since strong-armed government departments began to realise willy-nilly outsourcing wasn't, perhaps, the best idea. However, with contracts signed and staff already migrated, there was little to do but ride out the storm.
These days, the lessons of that fateful period, bolstered by significant technological improvements in the intervening years, have spawned major changes in the way outsourcing is handled. With service-based application architectures now commonplace and significantly improved telecommunications infrastructure linking sites at full speed, companies looking to outsource their IT these days are doing it in smaller, functional blocks that allow for tighter control and closer partnerships with service providers.
From hosted applications to managed networks, managed security, managed applications and more recently managed IP telephony, the managed services market has gradually expanded its scope to service an increasingly accepting clientele. Expanding horizontally from their roots in business process outsourcing (BPO), managed service providers (MSPs) are redefining their value proposition in terms that are relevant to today's low-cost, quick-return IT climate.
In an analysis of the market last year, IDC noted that 'discrete' managed services would grow 5.1 percent annually through 2010, outpacing traditional enterprise-wide outsourcing at just 3 percent.
This steady growth reflects growing user interest in MSPs' value proposition -- particularly as Windows Vista upgrades are likely in many companies over the next 18 months. Rolling out that desktop platform internally will be no small task for many organisations, and many will warm to letting a desktop MSP worry about the complexity.
Weighing the business case
Managed services contracts are particularly appropriate for smaller companies wanting the business value of particular technology but lacking the right expert staff -- and the financial resources to get and keep them. They're also appealing by allowing small IT organisations to keep up with the demands of large or distributed environments requiring 24x7 monitoring.
-We felt quite exposed in that we didn't have any kind of support services in our 94 remote sites," says Neil Dammerel, network manager with NSW Parliament, which recently outsourced its security management to MSP earthwave. -Now we're very much dependent on the centralised management we have with earthwave; it all just runs smoothly."
Many will remember the difficult early days of application service providers (ASPs), who struggled to achieve critical mass despite a seemingly viable managed applications strategy.
This time around, however, larger players are in the game too. Established content hosting providers like HostWorks and WebCentral have built on their rock-solid hosting infrastructure to offer relevant managed services. Also in the running are established integrators and services players, who have the experience and methodologies to deliver all-important predictability.
A wave of new entrants is also making its mark, spruiking untested models that fit particular needs. Many are finding new uses for virtualisation, which allows the easy commissioning of servers and desktops on an as-needed basis. Smartyhost spinoff Vigabyte, for example, uses VMWare virtualisation technologies to offer managed server services at prices ranging from $49 a month for a system with 40GB storage and 256MB RAM, to $99 per month for 40GB storage and 1GB of RAM.
While they can be a considerable boon, however, managed services are not without their challenges. When entering into such a contract, it's essential that provider and customer establish a mutually clear business vision -- and an understanding that arbitrarily rigid managed services contracts can compromise the whole point of the exercise. Variations are the stuff of everyday life, so make sure your MSP understands it may be necessary to resolve out of scope requests first, then worry about charging for them.
Conversations with customers that have embraced managed services also tend to bring out one more element: internal manpower. Outsourcing was all about trimming staff numbers by shifting technical staff to the outsourcer's payroll, but MSP customers typically find their adoption of managed services gives them more time to gather project management and long-term planning staff who, for once, have the luxury to think more strategically than ever.
In this special report, we look at the Victoria Police and the South West Alliance of Rural Hospitals' approach to managed services.
