Benefits of managed IT services
Software delivery is moving faster than ever thanks to improved processes and increased IT maturity. However, faster does not always mean better. In fact, according to the 2019 “State of Agile Report,” the vast majority of respondents (84 percent) said their organizations were below a high level of competency with agile practices, revealing that there’s significant room for improvement through agile coaching and training.
To combat this deficit, IT spending is on the rise. A recent survey published by TEKsystems found that 20 percent of IT management executives report high or unforeseen costs associated with digital transformation.
Why? Today, more and more IT companies are under significant pressure to keep up with customer expectations, application and service functionality, and security compliance — all while delivering value and keeping costs in check. As a result, many IT executives are investing in more predictable cost models.
If you’re one of those executives, and you’re in the process of weighing up the pros and cons of staff augmentation versus managed services, then you’re likely among the 74 percent of IT leaders who are frustrated with their current software delivery speed.
In this article, we will provide a brief overview of the aforementioned engagement models, and explore why more organizations are shifting to this model to accelerate and evolve their IT practices.
What is managed services?
Managed services is a software delivery model that involves the partnership of an IT or software development company and an outside vendor. The outside vendor manages all or some of the hiring company’s software development. The managed services team works with the client to map out a product development plan and also accepts responsibility and accountability for delivery.
What’s the difference between managed services and staff augmentation?
Managed services focus on delivering value rather than a set list of tasks, features, or user stories.
An accomplished managed team can build a sustainable, reliable process that blends and integrates teams to generate more predictable, valuable, and sophisticated outcomes through frequent, iterative software delivery cycles.
In fact, Mordor Intelligence research forecasts global managed service spending climbing from over $155 billion in 2018 to more than $296 billion by 2023. Although these survey results show that both staff augmentation and managed services models are used within the industry, data shows that the IT industry is trending towards the latter.
The goal — and potential — of a managed team is to get the job done, and while doing so, to evolve practices to achieve greater organizational value as delivery processes mature with each delivery cycle.
What Are the Benefits of Managed Services?
In addition to having more value-based development and delivery iterations, here are some other benefits:
As explained briefly above, managed services models are typically tied to delivering valuable outcomes — and this is also reflected in the pricing model. Rather than paying for a set number of hours, pricing is based on iterations (usually two-week “sprints”) and product delivery through a service-level agreement (SLA).
Because managed teams are financially incentivized to deliver, the value of the software features they produce is typically higher than that of staff augmentation or internal IT teams. As a result, managed services teams can help define reliable processes that lead to delivery systems that accelerate over time, ultimately evolving the organization.
Sustainable and reliable processes
In addition to value-based delivery, managed services teams focus on defining and improving processes, which drives value with each delivery cycle. By defining reliable processes, managed teams focus on the quality of outputs rather than inputs. Reliable processes are results-driven, which means that organizations can evolve — and at a lower cost than working with staff augmentation or another outsourcing model.
As mentioned briefly above, most IT organizations that adopt staff augmentation models often pay for hours rather than value. This can mean elevated development and production costs that sacrifice quality and overall value. However, managed services models often present fixed costs based on specific iteration deliveries. This helps the hiring IT company to more effectively budget and predict costs. Such engagements are also easier to scale over time when compared with hiring an in-house team.
Improved risk management
Every business, project, or experiment carries a certain element and amount of risk. Although most IT teams that work within agile environments accept that there will always be a level of uncertainty with projects and initiatives, managed services can help reduce overall risks and uncertainties related to deliveries by absorbing the delivery risk, as defined in the SLA. IT companies that attempt to implement and support all IT services in-house often struggle with significantly higher research and development and product development costs, as well as longer deployment times.
Does your organization need managed services?
When employing a software delivery partner, an organization can solely focus on defining and driving business value, rather than building and maintaining an IT department. Internal IT departments are then elevated to focus on business strategy versus software execution.
So, how do you know if your company needs managed IT services? The first red flag is when IT executives observe a decline in value or an increase in customer complaints. If your customers aren’t happy, that’s hurting your organization. Poor quality software is the likely culprit and your delivery model may be to blame.
Here are some other symptoms that suggest your company likely needs managed services:
Your internal teams don’t achieve or accomplish organizational goals due to a lack of service and support
Either you’re severely understaffed in the IT department and the issues grow like a snowball, or the unresolved technology problems fall on the shoulders of other teams and departments, often underqualified or exhausted with what’s already on their plate. But no matter how thin you spread your resources, some areas remain unattended, affecting the overall performance.
You experience too many service interruptions and/or downtime
IT services are there to ensure peace of mind for you by keeping your systems running and updated. In the ever-changing technology landscape, it is crucial to stick to a strict data backup schedule, fix issues on time, and always keep security in mind. There’s no excuse for lagging behind, since interruptions result in a loss in reputation and withdraw you from the business competition.
Constant budget overruns interfere with your planning
Hiring a dedicated team or utilizing managed services might look like an expense, but it is a cost-effective strategy. You won’t have to worry about unexpected budget overruns due to outdated software licenses and hardware breakage — this won’t be your problem anymore. Your software delivery partner will take care of the network infrastructure and maintenance, while you scale and plan accordingly to your IT budget.
You’ve seen an increase in customer complaints and issues
Customer or user satisfaction is a clear indicator of your solution’s efficiency. Having trouble resolving and eliminating complaints is a sign that your team doesn’t have enough time, resources or expertise to handle customer relationships. By outsourcing your IT operations, you maximize the uptime and reliability of your software, enabling you to allocate your in-house resources to improving customer service.
You suffer from lost data or security breaches
With technology rapidly evolving, security and compliance with regulations is becoming a never-ending headache. To ensure strict compliance and prevent security breaches, you can hand over protection and security policies to your managed services provider, so they can take action if a security incident occurs.
Managed services help organizations deliver value outcomes
Because IT services providers focus on an improved set of processes, value to the organization increases with each delivery cycle. This enables the organization to evolve, increasing the quality of output at a lower long-term cost than staff augmentation or outsourcing.
Our client’s story: how managed services contributed to the success of a risk and compliance solutions company
Forte Group provided managed services and direct employee placement to a US-based fintech solutions company with about 5,000 employees.
The client’s challenge was an enormous tech debt of multiple improvements that impeded the release of new features. The company was not able to keep up with demand or qualify, validate and hire fast enough. As a result, the client sought a managed services provider to identify weak points from both development and management perspectives, and understand what was lacking for business continuity.
Forte Group assembled a scrum team to eliminate the technical debt and unclog the way to develop new features, and to train in-house employees to support and operate in a newly established environment. Once the scrum team ensured everything was running smoothly, the client’s team would take over.
Since the client’s technology stack and architectural approach were not the greatest fit for the set goals, we got involved at the earliest stage of development. Getting to the root of the issue before scoping the project allowed for a problem-solving approach and faster initial momentum that enabled us to hit the ground running.
Because Forte Group gave us a managed services team rather than a couple of individuals, their ramp-up time was extremely small. They were great at stepping back and looking at the bigger picture of what our company needed to do to be successful and then presenting us with the pros and cons of developing one thing versus another in terms of how it would affect that larger picture of things.
- Building a product that meets all requirements is the main criteria for completing a managed services project. Throughout our engagement with the client, outcomes were the only measure of our performance rather than billable hours.
- In managed IT services culture, suggesting ideas for offerings and product improvement is an essential part of the provider-to-client partnership. As a provider, we not only lent our team’s experience and ability to execute, but also contributed to the client’s long-term success.
- The client shared that we always did a good job of keeping them abreast of the project’s progress. The client was able to develop their own rules around how they wanted to work, operate and communicate. As a result, the feedback loop was tight and productive.
- The client enjoyed exceptional process transparency that made anticipating what’s coming next stress-free. End-to-end responsibility left no room for deliverables with functionality gaps.
Should you select managed services over staff augmentation?
This depends on your goals and the results you’re planning to deliver. If your business objective is to provide consistent long-term services to your customers, staff augmentation with its ‘input’ concept might be a great fit. Here, the pricing is tied to the dedicated team performance and man-hours they put into your project. This is the only commitment — you will get a certain amount of work completed without guaranteed success. The costs are more or less fixed, and scalability is linear: depending on the scope, you can extend or downsize the team.
However, under managed IT services, there’s a service commitment called ‘outcome’ that doesn’t have a numeric man-hour value. It is tied to the level of excellence you’re planning to achieve, and the service provider is the one to define the means and tools to deliver the expected productivity. With an outcome-based model, the risks are lower when you’re rolling out a superior user experience.
What is the difference between managed services and outsourcing?
1) Comprehensive approach
With outsourcing, you seek a specific service or skill to be provided to you for a limited period of time. Managed services is not only a fancy name for externally sourced software development — it is a more holistic, evolved form of outsourcing that can utilize a comprehensive range of technologies to solve a complex problem beyond a bug or malfunction.
2) Focus on business value
With outsourcing, you usually address a single business need at a time, while with managed services you plan for success regardless of how much effort this outcome requires. It may inflate the price tag, but unlike an outsourcing provider, managed services experts do their utmost to explore new and efficient ways for you to excel at your business.
3) Ramp-up speed
Utilizing the outsourcing model usually stipulates a time buffer for finding the right talent for the project. With managed services, any business can expect that the project will get off the ground faster, which is beneficial when the time factor is crucial.
The article was first published on July 7, 2019, and was updated for relevancy and accuracy on August 24, 2020.