At your service

Managed services delivery, it seems, is coming of age. Deploying and administering specific IT functions has in recent years become a popular way for resellers of all stripes to make a buck.

Rolf Jester, a senior Gartner analyst specialising in services, says the managed services sector has become almost boring.
“[Managed services] is becoming more of a normal business, and normal businesses -- when things are ticking along, making money and delivering services that customers like -- are a bit ho-hum. And, in actual fact, that’s a good thing,” Jester says. “That’s good news.”

The Australian managed services sector has turned over about $4.5 billion in the past calendar year and that figure is expected to go on growing by 4 or 5 percent a year for the next five years or so, he suggests.

You would think that packaging and delivering managed services might be a game for industry giants, like big-bang outsourcing was once upon a time.

However, Jester says the field is much wider. Actually, many smaller companies have wriggled into the niches between small and mid-size and large company needs to provide every kind of IT and related services.

“It’s a well-established business in that sense. The good news is there’s growth and it is bigger than the gross domestic product [GDP] rate, which is positive,” he says.

Slowly yet surely, managed services is becoming a bigger part of the whole economy and of all IT deals. Customers are learning it is not necessary to have IT functions and infrastructure in-house, delivered by their own staff, so more functionality is being offered as a managed service of some kind as time goes on.

That makes sense up against the big picture, says Jester. In future, Gartner believes most IT will get delivered to customers as a utility. “It’s early days for that, but we’re seeing the early signs,” he says.

Global giants like EDS, IBM and HP have all announced various services that move delivery towards the utility ideal. Meanwhile, many small providers are tackling individual applications that can be provided to businesses more cost-effectively from an outsider.

“For example, similar marketing solutions can get delivered across the internet as an application utility,” Jester says.

Once upon a time, it was all too new and specialised for that to be possible. Today, just like with the invention of mass production methods in the 19th century, IT and IT services in particular, are going beyond commodisation and have started moving towards industrialisation. It is turning from being a craft, cottage industry into something more about scale, capital and investment, yet it works and is reliable, he says.

“That is a very strong trend, the industrialisation of IT,” he says. “And by definition, it means it’s more standardised. You can’t have the Model T [Ford] in any other colour than black any more and that will turn out to be a good thing.”

While people who want their IT services in a unique shade of pink may be inconvenienced, most users would find the commonality of more commoditised services a boon, Jester suggests.

“Both companies and players are learning the discipline more and more, getting better at defining what they’re selling and buying, understanding and managing that and the risks and how to mitigate them,” he says.

“I say it’s the future of business as well.”

Brave new world notwithstanding, it seems indeed that managed services have been proving lucrative for resellers, and more providers, as a result, are beefing up their offerings accordingly.

Brett Oberstein, national business manager for managed services at integrator Dimension Data, says the integrator has been getting busy in managed services. Recently, Dimension Data has launched managed IP telephony, SQL, incident management and response, digital rights management (DRM) and storage services.

“It’s grown from what was initially a maintenance base. Originally, we built and grew a very large maintenance business and we broadened our knowledge and expertise into a broader set of IT services,” he says.

Oberstein says managed services probably account for some 20 percent of Dimension Data’s business. New ideas, such as managed DRM, are proving popular with its customers wanting to better manage content such as SharePoint portals or email.

“That’s useful for financial or health providers, or anyone with intellectual property that needs to be protected,” he says.

One big issue, he concedes, is the ongoing investment in the resources needed to deliver the right managed services. Dimension Data partners with 30-odd vendors to get the knowledge it needs.

Further, service level agreements (SLAs) have substantially evolved since 1998 when Dimension Data started doing managed services. The integrator has fine-tuned the ways it could optimise and enhance what it provides. And key performance indicators (KPIs) have become mutual.

“We now have some fairly complex contract structures,” Oberstein says. “It’s not about managing the infrastructure but managing the business service.”