What are Managed Cloud Services and how to choose your provider? Managed Services

If you run or finance IT operations in your organization and would like to explore the intricacies of acquiring managed services from a provider, you are in the right place.

In this article, I’ll explain what Managed Services are about and which factors to consider when choosing the Managed Services provider. Let’s dive in!

What are Managed Cloud Services?

Managed Services mean that an external partner helps and oversees your business operations or processes.

An example of this are Managed Cloud Services that involve taking on and running (partially or fully) a client’s cloud environment. The goal of this approach is to improve performance and efficiency.

Managed Cloud Services – when to choose this model?

Now let’s explore the reasons why companies across all sectors go into this model. These could fall into 3 broad categories of business reasons:

1. Availability

IT talent is scarce, and it is extremely difficult to hire, retain and constantly train IT staff.

Hence, the talent pool for your organization might be limited – either because of your location, or because information technology is not your core business.

In such cases, it may be more efficient to work with a partner whose focus includes IT services and is able to provide the necessary technical muscle to power your organization.

2. Cost

This is a very wide-ranging reason. Cost may be looked at from various angles.

At its simplest, for most organizations, building all the capability for wide-ranging IT skills, knowledge, and IP is going to cost more than contracting a provider that specializes in the field.

Gathering and maintaining the development, project management, security, testing/QA, support capabilities in the various technologies your organization needs, often 24/7, is no easy feat.

Even more important is the fact that managed services expenses are categorized as operational, while in-house IT costs (when it comes to staff as well as tools) are capital expenditures. This, in the era of low-interest rates and unpredictable socio-economic environment, is welcomed by most industry leaders, as it allows to quickly change direction if required.

3. Focus

I believe this to be the most important, and sadly least acknowledged reason. It is your role as organization leader to redirect resources to where they make the biggest impact (i.e. your top/bottom line but also your mission).

And there are no other ‘resources’ in today’s economy more precious than people. This is why e.g. Google drops really large projects without hesitation when they don’t pick up quickly (remember Google+, Buzz, Notebook, Search appliance?).

It’s not that they don’t have the cash – they are literally sitting on it (so it’s not a matter of cost) – but their best and brightest people should work on initiatives that have the biggest impact.

How to choose a Managed Cloud Services provider?

Choosing a managed service provider is never an easy task and it’s a crucial decision.

A significant amount of time and effort is required to switch providers or in-source a service and it may take over 6 months to truly realize the benefits of the service.

There are certain ways that cloud vendors like Microsoft use to recognize their most capable partners. One of them is Azure Expert Managed Services Provider.

Now, I will cover more specific tips and some questions worth asking yourself (or the provider) before signing the contract.

1. ARE YOU A SMALL OR BIG FISH IN YOUR PROVIDER’S POND?

The question I am often asked during RFP (Request for Proposal) processes is ‘If we were to sign this agreement, how big (revenue-wise) of a customer would we be for you?’.

As a customer, you want to know if you will be their top 1, top 5/top 10, somewhere in the ‘middle’ or ‘low end’.

Asking for data supporting the answer, like financial statements and top customer breakdowns often make sense to validate the responses. Depending on the service you outsource, how standardized it is, how deeply specialized, the answer you want to hear will vary. 

• As a rule of thumb, for standardized services (like ‘backup as a service’), which will not be a large part of your entire IT operations budget, look for providers who have done it for a large number of customers, and hence you will not make their ‘Top 10’.
• For customized managed service that is critical to your IT operations, may include your custom business applications and is a large part of your IT budget, look to be anywhere in between Top 3-Top 10 of your provider customers. You want to have a strategic partner that will help you grow your business and treat you with priority and focus.
• Being a Top 1 customer of any provider for a sustained period of time is risky. It’s ok to start as one, but if your provider does not grow and provide services to other customers, they will become reliant on revenue from your company, potentially may opt for vendor lock-in and you will not be able to gain benefit from their experience with other customers.

2. SPECIALIZED OR GENERAL SCOPE?

As you are putting forward the specification, you may be tempted to bundle all your needs into one package. This is often what companies do to avoid the fate of ‘vendor battles’.

Some issues in IT environments are complex and may require vendor cooperation. Not all providers are open to this kind of collaboration, so make sure to check this in your reference calls and questions.

The case for specialization is valid when the service has a narrow scope, for example, your core business application that requires specialist knowledge and focus.

Usually, vendors will specialize in some technology stack, so throwing everything into a single specification will likely yield you only big vendors, for which you will never be in the Top 10 bracket described above.

3. SHARED OR DEDICATED TEAM?

It is important to understand whether the service you will be receiving will be provided by a dedicated, hybrid, or shared team.

A shared team is best for simple or small volume services. For most large organizations, a hybrid team is best, where there is a core team that is dedicated only to you, supplemented by specific area SMEs (subject matter experts) who ensure the additional skills and are present to support the core team.

When people must work with more than 3-4 customers and the volume of work is significant for each one, it is difficult to build relations, understand the customer’s processes and dive deep into the technical details of their applications.

4. PROCESS MATURITY, BUT ALSO FLEXIBILITY

Process excellence is important in service contracts, however, be careful of signs of rigidity. For all services that are larger than just a few monthly hours, you will require some amount of flexibility from your provider.

Aligning 100% to a rigid process is rarely possible, so you would be looking for a mix of relevant experience and know-how supplemented by the willingness to change and adapt.

5. INTELLECTUAL PROPERTY

It is important to see what the provider can bring to the table aside from pure manpower and process perspective. If the provider has delivered such services before, they will be able to present the IP developed during previous engagements that may be reusable with little or no additional fee in your service.

6. SLA: BE REALISTIC, WHAT CAN YOU (AFFORD TO) MEASURE?

When setting SLAs for the contract, don’t go overboard. Be sure you (or the vendor) can measure what you state. As the service matures, the KPIs may be added.

It’s good to ask the provider to provide historical, anonymized data from other services they carried out.

7. TRANSPARENCY

Managed service contracts are long-term. You want your partner to be as transparent as possible. Will they be willing to share all the data they gather on providing the service to you? How honest are they about who is going to do the service and from which location?

You want a partner that will communicate the service performance to you in a transparent fashion, even to the point where the service price is adjusted when improvements materialize, and the benefit is enjoyed by not only the vendor but also the customer.

Ask tough questions and see how the supplier responds. Being vulnerable about your weaknesses is not standard corporate practice but goes a long way to a trustful business relationship.

8. EXIT OPTIONS

Each contract will end one day. Take a good look at what your exit options are. Are there any exit fees and how long is a notice period? Are there any options for in-sourcing? Is the knowledge base transferred to you, are ITSM processes built on your platform?

We do not like to lock the customer into our services. A customer being with us only because they have to will not be happy. For larger services, we also prefer to work on the customer ITSM platform, as this allows the customer to retain the history, knowledge base, CMDB when the vendor is changed.

9. UNDERSTANDING BUSINESS CONTEXT

Is the provider putting in the effort to understand your business, your challenges? Are they actively listening, asking smart questions, and probing for specific data? Are they pushing their own solutions, or open to change and adjusting to fit your needs?

Additionally, a service transition plan will tell you a lot about how the provider anticipates challenges in the first months of taking on the service.

10. CULTURAL-FIT

Ask about company culture, see if it is exhibited in the long RFP process. Check if it is in line with your core values.

Two organizations with vastly different values, and hence behaviors and priorities, will not be able to work together efficiently and with trust.

Meet your future service manager/owner – see for yourself if this is the person you could work with on a regular basis.

I hope these tips will be helpful in your journey to find the best Managed Services provider. Will they allow you to avoid missteps and bad decisions?

Unfortunately, there is no guarantee, as there is always something I might miss. But the correct preparation and research is the key to success, so keep these rules in mind while looking for the Chosen One (or, in other words, your dream Managed Services provider)!