Managed services is the practice of

outsourcing Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity which otherwise is or could be carried out internally, i.e. in-house, and sometimes involves transferring employees and ...

the responsibility for maintaining, and anticipating need for, a range of processes and functions, ostensibly for the purpose of improved operations and reduced budgetary expenditures through the reduction of directly-employed staff. It is an alternative to the break/fix or

on-demand outsourcing On-demand outsourcing is a trend in outsourcing wherein major internal operations processes of a company are being shifted to a provider that is paid for by the number of transactions involved. The business transferring the services pays for the qu ...

model where the service provider performs on-demand services and bills the customer only for the work done. Under this subscription model, the client or customer is the entity that owns or has direct oversight of the organization or system being managed, whereas the managed services provider (MSP) is the

service provider A service provider (SP) is an organization that provides services, such as consulting, legal, real estate, communications, storage, and processing services, to other organizations. Although a service provider can be a sub-unit of the organization t ...

delivering the managed services. The client and the MSP are bound by a contractual, service-level agreement that states the performance and quality metrics of their relationship.

Advantages and challenges

Adopting managed services is intended to be an efficient way to stay up-to-date on technology, have access to skills and address issues related to cost, quality of service and risk. As the IT infrastructure components of many SMB and large corporations are migrating to the cloud, with MSPs (managed services providers) increasingly facing the challenge of

cloud computing Cloud computing is the on-demand availability of computer system resources, especially data storage ( cloud storage) and computing power, without direct active management by the user. Large clouds often have functions distributed over mu ...

, a number of MSPs are providing in-house cloud services or acting as brokers with cloud services providers. A recent survey claims that a lack of knowledge and expertise in cloud computing rather than offerors' reluctance, appears to be the main obstacle to this transition. For example, in transportation, many companies face a significant increase of fuel and carrier costs, driver shortages, customer service requests and global supply chain complexities. Managing day-to-day transportation processes and reducing related costs come as significant burdens that require the expertise of Transportation Managed Services (or managed transportation services) providers.

History and evolution

The evolution of MSP started in the 1990s with the emergence of application service providers (ASPs) who helped pave the way for remote support for IT infrastructure. From the initial focus of remote monitoring and management of servers and networks, the scope of an MSP's services expanded to include mobile device management, managed security, remote firewall administration and security-as-a-service, and managed print services. Around 2005, Karl W. Palachuk, Amy Luby, Founder of Managed Service Provider Services Network acquired by High Street Technology Ventures, and Erick Simpson, founder of Managed Services Provider University, were the first advocates and the pioneers of the managed services business model. The first books on the topic of managed services: ''Service Agreements for SMB Consultants: A Quick-Start Guide to Managed Services'' and ''The Guide to a Successful Managed Services Practice'' were published in 2006 by Palachuk and Simpson, respectively. Since then, the managed services

business model A business model describes how an organization creates, delivers, and captures value,''Business Model Generation'', Alexander Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self-published, 2010 in economic, soci ...

has gained ground among enterprise-level companies. As the value-added reseller (VAR) community evolved to a higher level of services, it adapted the managed service model and tailored it to SMB companies. In the new economy, IT manufacturers are currently moving away from a "box-shifting" resale to a more customized, managed service offering. In this transition, the billing and sales processes of

intangible Intangibles or intangible may refer to: * Intangible asset, an asset class used in accounting * Intellectual capital, the difference in value between tangible assets (physical and financial) and market value * Intellectual property Intelle ...

managed services, appear as the main challenges for traditional resellers. The global managed services market is expected to grow from an estimated $342.9 Billion in 2020 to $410.2 Billion by 2027, representing a

CAGR Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some ele ...

of 2.6%.

Types

In the information technology area, the most common managed services appear to evolve around connectivity and bandwidth, network monitoring, security,

virtualization In computing, virtualization or virtualisation (sometimes abbreviated v12n, a numeronym) is the act of creating a virtual (rather than actual) version of something at the same abstraction level, including virtual computer hardware platforms, stor ...

, and disaster recovery. Beyond traditional application and infrastructure management, managed services may also include storage, desktop and communications, mobility, help desk, and technical support. In general, common managed services include the following applications.

Provision

Definition

A Managed IT Services Provider (also known as an 'MSP') is a third-party service provider that proactively monitors & manages a customer's server / network infrastructure, cybersecurity and end-user systems against a clearly defined

Service Level Agreement A service-level agreement (SLA) is a commitment between a service provider and a customer. Particular aspects of the service – quality, availability, responsibilities – are agreed between the service provider and the service user. ...

(SLA). Small and medium-sized businesses (SMBs), nonprofits and government agencies hire MSPs to perform a defined set of day-to-day management services so they can focus on improving their services without worrying about extended system downtimes or service interruptions. These services may include network and infrastructure management, security and monitoring.. Most MSPs bill an upfront setup or transition fee and an ongoing flat or near-fixed monthly fee, which benefits clients by providing them with predictable IT support costs. Sometimes, MSPs act as facilitators who manage and procure staffing services on behalf of the client. In such context, they use an online application called

vendor management system A vendor management system (VMS) is an Internet-enabled, often Web-based application that acts as a mechanism for business to manage and procure staffing services – temporary, and, in some cases, permanent placement services – as well as outsi ...

(VMS) for transparency and efficiency. A managed service provider is also useful in creating disaster recovery plans, similar to a corporation's. The managed services model has been useful in the private sector, notably among

Fortune 500 companies The ''Fortune'' 500 is an annual list compiled and published by '' Fortune'' magazine that ranks 500 of the largest United States corporations by total revenue for their respective fiscal years. The list includes publicly held companies, along ...

, and has an interesting future in government.

Main players

Main managed service providers originate from the United States ( IBM,

Accenture Accenture plc is an Irish-American professional services company based in Dublin, specializing in information technology (IT) services and consulting. A ''Fortune'' Global 500 company, it reported revenues of $61.6 billion in 2022. Accentu ...

, Cognizant), Europe ( Atos, Capgemini) and India ( TCS,

Infosys Infosys Limited is an Indian multinational information technology company that provides business consulting, information technology and outsourcing services. The company was founded in Pune and is headquartered in Bangalore. Infosys is ...

Wipro Wipro Limited (formerly, Western India Palm Refined Oils Limited) is an Indian multinational corporation that provides information technology, consulting and business process services. Thierry Delaporte is serving as CEO and managing direct ...

Advantages and challenges

History and evolution

Types

Provision

Definition

Main players

See also

References

Further reading