Managed IT services are widely used by the most sophisticated organisations across the globe. Recent reports show that over 90% of the Fortune 500 have multiple outsourcing contracts to managed service providers, with a value of over $190 billion. This includes managed IT services such cloud services, infrastructure, networks, security, backup, applications and much more. How can organisations at any scale adopt the same strategy and benefit from managed IT services?
What does “IT” look like in a Fortune 500?
At a scale of a Fortune 500 organisation, things look different than the usual. Running a business with hundreds of thousands of employees in different regions across the world, with millions of daily activities to serve thousands of customers and generate billions of dollars in revenues can easily become complicated. It requires well structured operations to run a business at that enormous scale, where any activity that does not add value should be minimised, automated or even eliminated when possible.
These companies have always created better alternatives to enhance the way they do everyday business. Normally, an IT department at that scale would serve hundreds of thousands of daily users, with each user group having their own set of required applications and services that help them do their jobs. A minor issue causing a few seconds of delay in a widely used service within the company would cost over a 100K seconds of waste, or almost 3 working days of a full time equivalent! The mass makes minimal things count, and a few minutes everyday throughout the year is a significant amount of lost potential worth acting upon.
As the technology evolves really fast, these organisations are typically early adopters. Being at the high end of new technology allows them to stay ahead of competition and maintain their leadership. They’re always looking for accelerated adoption of new technologies, without adding a technical debt to their operations. Managed IT services have created a reliable alternative for them to minimise costs, reduce complexity and achieve their benefits from new technologies.
How are managed IT services consumed at that scale?
A few decades ago, worldwide leading enterprises started outsourcing more “non-core” operations to managed service providers (MSPs). This applies to almost all functions within the organisation including transportation, facility management, advertising, operations and even HR. This approach allowed organisations to build business-centric operations across the company focused on adding value and contributing to the business goals. Non-strategic tasks, especially ones that require a specific expertise, would be cheaper and more efficient to outsource. The bottom line here is that “keeping the lights on” is never strategic!
A recent Gartner report shows that the biggest challenges facing CIOs in 2021 are insufficient skills and technical debt. Managed IT services helped offload a big portion of complex operations and minimised the skill gap within these organisations. This helped in cutting down costs while providing the required skills and redundancy at a fraction of the hiring budget. An MSP is usually capable of hiring world class specialists in their specific domains as they can easily utilise their expertise to serve multiple customers. This exposure to multiple environments allows MSPs to become experts in the domains that organisations hire them for. Typically, managed IT services within large organisations include:
- IT helpdesk support
- Data centre hosting
- Infrastructure management
- Private/hybrid cloud operations
- Platforms and applications
Managed IT services at any scale
Hiring is an investment, like any other investment you make within your organisation. You find a skill or resource gap within your organisation, you put a budget to fill in that gap and most importantly, you expect a profitable return on that investment.
IT operations are no exception, and follow the exact same approach. When designing IT solutions, you start with the end result. The focus is typically an application or service that you want to provide whether internally or externally. As an example, an electronics retailer realises that moving to an e-commerce platform will give them a better market positioning. The strategic goal is transitioning to an online platform, and the efforts should be focused on achieving this transformation. They might hire a team of devops engineers that will directly contribute to that goal, but managing all the underlying dependencies is not strategic and will require a lot of time, effort and money. This includes building the underlying infrastructure and services that will provide functionality for the core application, and maintaining them 24×7. At that point, why spend months in hiring and training a team for every underlying service if there is a cost efficient alternative that will allow a smooth and quick transition?
A common misconception with managed IT services is that they are only cost efficient on the bigger scale. This is not true with most managed service providers, as the cost of the service is usually calculated based on the size of your workload, which allows you to start small and scale linearly. In my previous blog “How to manage a 24×7 private cloud with one engineer”, it is clearly discussed how operating an OpenStack private cloud can cost you less than hiring one full time cloud operations engineer.
Finding the right balance
Managed IT services are not replacing your IT operations, and they never will. Finding the right balance between what to outsource and what to insource is the key to building efficient operations. A typical IT department will have two categories of activities. The first category consists of daily operational tasks and firefighting issues that come along the way (Quadrants I & III). The second category contains long term planning for transformation and process improvement (Quadrant II). The first category is usually prioritised due to urgency, leaving little to no time for the second more effective category.
Hiring a managed service provider to take care of the daily operations will allow you to spend more time on improving your business by offloading activities from Quadrants I & III that keep you from long term strategic planning. Focusing more on Quadrant II tasks will enable you to implement a continuous improvement strategy within your IT, while reducing the overall cost spent on operations. These savings can be allocated to your long term plans, R&D or activities that will positively impact your business.
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