Managed services may not be for everyone 18 March, 2009 By Chris Talbot

As with anything IT-related, it's important to do a cost-benefits analysis and decide if the return on investment (ROI) makes sense, said Michelle Warren, president of MW Research & Consulting.

"It's essentially best practices. It comes down to best practices and the economics," Warren said of managed services.

Managed services run the gamut in services being offered, from e-mail hosting to network monitoring and management to help desk operations, and whatever is chosen will cost money on a regular basis (typical contracts are based on per-month billing). With the economy in a serious downturn, finding extra money to put towards IT is difficult, but the trade-off is businesses will get superior service levels with managed services because they'll be outsourcing to professionals, Warren said. That offers a level of peace of mind.

"When it comes to something like managing e-mail, that's what companies need. They need their e-mail to work and be up and running. They can't settle for something that doesn't work," she said.

When managed in-house, many businesses struggle in how to best do it, and it generally requires the hiring of full-time people do it, which means dealing with salary costs and training. No matter whether IT functions are managed in-house or purchased as a managed service, the end result is it costs money, Warren said.

"Some organizations, especially small businesses, like to do it themselves," she said. They get peace of mind from having it within their own walls.

When it comes to finances, Warren said it's probably slightly cheaper by doing it in-house than by outsourcing it, but it depends on the organization. It's important to do a cost benefit analysis and get quotes from two to three managed services providers or channel resellers that offer managed services.

Another important cost to be concerned about is what happens when an IT function goes down. It's something a lot of organizations don't consider, Warren said. If e-mail goes down for two days, what's the cost to the organization?

"Potentially it's huge. Compare that to having it outsourced and hosted," she said.

A lot of managed service providers will have some sort of backup or failover system, whereas small businesses that run IT functions in-house are unlikely to have such things, she explained. Managed services also generally come with some sort of service-level agreement (SLA) attached that outlines the responsibilities of the service provider.

"They're now in the driver's seat. They should be able to negotiate for what they're looking for. It's certainly a buyer's market right now," Warren said.

Another benefit to going with a managed service is that providers keep their software updates so customers are using the latest releases and patches, she noted. Managed by an in-house IT team, that's not always the case.

The value of a managed service versus in-house management varies based on the company and what it needs to do. Warren said there are benefits for both approaches, and what makes sense for one business may not make sense for another.


Previous Trusted Business Advisor articles by this author:
07/23/09 Understanding the competition is critical in sales
06/25/09 MSPs cashing in with margins up to 65%
05/29/09 Social media as a sales tool
04/08/09 MSP market fragmented, but key players stand out
04/02/09 Automation is key to managed services billing
03/25/09 Transitioning to managed services model not easy
03/11/09 Partner locator pushes good leads to resellers
03/11/09 Getting into managed services not as simple as flicking a switch
03/04/09 Managed services business drivers "just make sense"




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