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1 Business benef its of managed ICT services A leadership perspectives white paper Recommended next steps for business and industry executives Issue 7 in a series

2 Executive Summary With the steady decline in broadband network costs and the creeping commoditisation of ICT, comes the increased realisation by business that cost-economies are to be had in using service providers to remotely manage and deliver a number of different IT services. Adoption of managed ICT services leads to cost savings, frees up a company s IT staff (or avoids the need to recruit specialists), and makes best use of available resources. Business case overview Managed services can be defined in different ways and can mean different things to different people. Broadly speaking, they encompass: ICT computing and/or network infrastructure and/or applications delivered by a thirdparty ICT service provider. The provider assumes responsibility and accountability for the availability, performance, and reliability of the entire set of ICT processes and computing/communication capabilities it provides to a customer. The architecting, deployment, 24x7 monitoring, and proactive management of these ICT environments, which typically are always available and always secure. Services may also include the applications themselves. Services that provide key functions such as security, business continuity, disaster recovery, data integrity, and high availability, so a customer can focus all its internal IT resources on core business activities and processes. So the promise of managed ICT services is that instead of continuing to invest in onpremise infrastructure and an IT workforce, organisations can actually buy-in services that are comparable if not higher quality to those they provision themselves. There are perhaps six components of ICT that lend themselves well to delivery as a managed service from a specialist supplier: Managed infrastructure and hosting services the provision of managed ICT and website capabilities, as well as the managed application services that are often bundled into web hosting offerings. Produced by du

3 Managed desktop / mobility services the provision of service to manage PCs and other desktop systems, and equivalent mobile devices such as laptops and tablets. Managed performance monitoring and problem resolution remotely delivered performance monitoring and break fix of IT, communication and application infrastructure. Managed security services the provision of security services and threat prevention operations. Managed storage services the provision of data storage capacity, managed remotely or on-premise. Connectivity and collaboration services from basic IP, managed Ethernet and VPN services to enterprise mobility services and the very latest telepresence video collaboration systems. Connectivity and collaboration services, and managed security are the highest growth markets, being driven by the need of organisations to roll out next generation networks and secure them (a key activity for all), in order that they are subsequently able to attain the many business benefits of a highly connected workforce. Suppliers of such services, or Managed Services Providers (MSPs), deliver and manage network-based services, applications, and equipment to customer organisations. They deliver their services as a one-to-many or one-to-one service. The former service being used by multiple customers, and the latter having a dedicated service between provider and customer. Payment for both of these service types is generally on a usage basis; for example they are priced according to the number of desktops supported, or the volume of storage used, or telepresence sessions run. It is important to note that the key difference between IT managed services and more traditional types of outsourcing is that the latter often involves the transfer of assets both technology and staff-related to the third party. This is not the case with managed service contracts. The managed services model means MSPs can maximise the efficiency and quality of their offerings, due to their narrow focus on an area that can be improved iteratively. Thanks to the economies that can be derived from operating on a large scale, managed services should be available at a lower cost than the customer organisation could achieve itself, thereby increasing the value for the customer.

4 Contracts for managed services are typically shorter than those for strategic outsourcing. The latter can often be created to run for between seven and ten years, whereas managed services contracts can run for as little as 12 months. The reason for this is the one-tomany delivery model which enables the service provider to achieve a shorter payback period for the service offered. Even with a one-to-one delivery model, there is still a shorter payback period than if the service had to be created from scratch for every new customer the one-to-one model takes the basic service and modifies it for that particular customer. In the UAE around 40% of organisations currently outsource some aspect of their ICT functions to a third-party service provider in this way, and another 15% are considering doing so during The appeal holds strong with large enterprises as it does with SMBs. The reason is that there is compelling evidence that managed services, even when implemented on a small scale, can deliver significant cost savings, and will free up staff and resource. On the commercial benefits of managed services Adoption of managed services brings with it several types of commercial benefit, which are relevant whatever the size of organisation. Overall, it can simplify IT operational and investment issues by delivering IT infrastructure and applications as completely administered services. The reasons for adopting managed services Lower costs Higher levels of support and availability Predictable cost Access to the latest technology Access to an enhanced skill base Adaptable to business swings Ability to focus on the core business Avoidance of capital expenditure 10 0 The advantages of managed services mean that, rather than commit significant upfront capital expenditure, technology or services are purchased as an on-going operational expense. Small organisations with tight controls on cash flow and capital expenditure benefit the most from this approach, but the cost measures and limits on capital expenditure are experienced by organisations of all sizes. The cost savings that organisations can expect from using these services vary hugely, and can sometimes be as high as 40%. According to industry estimates, realistically a figure of between 10% and 30% savings is not unachievable. It must be borne in mind that this is not industry specific, and there will be particular circumstances applicable to individual organisations in various industries. Produced by du

5 The benefits in terms of financial value not only relate to the fact that the overall cost is lower but that managed services provides the customer organisation with a predictable cash flow for the service effectively providing more opportunities for cost management. As the figure shows, costs savings are the top factor in deciding to turn to managed services. However, a majority of adopters maintain that a major reason they had contracted with an MSP was to free up their internal IT staffs. The use of the service provider s team to maintain the day-to-day operations frees up resource for the customer organisation to concentrate on core business and IT activities to work on projects that fall into the business s core competencies in other words, they can be focused on revenuegenerating activities. Managed services leverage the core competencies and technical skills of MSPs as a 24x7 IT back-end team for managing, administering, and maintaining the day-to-day operations of the most sophisticated and up-to-date IT infrastructures available to customer organisations. These are expensive skills that many companies might not be inclined to retain themselves, particularly if IT management is not deemed a necessary core competence. The use of managed services actually helps accelerate the progression of the IT department towards being more business focused, as the services that are given to third parties to manage are often the more technology-based commodity services, allowing the IT department to concentrate on business objectives, rather than just delivering technology services. Summary benefits of managed services Benefit Focus in-house IT resource on core competencies Contain operating expenses through payment for actual usage A reasonable level of control is retained by the customer Cost saving opportunities Access to best-of-breed solutions Proactive use of the managed service Description Managed services generally provide key functions such as security, business continuity, disaster recovery, data integrity, and high availability, enabling the customer organisation to focus on supporting business development activities. Payments are generally usage-based, e.g. per agent, per session, per port, per day/week/month, per minute, per call, per transaction, etc. By retaining the assets of technology and staff in a managed services agreement, the customer organisation has more control than in a traditional outsourcing arrangement. By sharing the resources needed to achieve adequate security, monitoring, testing, and reliability amongst multiple customer organisations, a MSP can offer significant economies of scale. Technology or services are purchased as an on-going operational expenditure, rather than capital investments that can impact an organisation s bottom line. As many solutions can be delivered as a managed service at a much lower cost, purchasing them in this way can give organisations access to solutions that they could not previously afford to buy. A good MSP will not only deliver a service and respond to flexibility requirements when they arise, but will also demonstrate areas for potential improvement from both provider and customer perspectives.

6 With a core competency in network service provision, a telco like du has already invested heavily in the multi-protocol label switching (MPLS) network technology that is increasingly considered key to the delivery of managed services. Given the way that latest ICT virtualisation technologies enable a service provider to automate and manage client assets and the quality of service delivered to the customer, this is considered a vital enabler in the delivery of managed solutions. Indeed, industry analysts believe that ownership of such network technology to better manage IP infrastructure will become more critical in managing ICT service and business-level agreements in the managed service space. MPLS capability is significant in the managed ICT services market because: it provides predictable routing of data needed to support differentiated IP services, thus enabling tighter service-level agreements (SLAs) for customers based on business priorities. it enables the service provider to integrate many services (such as IP VPNs and transparent LAN services) over a common switching platform at reduced cost. The management of an organisation s physical IT infrastructure is a sophisticated and time-consuming part of IT provision, taking up significant resources. As organisations continue to want to reduce on-going costs, the increase in complexity associated with infrastructure such as that relating to security and regulatory issues is likely to mean that it will become more common to engage specialist third-party experts. That this may also help to align infrastructure management with overall business direction is also a significant consideration. Understanding the managed service offer Many medium-sized to large organisations already have their servers managed by third parties, sometimes even physically (i.e. where the server is installed at a secure, specialist hosting location). Mid-range servers lend themselves particularly well to the managed infrastructure services proposition. However, from a hassle perspective, desktop management is probably the area that has highest profile, yet causes the biggest internal issues because the skills required for desktop helpdesk and break/fix services are both broad and deep. Front-line support can prove difficult to outsource, but doing so can free up internal IT resources for more productive purposes, and can help to wean users away from constantly interrupting an on-site IT support capability to become more self-reliant (as long as this is done in a positive manner). Network convergence will see managed network services gain in importance in the near term. Managed network services involve having a third-party provider like du take responsibility for operating certain elements of an organisation s communications network (Local and Wide Area Networks LAN and WAN voice, and data). Managed and hosted IP telephony is also on offer. Produced by du

7 These managed connectivity solutions can expand to remote access capabilities, overlapping with some aspects of security where secured tunnels are carved out of the public internet to provide businesses with Virtual Private Networks or VPNs. A range of support options is typically available as a managed services offer, incorporating performance monitoring, configuration, and security management for both data and voice environments. The user of the service can retain ownership of the assets, so that they are simply managed by the third party; alternatively, the network may be fully outsourced. The main drivers for such services include the rise of packaged applications that tend to be bandwidth-hungry, and the cost and complexity of managing evermore architecturally-diverse networks. Trends in fixed/mobile convergence, as well as the merging of IP and voice networks, are all making the management of network infrastructure more demanding, and managed network solutions more popular. Growing message volumes and the greater awareness of the need for business continuity is driving the steady growth of storage management services. The need for business continuity and backup is driving demand for managed storage services, allowing for cost-effective offsite provision. Backup services are also growing in appeal. The main drivers for this are that backup is considered by many organisations as a major headache they know that it should be done regularly and efficiently, yet all too often it is not. Cost-effective, third-party offerings (as long as these have clearly-structured SLAs) are thus highly desirable. Virtualising storage requirements by outsourcing them can be a simpler process than managing such storage internally. Operational requirements can have a major impact on the cost of such provision, and need to be clearly defined upfront. The growth of messaging and collaboration tools is also driving the demand for storage. Testing the retrieval of such backups and access to archived storage will be vital, especially as some categories of information must legally be available for a number of years. Managed security services are one of the most rapidly-growing of managed services, and these are proving increasingly popular as organisations overcome resistance to the idea of having third parties provide security services. It is commonplace that an organisation will start with one area then add further security aspects over time. The types of service on offer include patch management, firewall management, threat management, remote access security, and management. Managed anti-virus and anti-spam protection is certainly high in demand and is likely to continue to increase, given that concern over both issues remains high.

8 du is a pioneer among service providers in the region, and offers a full suite of security solutions delivered as a managed service. This includes managed security monitoring, managed web security, security event and log management services, as well as the more commonplace managed security and spam management services. A specialist MSSP like du will have tightly-honed skills (and may well have a wider range of tools in its armoury, particularly in the case of threat monitoring and protection). Security done well is a task that can take up significant resources and specialist security services are expensive to hire and retain inhouse. The growth in mobile device use at work has spurred the rise of managed mobility services as a part of many providers offerings. A major problem that company s face in bringing mobility under control, is the decentralised and uncoordinated development of mobility, within the organisation. Unlike other aspects of IT and communications, mobility has tended to infiltrate organisations from the bottom up. The areas that are particularly relevant here are mobile device security, overall device management, software and inventory management (ensuring that authorised and adequately licensed software only is installed on devices), connection management, backup and recovery, system/application configuration, maintenance and helpdesk support services. Such services help organisations manage the device fleet, roll out and manage secure data applications, analyse invoices, and allocate costs back to departments and users. Service providers are recognising these customer demands, and are starting to offer elements of managed mobility such as contract, expense, and device management. Areas for consideration in adoption of managed services. Benefit SLAs Vertical sector Provider expertise Technical expertise Flexibility Description What Service Level Agreements are available? Consider the options in light of the service or project being outsourced business-critical systems need high levels of availability. In some managed services agreements it is important that vertical sector expertise is available, e.g. ERP solutions. In others, for example Web site hosting, it is not. How long a provider has been in business delivering what you require will contribute to the chances of successful use of managed services. However, if the company itself has not been in business long, check the credentials of the individuals running the company instead. What technical expertise can the MSP demonstrate amongst its staff, and to what level? A provider must be able to adapt to changing customer requirements, within usual change management boundaries. This is the seventh in a regular series of Leadership Perspectives White Papers, produced by du in association with Ovum, a preferred knowledge partner. For more information, please or visit Printed on environmentally-friendly paper produced from sustainable sources. Produced by du

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