As Thanksgiving approaches on November 27, many U.S. companies are heading into an extended four-day holiday weekend.
If you're an executive or CIO ask yourself the following question: If your web servers, databases or network infrastructure failed over the holiday weekend who would you call for help?
Despite the proliferation of smart phones and ubiquitous network services, many IT staff members are impossible to reach over holiday weekends.
And commuting into the office for an IT or network emergency is the last thing most employees have in mind when they sit down for Thanksgiving turkey.
Secure, Safe and Sound
On the other hand, I will rest easy this holiday weekend because our company depends on multiple managed service providers (MSPs) -- a group of companies that remotely monitor, manage and troubleshoot our Web servers, databases and network systems.
In most scenarios, our MSPs mitigate an IT or network issue before it becomes a major problem. We pay a flat monthly fee to our Web host and MSPs for those proactive services.
As a result, my business partner and I will relax with our respective families this holiday weekend -- even as thousands of readers across the world continue to visit our corporate and media Web sites.
Through our MSP relationships we've purchased peace of mind -- which is actually priceless.
Our prior commentary on SaaS and Managed Services: Big Service Providers Plug In does a good job pointing out how various service providers are attempting to deliver a widening array of Software-as-a-Service (SaaS) solutions and managed services.
This trend is being driven by two major forces. First, the commodization of traditional transport services. Second, the shift in customer attitudes regarding IT management.
Service providers can no longer differentiate themselves based on the quality of their transport services. As a consequence, service pricing, customer loyalty and profitability of this mainstay business continue to decline.
To compensate for this erosion of their traditional transport business, service providers are seeking to deliver a new generation of value-added services which can give them greater 'stickiness' with their customers.
It's a Win-Win Scenario
At the same time, customers are seeking to offload, or out-task, a broader assortment of IT management responsibilities so they can improve the reliability of their systems and software, reduce their operating costs, and focus their limited resources on more strategic and/or innovative corporate initiatives.
THINKstrategies uncovered the growing level of interest and adoption of IT management SaaS solutions among IT professionals in 2007 as a key finding of annual survey with Cutter Consortium (download a complimentary copy of "SaaS Penetrates the IT Department").
Forrester recently published a report entitled -- "How Big is SaaS in IT Management Software?" -- which suggests that SaaS solutions only represent 1 percent of total IT management software sales today, but will grow to 10 percent by 2013.
Given that 25 percent of IT professionals who responded to THINKstrategies and Cutter Consortium's survey a year ago said they were already using SaaS solutions to address their IT management requirements, Forrester's forecast is probably low.
Multitude of SaaS Solutions
Smart vendors, service providers and VARs are recognizing this trend and seeking to win a share of this rapidly growing market. The good news for IT professionals is that they will have plenty of SaaS solutions and suppliers to chose from.
As always, the best choice will be selecting the supplier that you trust the most to meet your particular business needs and requirements.
Quick: Name the world's most successful software as a service (SaaS) companies. Most readers will likely mention Salesforce.com ... then perhaps NetSuite, two key players in on-demand CRM (customer relationship management) and accounting software, respectfully.
Salesforce.com and NetSuite certainly have momentum in their markets. But consider this: Big service providers and broadband providers like Cablevision and Verizon Business may be the best-kept secrets in both the SaaS and managed services markets.
With each passing day, I notice big service providers launching more and more SaaS and managed services offerings. Increasingly popular options include:
- Managed and hosted unified communications
- Hosted Microsoft Exchange and IBM Lotus Notes
- Managed routers, switches and network infrastructure
When Big Meets Small
Still, I'm frequently skeptical when big service providers strive to offer PC-like services and support to smaller organizations.
Conventional wisdom says small businesses are best served by VARs and solutions providers -- the folks who provide on-site consulting, integration and support services. Big service providers, critics claim, don't really have their fingers on the pulse of small business.
I think that's changing. Over time we'll see hybrid business engagements surface, where service providers and VARs outsource business engagements to one another.
In some scenarios, the service providers will host customer applications. In other scenarios, the VARs will continue to build and maintain network infrastructure for customers.
In all scenarios, small and mid-size businesses will seek predictable, steady IT costs by marching toward SaaS and managed services. Similar to how voice and IP came together in the late 1990s, SaaS and managed services are now inseparable.
My colleague, Joe Panettieri, reports that Dell has won its largest managed services agreement ever with the state of Georgia.
This contract illustrates how Dell, and other technology vendors, are shifting their go-to-market strategies to respond to customers' changing IT management needs.
Anyone who follows the technology industry knows that Dell has been struggling to keep pace with HP when it comes to computer sales. What few casual observers have recognized is how Dell has amassed a new set of remote management capabilities via a series of acquistions over the past year and a half.
Why Managed Services Matter
During that time, Dell has acquired SilverBack Technologies, Everdream, EqualLogic and MessageOne to serve as the foundation for a new portfolio of Software-as-a-Service (SaaS) and managed service capabilities.
Dell understands that it will have a difficult time outpacing HP and other technology vendors on the strength of its products alone as laptops, desktops and servers become more commoditized.
Instead, Dell and other vendors must differentiate themselves on their ability to help customers generate the greatest value from their systems. This means redefining their services to help customers, and their channel partners, better manage these assets to optimize their performance.
Redefining the Meaning of Support
The most cost-effective way for vendors to monitor these devices and proactively administer them is via managed services. The best way for them to offer these capabilities to their channel partners or customers is via SaaS solutions.
These 'on-demand' services redefine the nature of vendor/customer relationships. Customers no longer have to assume the responsibility for managing their systems and software, and wait for their vendors to respond to their problems when something goes wrong.
Now, they can shift the burden on their vendor to ensure the uptime and performance of their systems and software. By the same token, vendors can no longer boast about their customer support response times. Instead, they must demonstrate their willingness to take on this greater responsibility.
Are you puzzled about how to choose the best-fit managed service solution for your particular business needs? As a basic guide, the following are three typical high-level scenarios for deploying managed network services.
Scenario 1: Customer Owns Network and Shares Management Responsibility
Companies that already have an internal IP network can continue to manage it while out-tasking the management of onsite equipment -- usually known as customer-premises equipment (CPE), used for the managed service (see Figure 1).
The Roles and Responsibilities are as follows:
Managed service provider -- Sets up, maintains, and administers the equipment needed for the managed service, including company-owned equipment such as servers.
Company -- Managed service customer maintains and administers its internal network.
Scenario 2: Service Provider Owns the CPE; Customer Can Share Equipment Management with Service Provider
Some companies do not own a LAN, either because the location is new or the company already out-tasks its LAN services. In this situation, the service provider can manage the equipment needed for the corporate network as well as the managed service.
Many large enterprises like this arrangement because they can maintain physical control of the equipment while relying on the service provider for 24-hour network operational support (see Figure 2).
The Roles and Responsibilities are as follows:
Managed service provider -- Sets up, maintains, and administers the equipment for the managed services as well as the corporate network.
Company -- Monitors its corporate network through a Web interface provided by the service provider, receives regular reports on the network status and managed services, and is notified in case of a defined emergency.
Scenario 3: Service Provider Owns Equipment in its Own Facility; Customer Monitors Service Provider's Management of the Equipment
The difference between this scenario and the previous one is that most of the equipment is physically located in the service provider's "hosting" facility instead of on the customer premises.
The Roles and Responsibilities are as follows:
Managed service provider -- Sets up, maintains, and administers the corporate network and related managed services; most of the network equipment is physically located in the provider's computing center; the exceptions are the equipment for the LAN and network connections, as well as gateways for computers and IP telephony.
Company -- Monitors performance of its systems through a Web interface provided by the service provider, receives regular reports on the network status, and is notified in case of a defined emergency.
Summary: each of the three basic scenarios can be customized to meet your particular requirements. In upcoming posts, we'll identify some more specific application examples.
Companies with branch offices are facing a technology paradox: On the one hand, businesses are expanding their branch office locations by 6.8 percent annually. On the other hand, only 15 percent of those remote locations have on-site technology staff members, according to Nemertes Research.
Those stats beg the following question: How do you empower branch office employees with the proper technology when you can't afford to staff those remote offices with more IT staff?
The answer (as our regular readers already know) is managed services. Increasingly, companies are moving their IT assets out of remote offices and into either (A) a centralized data center or (B) an Internet cloud.
The march toward centralizing and virtualizing IT has some benefits and some challenges.
Next Generation Empowered Branch
The good news: Centralizing applications and IT infrastructure can make networks easier (and less costly) to maintain. The bad news: Accessing centralized applications from remote offices can be a painful, time consuming process. And application performance over a Wide Area Network (WAN) connection can be horrendous.
A range of managed services, however, can potentially eliminate those challenges. Application acceleration services, hosted VoIP, hosted unified communications and managed 3G services are now all mainstream solutions for branch offices.
And the trend toward managed branch office services will surely accelerate -- especially as companies explore next-generation technologies such as TelePresence.
The lesson for readers: Keep expanding those branch offices.
But, check in with managed service providers (from big companies like Verizon Business down to small companies like your local VAR or integrator) to see what type of managed branch office services they offer.
THINKstrategies recently unveiled the initial findings of its fourth annual Software-as-a-Service (SaaS) customer survey, in conjunction with Cutter Consortium, which revealed that 63% of the responding organizations are using a SaaS solution -- almost double the 32% who were using SaaS solutions in 2007.
Over the past four years, we have seen tremendous growth of the SaaS market spurred along by rising frustration with the challenges of deploying traditional software products and the hassles of keeping enterprise applications up and running.
Our surveys were the first to find widespread interest and substantial adoption of SaaS in 2005.
Changing workplace requirements have led to more workers needing to access applications and corporate data remotely, which has also led many organizations to adopt web-based SaaS solutions.
The Shift Away from CAPEX
But, the most important consideration has been the financial savings generated by shifting from upfront capital investments in perpetual licenses and systems to a more flexible, 'pay-as-you-go', subscription model. This approach has become particularly attractive in today's tough economic climate.
Despite these advantages, many IT organizations were reluctant to accept SaaS, and even resisted its adoption in many cases because of concerns about the reliability, security and performance of these web-based applications.
However in 2007, THINKstrategies survey found growing acceptance of SaaS solutions by IT professionals who were not only learning that SaaS solutions could be trusted to successfully support their business units and end-users, but also discovered that a new generation of SaaS solutions were available to help them better manage their IT operations.
Business Case for Out-Tasking IT
Leveraging SaaS and a broader array of 'cloud' computing services is an extension of the same mindset which is driving many IT departments to recognize the benefits of contracting for managed services.
This 'out-tasking' strategy allows IT professionals to offload many of the day-to-day technology deployment and management responsibilities which can be performed in a routine fashion more economically by a specialized third-party, so the IT staff can finally focus their limited time and resources on more strategic initiatives or even innovative projects.
Click here to obtain the first of a series of three Executive Update reports based on the THINKstrategies/Cutter Consortium SaaS survey results.
Many companies find it expensive to keep up with new Business Technologies -- or simply prefer to devote their limited IT or Telecom resources to the core business, rather than routine ongoing network management.
Managed network services can quickly enable your company to evolve, by giving business decision makers access to leading network technologies and management expertise -- without requiring high initial capital expenditures (CapEx), or ongoing investments in technology upgrades.
Deploying a Managed Service Solution
When a company subscribes to a managed service, a service provider manages the network equipment and applications on the customer premises according to the terms of a service-level agreement (SLA) established to meet the company's unique business needs.
Some managed services are also hosted, meaning that the service provider hosts the equipment in its facility instead of the customer's, and delivers services to company employees over the Wide Area Network (WAN) to wherever they are physically located.
For small and medium-sized businesses (SMBs), managed services provide enterprise-class capabilities for a predictable monthly fee -- without requiring a large, initial capital investment.
The On-Demand Pay-as-you-go Model
Companies that out-task enjoy high levels of network support and availability, enabling internal IT staff to focus on strategic activities instead of network support, and pay only for those networking services that they need.
Managed services generally include software, hardware, and other Internet Protocol (IP) networking services. The service provider's highly experienced technical experts focus exclusively on providing the network services and support that customers need to meet their business requirements.
Companies have the option to out-task some or all of their network management and monitoring tasks and retain control of the rest -- even if the equipment is physically located at the provider's site.
Key Benefits of Managed Network Services:
- Reduces costs, including service call fees, hardware, operations, and network transport
- Eases adoption of new technology-enabled business processes
- Increases levels of support and network availability, without additional staff
- Makes your IT and Telecom budget more stable and predictable
- Provides access to the latest technology, with limited risk
- Provides access to an enhanced technical skills base
- Makes it easier to adapt to changing business conditions
- Enables the IT manager and staff to focus on your core business
At first glance, some small businesses are caught in a technology paradox: They need modern technologies to drive revenue higher. But they don't have enough cash to acquire that technology.
A recent American Express survey found that more than half of today's U.S. small business owners are experiencing cash flow problems, reports StartupSpark.com. As a result, the top priority for most small businesses is maintaining current sources of revenue -- rather than building new ones.
Have Your Cake and Eat it Too
I say: Why not pursue both goals? Fact is, you don't need very deep pockets to leverage modern technology. What you really need is a predictable cost structure -- a way to know exactly how you're going to continue innovating without suffering from surprise IT costs.
By now, you likely know where I'm heading: Predictable managed services contracts can help many of those worried small business owners get a handle on their IT costs.
Our company, for instance, pays a flat monthly fee for e-newsletter marketing services from StreamSend.com. We use that service to launch new products, promote news or evangelize special offers to new target customers.
We're also learning to cut the hidden costs of business travel. One prime example: We used to pay hotel WiFi fees, which varied greatly from region to region. But now we're paying a flat monthly fee for Starbucks WiFi service, which is readily available in all the cities we visit. Also, we're thinking of shifting again, this time to a cellular Internet connections for our laptops.
Cash Flow Management Solutions
Those are pretty basic steps. But don't stop there. Look at every piece of your IT infrastructure -- applications, hardware, systems, etc., and determine if there's a managed alternative available for a predictable monthly fee.
Then communicate and innovate with minimal impact on your monthly cash flow.
According to a recent McKinsey & Company report, their research results demonstrated that the potential for managing servers and other IT resources remotely is essentially underutilized.
However, changes in the current business environment will increase the adoption of this approach. Plato, a wise Greek philosopher, wrote about how "necessity is the mother of invention." Certainly, that perspective is equally valid today.
The motivation for utilizing the resources of a service provider can be considerable. A case in point: Fortune 50 companies, with budgets of $2 billion, can save as much as $500 million of their IT infrastructure budgets.
How, you may ask? Apparently, it's mostly from reducing fully-loaded labor costs.
Evaluation of IT Assets and Liabilities
McKinsey surveyed 141 CIOs at multinational corporations, and 34 percent of them said that they anticipate utilizing some infrastructure management services over the next three years -- which is an increase from 19 percent of respondents in a similar survey performed during the prior year.
Economic justification is the basis for the expected growth. As hardware costs fall, labor has become the focal point. They estimate that costs for non-labor IT components -- the hardware, software, maintenance, and facilities -- declined by almost 44 percent between 2000 and 2008 as prices have dropped.
McKinsey also estimates that total costs will fall by nearly half from 2000 to 2010, however the labor component will more than double -- to 62 percent, from 30 percent.
Apparently, the attraction of a managed service solution is due to changes in the deployment of infrastructure. Many organizations have simplified their IT and network architecture, making it easier to decouple components, and utilize service providers.
Selectively Out-tasking the Drudgery
Besides, standardization has made some management tasks ready for automation. As a result, it is now easier to manage some complex IT tasks, like network security monitoring, from a remote location.
Furthermore, organizations can selectively out-task parts of their IT infrastructure management. Some companies will choose to only out-task network monitoring, while others seek assistance with the total management of their data center needs. Clearly, it's a flexible model that can adapt to shifting business requirements.
In summary, McKinsey believes that the greater speed and security of data networking has made interactions between the service user and their provider more stable. This progress has therefore increased acceptance of the managed service delivery model.
By the way, before you rush to reduce your Business Technology deployment plans, you may also want to reflect upon McKinsey's guidance on IT spending cuts: they believe that "IT investments deliver more value to a company's top and bottom lines -- by creating new efficiencies and increasing revenues -- than any savings gained from traditional IT cost cutting."
I spent Thursday afternoon moderating a Webcast about the managed services industry. The discussion drove home the fact that small businesses will continue to embrace certain managed services regardless of the economy around them.
My guests included:
- Gary Pica, general manager of mindSHIFT Technologies, one of North America’s top managed service providers
- William MacLeod, CIO, Accu-Sort Systems, a mid-size business that focuses on automatic data capture solutions
- Jim Alves, executive VP, product marketing, Kaseya
MacLeod conceded that his company is "rethinking everything" -- nearly all IT projects and expenses -- during the current economic turmoil. But here's the interesting part: MacLeod mentioned several managed services that his company will continue to embrace, no matter what:
- Internal customer (i.e., end user) support: Here, MacLeod depends on a mix of outsourced help-desk and on-site services from mindSHIFT, his managed service provider.
- Enterprise business systems maintenance and support: In other words, MacLeod is not going to cut any IT costs that could harm the reliability and scalability of his applications.
- Data Backup/Retention: Information is the lifeblood of Accu-Sort's business. Here again, MacLeod depends on his MSP for managed services.
- IT Security: Rudimentary tasks -- such as patch management and network monitoring -- can be outsourced to ensure businesses can focus on more innovative projects.
But, MacLeod's strategy at Accu-Sort reinforces the fact that progressive businesses are embracing reliable, predictable, cost-effective managed services -- regardless of the economy around them.
It is time for IT and business decision-makers to get over their fears of 'out-tasking' various aspects of their daily operations to specialized service providers.
Today's turbulent economic climate, intensifying competitive landscape and changing workplace requirements demand that organizations of all sizes re-think their business technology sourcing strategies.
What I believe is still inhibiting many IT or business decision-makers from adopting Software-as-a-Service (SaaS) and managed services are a few common misconceptions and interrelated fears.
Gain New Perspective, with Sharp Focus
For instance, too many IT and business decision-makers continue to resist a growing assortment of SaaS and managed services which can address their business application and IT management needs because they are concerned about losing control, sacrificing performance and/or dealing with additional security risks.
While all of these are legitimate concerns, THINKstrategies has found that they are not real issues when it comes to today's SaaS and managed service offerings.
Instead, most of these services have achieved better performance and higher security levels than many in-house application and IT operations. They also have achieved these service levels with lower upfront costs, quicker deployment cycles and less ongoing management requirements.
As a result, most SaaS and managed service users gain greater ROI on their IT/applications at a lower total cost of ownership (TCO), by focusing their efforts on overall business impact.
An Adaptable Coexistence Strategy
Many IT/business decision-makers also believe that SaaS and managed services are only appropriate for small organizations with limited financial resources or internal skills, and relatively simple functional requirements. Said another way, they think SaaS and managed services aren't sophisticated enough to address the complex needs of mid- to large-scale enterprises.
The reality is that there are a wide array of SaaS and managed service offerings which can address organizations of various sizes. Small businesses can fill voids which they couldn't afford to address with traditional applications or management products with many SaaS and managed service offerings. Mid-size and large-scale enterprises are also finding plenty of SaaS and managed services to fill unmet needs, or augment and extend the value of their existing software and systems.
The Fearless Agents of Change
Too many IT managers view SaaS and managed services as outsourcing solutions that could ultimately make them replaceable.
While this is possible, it is more likely that SaaS and managed services can help IT managers overcome the day-to-day challenges of deploying and administering software and systems, so they can refocus their time and energy on better supporting the more strategic needs of their business units and end-users.
The bottom-line is that IT managers can no longer justify doing business as usual. The sooner they put their fears of SaaS and managed services aside, the sooner they will be able to leverage these services to better serve their organizations and safeguard their positions in an uncertain world.
According to Matt Cowall at Appia Communications, if you look around the business video communication landscape today, you'll see two extremes in predominant use within the marketplace.
At one end are TelePresence and other highly sophisticated solutions. These are expensive and largely aimed at the enterprise market, but the quality of the video experience is excellent.
At the other end are PC- and Web-based solutions. These products are inexpensive, but often lack the quality and reliability that business users require.
Mid-Market Video Requirements
Somewhere in the middle, SMBs and similar organizations hope for the best of both extremes -- high video quality and reliability at an affordable price.
But a recent convergence of circumstances and next-generation technologies appears to be closing the gap in both directions, fueled by:
- The soaring costs, hassles, and inefficiencies associated with travel
- The slowing of the economy, which puts a premium on doing more with less
- The focus on reducing carbon emissions
- Internet Protocol (IP) technology, which cuts video transport costs, especially in comparison with traditional ISDN services
- New video compression codecs
- The emergence of Video as a Service (VaaS)
The Rise in Virtual Meetings
Case in point: in survey results released last month by the National Business Travel Association, travel buyers from over 320 U.S. companies reported a 57 percent increase in the use of videoconferencing, and 81 percent of those respondents said that the increase is due to a deliberate replacement of travel with video.
Video communication is on the rise, but how will "the middle" fully adopt and employ it? What mix of products and services will meet the demand? It will be fascinating to find out. Maybe next time, we can discuss it face to face.
Somewhere between the economic panic and the managed services craze their resides a simple truth: Now is the time for all small businesses to carefully consider their IT strategies for 2009.
I'm tired of reading wild statements that say managed services and Software as a Service (SaaS) are immune to the economic turmoil. It's far more accurate to say we've reached an inflection point of sorts, where small businesses need to review what they spent on IT in 2007 and 2008 to help their planning in 2009.
Traditionally, many small businesses acquired IT assets -- PCs, servers, networks, applications and other infrastructure that they ran internally. But those acquisitions required big lump-sum capital investments.
During the current economic turmoil, we're seeing a shift in the market. Smart small businesses increasingly depend on IT services.
Much in the same way that they pay flat monthly fees for broadband and cellular services, small businesses are embracing managed services to gain far more predictable -- and far more reliable -- IT options.
Look Back to Get Ahead
If you're a small business owner or manager, take a look at your 2008 and 2007 IT expenses. Be sure to underline purchases involving storage, security and application infrastructure.
Going forward, investigate how those big-ticket items could be shifted (partially or entirely) into the cloud.
Hundreds -- perhaps thousands -- of IT solutions providers now offer managed firewall and managed endpoint security services. And new cloud storage services -- such as Amazon's Simple Storage Service -- can bolster your own on-site storage area networks with key disaster recovery capabilities.
The trend certainly includes any applications you're seeking to license or "purchase." I am not suggesting that all on-premise applications will shift to the cloud. But before you build -- or buy -- your next business application, check to see if it already exists on the Web. Chances are, it does.