Has Managed IT Support Become a Commodity?

“Mary! We need a new managed IT support company right away. Call up five or ten local guys and get prices. Let’s sign up with the guy who gives us the best price.”

“Hello. Ajax I.T. Service? This is Mary Jones the office manager at Wendy’s Widget Works. We have 15 computers…I think. Maybe 20. I think we have a server. We’re using Office 2003. Works fine. I need a price on your taking over our IT support. I need the price in two days and we’re giving the contract to whoever gives us the best price. Oh, yeah. What kind of guarantee can you give us that our network will never go down?”

“Thanks for calling, Mary, but before we give you a price, we would like to send a Solutions Architect to your office to run a complimentary Network Infrastructure & Security Assessment so we understand what you have and what you need. It’s really impossible for anyone to give you fair and accurate pricing, much less top level service, unless we know exactly what your technology looks like. Anyone who gives pricing without knowing this is either fooling themselves, or fooling you. After the assessment, we meet with you for an in-depth discussion so you fully understand what we do and how we work. Can we set an appointment?”

“No. That won’t work for us. The boss doesn’t want anyone looking at our equipment. He just wants a price.”

The trouble is, Mary’s boss thinks of Managed IT support as a commodity. It doesn’t matter where you get it, because it’s all the same. Like Campbell’s pork and beans.

Restaurant Manager: “Hey, Joe. What’s today’s price on a case of Campbell’s pork and beans? What!?! I can get it 50 cents cheaper from Bob!”

Well, if you want to compare the availability of your IT network with all its moving parts, and the security of your data against today’s cyber-crime and/or the possibility of data theft or loss, and the mobility of your employees…to a can of beans, then shopping for a Managed IT Support Provider (MSP) based solely on price is probably right for you.

Some people have compared choosing a managed IT support provider with choosing between a Ford or a Cadillac. Not a good comparison. The Ford will certainly cost you less, but it will still get you where you want to go. That’s not always true with a low-cost IT service.

Maybe the question should be: Why are you looking for managed IT support?
Most companies begin this search because of one (or more) of several reasons: their IT isn’t working properly, they’ve outgrown their current IT provider, they are thinking of cutting costs, but many of these people still think of IT support as a “necessary evil”…something they have to have, but that doesn’t contribute to the bottom line. While this “necessary evil” mindset may be true when they start their searches, many of these firms end up discovering that good managed IT support also provides a tremendous value-add in a way that “commoditization” cannot address.

Managing Your IT in the Digital Age

Is your company a technology company? Are you using email, or Microsoft Office, or digital phones, or the Internet, or online banking, or ecommerce? Using these makes you are a technology company, and if you want to guarantee your company’s future against the digital disruptors that will soon be at your doorstep, your technology better be up to the challenge. New and improved technologies that improve customer experience (YOUR customers) pop-up all the time, as are “better” and more agile cyber-criminals who want to attack your business in very destructive ways. In today’s business world, top-quality IT management and support are no longer luxuries, they are critical.

Large corporations know this and they hire large, talented IT teams. The IT needs of these companies are so diverse that it is impossible for a small team of two or three people to have the skill sets, or the bandwidth, to accomplish all that is necessary. Smaller companies have had to work the situation a little differently: they hire a managed IT service provider that has its own team of professionals whose varied expertise can be allocated as needed.

Small Companies with Small In-House IT Teams

Of course, not all small to mid-sized companies go in the direction of fully-managed IT. Some small but growing companies hire in-house IT managers to handle their day-to-day needs, but as they continue to grow, they are faced with a decision: continue to expand the in-house team or augment the services of the existing team with a third-party service. We go back to our example of managed IT service companies with a wide variety of well-trained IT professionals who can handle virtually any situation that arises.

Managed Service as a Disruptive Business Model

To understand the mind-set of managed services as a commodity, we have to go back to the mid 1990s. Managed services as an industry was viewed by many as a temporary necessity that would fade away and that VARs (value added resellers) would take over, providing these services along with the actual hardware and software products. In fact, managed IT service providers were considered a threat to the then current VAR business model…even the IT media of the time agreed. And the vendors (the manufacturers) liked this model because their licensed VARs were merely salespeople promoting the vendors’ products, and the power was kept in the hands of the vendors.

But the VARs often lacked the skills to properly spec and service the hard and soft equipment they were selling, so the MSPs stepped in and, in many cases, took over the spec’ing and servicing. While many of these MSPs were one, two and three man shops, it was assumed that any one of these companies could handle IT situations as well as any other. For some time, and up to a point, this may have been true, and old concepts die hard.

As the 2000s passed and the 2010s came on, two things happened: 1 – technology became more and more complex, changing and growing exponentially, and, 2 – the MSPs developed their own relationships with the vendors, spec’ing and selling the right equipment based on their clients’ needs, not based on what the manufacturer was pushing that month. In fact, today, managed IT support providers are major influencers in the products their clients buy.

This make a great deal of sense. It is the IT service providers who will have to service and maintain this equipment, so it is in their own best interest to sell their clients the best products for their clients’ needs. This is much different than the VAR who would sell the equipment and essentially walk away from it because he no longer had a financial interest in what he sold.

The Right MSP and the Right Equipment

Here is a basic truism about dealing with a top-flight MSP: when it comes to selling their clients any type of equipment, the better the equipment fits the job, and the better able the MSP is at servicing that equipment, the better off will be the client, the MSP, and even the vendor. No one, especially the MSP who will be servicing your entire network, wants network or equipment problems of any type, and when they do occur, and they will, the client is best served by working with someone who knows exactly what to do.

Companies that buy managed IT services based solely on price often discover that the company they engaged simply does not have the expertise necessary to accomplish what needs to be accomplished.

Technology is Constantly Changing

All the above is very important, no question, but there another side to this. We live in the age of Digital Disruption. Technology is ever evolving and technology leaders in every industry are pushing their way forward to the head of the pack. Think of Uber vs the taxi industry, or the effect of Netflix on Blockbuster. (In 2004 Blockbuster had 9,000+ stores with 84,000+ employees. By 2010, it was all gone, save fewer than 60 stores, and now they are gone, as well.) The advent of the managed IT services industry is another in the long line of digital disruptions that have affected many industries.

But the vast majority of digital disruptors are working on a much smaller scale, often becoming their industry leaders on a local level by using newer technologies to better service customers, or launch new products, or analyze and improve manufacturing.

Your MSP should be working hand-in-hand with your management team to help identify the technologies that can power your business forward and in helping your business become a true digital business. This is not the stuff that comes from thinking like a commodity.

No. Managed services are not a commodity. To be a commodity, all providers would have to be equal, would have to have the same technical capabilities and same relative manpower.

Here at DynaSis, we have developed a road-map of how any business becomes a digital business. Today’s Digital Business consists of:

  • People
  • Business Processes
  • Applications & Data
  • Infrastructure.

The above factors help define your Digital DNA, which is made up of:

  • Your IT Strategy
  • Your IT Organization
  • Your IT Processes
  • Your IT Infrastructure…

…which lead to your Core Competencies:

  • Availability of Your IT Infrastructure
  • Security of Your Data
  • Mobility – Anytime, Anywhere Access on Any Device…

…which lead to your Expected Outcomes:

  • Increased Productivity
  • Reduced Costs
  • Minimized Risks
  • Maximized Growth…

…all of which lead to: Increased Profitability.

Not all MSPs have the ability to assist their clients this way. Not all MSPs have the technical where-with-all themselves to properly service their clients, or to help them make effective IT decisions. Not all MSPs have their own internal IT capabilities that keep them at the forefront of their own industry.

There are effectively three ways a company can accomplish this:

1: Hire their own high-level internal IT team that can plan into the future. (No, we’re not talking about someone who can fix computers or teach someone how to email.) This works well for larger companies of 100+ employees.

2: Hire a highly qualified Managed IT Support provider.

3: Hire a small internal team for high-level planning, and also hire a highly-qualified MSP to handle the day-to-day tasks, as well as coordinate with the internal people.

 

The “Break & Fix” Model

One more thought: some smaller companies, usually with no more than 50 employees, function under what is referred to in technology circles as the Break & Fix Model. This is a euphemistic (and certainly unflattering) way of referring to service providers who are engaged only when they are called on to fix what is broken. To some it seems that this is more economical. After all, why pay for a service contract when there is a chance nothing will break? But there is a better way of looking at this. For example, the more things that break, the more money the “fixer” makes. Think about that. But when you are using an MSP, the less often things break, the more money the MSP makes, AND the more effectively and efficiently your technology serves your company and your customers. Would you rather have a provider who makes more when your system crashes, or who makes more when everything is running perfectly? No-brainer here!

Comparative Costs – A Final Word

Our experience also shows us that when customers engage a highly-qualified MSP (like DynaSis, for example!), while it may seem like the costs will be higher because of the monthly contract fees, in looking back, they almost always find that on an annual basis, their IT costs are equal to or less than they had been previously, AND they have the advantage of their technology becoming a vital and powerful tool for driving their businesses forward.


http://www.heitmanagement.com/blog/2013/09/commodity-vs-differentiated-it-services/
https://www.infoworld.com/article/2625231/managed-services/cloud-computing–it-as-commodity.html
http://mspmentor.net/managed-services/managed-services-commodity-only-if-youre-slacking
https://www.cio.com/article/2930498/it-strategy/why-businesses-are-turning-to-managed-it-services.html
https://mspalliance.com/managed-services-become-commodity/
https://www.varinsights.com/doc/avoid-the-managed-services-commodity-trap-0001
https://mspalliance.com/iaas-new-commodity-managed-service/

 

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