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Back in 2008, as service delivery expanded beyond the equipment-centric “break-fix” model, Stratecast offered a definition for “the new managed services”—one that focused on collaboration between provider and customer. In recent years, we have seen another shift in the way enterprises purchase technology services, necessitating that we revisit our definition.
As business technology solutions grow in number, complexity, and strategic importance, resource-strapped IT departments are increasingly turning to outside experts to help them manage those technologies and the business processes they support. According to Frost & Sullivan research, nearly half of U.S. businesses have invested in some sort of managed communications or technology services, with another third planning to add or expand such services in the next two years.
But what exactly do those managed services look like? It turns out that there is little consensus as to what comprises a “managed service.” Some providers appear to use the term to denote a premium version of their standard service, one that involves a higher level of customer support. Other providers use the term to denote the inclusion of management tools or a self-service management portal that is provided to customers. In a few cases, the word “managed” appears to be gratuitously appended to a service name to make it fancier (and presumably to justify a higher price point)—like calling a roadside diner a “café.”

In years past, IT leaders (along with most of the industry) considered managed services as a point on the lower end of the outsourcing scale—a sort of “outsourcing lite” for customers who chose neither to fully manage their technologies themselves nor to implement a complete Business Process Outsourcing solution. Managed services were a compromise solution, like frozen supermarket meals for those who had no time to cook but could not afford a restaurant dinner.
Today, the role of the enterprise IT department is evolving, from self-sufficient cottage industry to service broker. IT leaders are re-assessing what it takes to deliver services to the business successfully. Greater accountability for meeting business goals calls for a higher level of visibility and control over IT components. Greater flexibility in delivering services calls for a higher level of integration and collaboration with service providers.

In this context, the new role of IT calls for a new and expanded definition of managed services—a definition that cannot be adequately represented on the linear scale of task performance that runs from “in-house” to “full outsourcing.” The new managed services represent a strong partnership—in which the provider contributes technology and expertise, and the customeroutcomes.
In this brief, Stratecast revisits our definition of managed services, updating it for today’s more complex business and technology environment. In doing so, we recommend ways for Managed Service Providers (MSPs) to meet the current and future needs of enterprise clients.

What is a Managed Service?

Businesses are enthusiastic participants in our service economy, buying and selling services up and down the supply chain. But not every service can be called a “managed” service.
The very term “managed service” suggests its essential components. By definition, a “service” involves one entity performing a function or providing some sort of accommodation for another entity. To “manage” is to introduce ongoing processes that drive toward success, generally in the areas of operational performance and efficiency. This is the context in which we talk about managing our employees, our expenses, or our household affairs: each involves ongoing effort that drives toward a goal (e.g., maximizing productivity, optimizing profitability, and maintaining order).
Thus, a managed service must not only satisfactorily perform a function (e.g., networking or storage), but must incorporate tools and processes that allow customers and their expert partners to continually assess how well their goals are being met, and make necessary changes.

The specific components of a managed service vary based on the type of service being managed. Some services require a high level of provider expertise (e.g., managed security services); others offer little more than an extra set of hands (e.g., managed router services). However, three broad areas differentiate a managed service from a non-managed service; they are:
• The managed service includes proactive, hands-on monitoring by expert technicians. Today’s sophisticated technology platforms provide high degrees of visibility into service and component performance, making it easier for even non-technical users to understand and manage their services. And increasing levels of automation enable systems to “learn” and enact changes based on policy or situation, without human intervention. Nonetheless, in Stratecast’s view, a managed service requires human oversight and intervention by an expert who has the experience to interpret the monitoring data (at a customer or global level), and take or recommend appropriate actions.
For example: Managed security service technicians monitor global traffic data in real time. This allows them not only to respond, but to anticipate potential cyber-attacks, assess the risk per customer, and take action to minimize the impact.

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The New Managed Services: Flexibility, Acountability, and Control 

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