At your service

Businesspeople increasingly want their companies to be responsive, adaptable, focused and resilient as the best route to long-term profitability.
Such a company is like a living thing, focusing tightly on specific needs, responding quickly to changes in its environment.

Yet as costs and complexity rise, organisations are seeking new ways of increasing organisational agility by reducing fixed costs. In the 1970s and 1980s, that meant getting rid of staff. In the 1990s and the 2000s, it increasingly means getting rid of IT.

Which is, funnily enough, great news for the channel. Because IT is indispensable, the only way to 'get rid of it' - yet improve company agility - is to outsource it somehow, setting the stage for managed services.

A year ago, Gartner predicted that larger and mid-size enterprises would increasingly choose selective, best-of-breed [discrete] outsourcing, but about 40 percent of large enterprises would still elect a single supplier to avoid the complications of managing multiple service providers. Back in 2001, the Australian managed IT services market was worth US$1.5 billion, with 33 per cent coming from network management services, 20 per cent from LAN-related services and 50 per cent from server-and-hosting services.

Gartner research has suggested that by 2006, business process management services will amount to more than 27 percent of the total of IT services in the Asia-Pacific region. A high proportion of IT management services is expected to be embedded in these contracts.

Emily Ballantyne and Ken Caflisch, the COO and CEO respectively of Sydney-based managed service provider (MSP) Trilogy, say their company today mainly targets SMBs. In the past 18 months, the Trilogy executives have invested several million dollars in tailoring their managed services setup around LAN, WAN, desktop and applications needs.
'We've invested in technology and infrastructure and people,' Caflisch says. 'But all the customers can share in the benefits of that single investment.'

Primarily based around remote management services, Trilogy earns about 80 percent of its revenue from ongoing contracts, starting from Cisco and HP hardware rentals and helpdesk offerings and then building managed services around that with a view to developing ERP services in future, Caflisch says.

Ballantyne notes that it has taken some time for managed services - still closely aligned with outsourcing in many people's minds - to take off. 'With managed services, customers retain control and in some cases get equipment on their sites but gain all the benefits of having professionals manage their environment,' she says.

Contracts and communication are undoubtedly crucial, Ballantyne says, but Trilogy itself has found that its prior experience - the company provides services to law firms and councils - has meant that it has so far had few difficulties in ironing out mutually satisfactory contracts.

Caflisch hints that key to Trilogy's success so far might be a flexible, open-minded approach. 'We don't specifically target security [for example], but if it is part of the customer's environment then we'll do it,' he says. Both agree that managed services are likely to keep growing for Trilogy in future.

Maree Lowe, director at box-builder and services provider ASI Solutions, says she's seeing definite strong growth in the managed services market. 'Significantly, we're working in some Federal Government deals,' she says.

For ASI, the way into managed services has been partially smoothed by partnering IBM Global Services - a veritable giant in the field. However, ASI's role is very much hands-on - with the reseller responsible for customers' outsourcing of IT and delivery of services over the LAN, among other things.

The main growth area is medium-size business, Lowe says, with 50 to 100 users. 'This is more likely to be a corporate customer. They're looking for back-up into their own IT where they might not have the staffing or the expertise. They might have their own IT structure - they just want extra resources for projects,' she says.

Helpdesk and LAN integration services have also stayed strong, with ASI picking up 'quite a few' contracts over the past year. Meanwhile, ASI was increasingly moving towards remote management deals.
'For customers with more than 500 users, the IT [infrastructure] is becoming so big,' Lowe says. 'They're really looking at what the core business is so let's get outsourced.'

System integrators are asking ASI for help, 'asking us to be their arms and legs around Australia', she says. Some customers have begun to ask ASI Solutions to even do some IT staffing projects for them. 'And that's something we have never done,' Lowe says.

Last year, enterprises really began to move into selective outsourcing, particularly in relation to network management, but today niche managed services providers are appearing in diverse verticals and IT specialities such as storage, web-based hosting or application service provision, and today's hottest topic - security.

Gavin Lowth, operations manager for Symantec's new managed security services, says the global security software vendor foresaw a larger drive for outsourcing security, partly as company security needs proliferate and grow more complex. 'There are two reasons. One, the skill sets available in-house. There's rarely resources around when viruses or [other things] pick on the network,' Lowth says.
'Also, these companies are trying to have these people on board 24x7.'

He points out that smaller businesses find increasing difficulty in managing IT security - especially as IT converges. Managed security provision would appear to be a major contributor to a 'trickle-down' of managed services to smaller companies.

Meanwhile, regulatory requirements have become more pressing - especially with the advent of legal reforms around corporate governance, such as CLERP 9 in Australia, Basel II in Europe and Sarbanes-Oxley in the US.

For Symantec, resellers of managed security services must not only know about security products, issues and packages but be better than average at communicating the benefits of access to the reams of data that accompany security service offerings.

Lowth hints that may not be happening at the moment. 'From a management perspective, we see a lot of takeup when [customers] can actually see the value,' he says.

Building up a managed service offering from scratch requires a large capital outlay in terms of infrastructure, he says, which means that diversification probably will not stay order of the day.
'I think that it will broaden into PKI (public key infrastructure). There are providers with a lot of niche stuff, but I think there's going to be a lot of consolidation in the next 12 months. We'll see a handful of key providers in security services,' Lowth adds.

The company launched its managed security services partner program late last year in Sydney, promptly signing a few organisations based on location, customer reach and skills fit, he says.
'The program breaks down into high-end partners like the telcos, solution partners such as system integrators, and plain reseller partners which ... [only] do the financial arrangements,' Lowth says.

The company does want to expand its reseller base - current partners include Queensland integrator Citec, Macquarie Corporate Telecommunications and Optus - but will choose carefully.

Managed services is not a commodity-type product - it can only effectively be resold by inclu