Managed Services Offer Paths Forward in the New World of Work
by Kate Weimer
It’s no secret that the world of work has seen a massive upheaval over the last two years. Virtually every industry has grappled with the effects of the Great Resignation, remote work, supply chain disruptions, economic strains, and more.
Considering these challenges, many businesses need help—and they’re actively seeking it out:
- According to Kearney, estimates state that 90% of Fortune 1000 companies outsource work to managed services providers (MSPs).
- In 2019, Gartner reported that 85% of logistics leaders expected their outsourcing budget to increase in 2020.
- Technavio reported that in 2021, the global market for managed services grew by 7.10%.
- The overall market value of managed services was $161.37 billion in 2021, as reported by Research and Markets.
To understand the full scope of why companies are increasingly turning to managed services providers, we first need to ask: What exactly are managed services? And when did MSPs start gaining momentum in the business world?
DEFINING “MANAGED SERVICES”
A managed service is the outsourcing of processes or functions within an organization. That is, a company would turn to managed services when they need help with a project or initiative. The MSP will develop a way to tackle the client’s business objective, oversee the hiring and implementation necessary for realizing the business objective, and drive success on behalf of the organization.
Managed services were born from the tech boom in the late 1990s and early 2000s. During this time, many companies realized they needed to integrate more technology into their businesses—or be left in the dust of the dot-com era. However, with digital technology being something most people were just becoming more comfortable with, implementing major advances and managing new initiatives was easier said than done. Ultimately, organizations required a level of expertise that simply did not exist within their internal teams.
Enter: managed services. They paved the way for third-party vendors to provide technical expertise in areas where an organization needed help but didn’t need to hire a full internal team. Over time, managed services grew beyond these functions—though tech support remains a core area for many MSPs.
Today, the managed services umbrella can cover:
- End-to-End Team Building and Development
- Recruitment Process Outsourcing
- DevOps/SRE
- ITIL Management
- Data Engineering
- Application Development
- Agile Services
- Cloud Modernization
- End User Support
- Back-Office Support
- IT Service Management
- PC/Desktop Operations
WHY DO COMPANIES TURN TO MSP’S?
It’s impossible to deny the breadth of capabilities that managed services offer, but still, the question stands of why managed services?
One of the most common answers is cost savings. When it comes down to brass tacks, hiring a third-party vendor to help achieve business goals is often cheaper than building the teams and infrastructure an organization would need internally. And cost savings can be significant—the International Organization for Standardization reports that companies who use an MSP claim to achieve an average cost reduction of 15%.
While reducing costs has long been the number one reason why companies turn to managed services, Deloitte reported that in 2021 it was bumped down to the number two spot. Instead, the top reason companies gave for engaging MSPs in 2021 was the need for standardization and process efficiency. This tells us that organizations might be executing programs and processes on their own, but they realize there is room for improvement. Now more than ever, business leaders are seeking the support of subject matter experts to help drive these improvements.
Coming in at number three on Deloitte’s report of top reasons why organizations engaged MSPs in 2021 is the desire to drive business value. This can include concrete value like revenue (which is supported by cost savings) or more abstract value, such as how customers and employees view the business. MSPs can create a huge impact when it comes to these more abstract values by providing an extra level of engagement to the employee experience—something imperative in today’s world as employers fight to attract and maintain talent.
THE FUTURE OF MANAGED SERVICES
The challenges businesses face today aren’t going away anytime soon, but neither are managed services and the benefits MSPs can provide. In fact, Technavio projects that the managed services market will accelerate at a compound annual growth rate of 9.45% from 2021 to 2025 and see a market share increase of $126.47 billion in that timespan, nearly doubling today’s market value.
As the market becomes more saturated with MSPs promising to solve your problems, it’s essential that you choose the right partner. Questions to think about when considering a managed services partnership include:
- Do you prefer a team that is onshore, nearshore, or offshore? There is no one right answer when it comes to deciding where your team should be operating from. A variety of factors—including talent pools, target markets, and cost—can affect the best path for your organization. When seeking a managed services partner, you’ll want to find one that understands the different options and can provide support in whatever area is best for your organization.
- What level of program management do you require? No two companies have the same needs. As such, the amount of management one company might require from an MSP could vary greatly from another. When looking for a managed services partner, be sure their delivery model is customizable to your unique needs.
- What focus is there on managing and developing talent? A service is only as good as the team providing it, so you want to seek out an MSP that has strong sourcing capabilities and provides continuous education opportunities to the resources hired for the service.
- Do you have a specific technology environment you work within? Whether it is a Cloud provider, app development tool, web hosting platform, or some other element of your tech stack you want to keep, it is critical that the MSP you select will work within your environment.
Choosing an MSP to partner with is no small task, but these questions will help direct you to the provider that’s right for your organization. If you’re not sure how to proceed or need more information about the impact of engaging an MSP, please reach out to our managed services experts through the form below.
With managed services being the fuel of success for businesses in the future, the last (and perhaps most important) question leaders should be asking themselves is: When will your organization tap into all the benefits managed services have to offer?