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Does Using Managed IT Services Really Save Money?

Feb 26, 2016 Managed Services Dennis Junk

Does-Managed-Services-Really-Save-You-Money.jpgWhen you hear that 72% of businesses that outsource some part of their IT operations to a Managed Services Provider (MSP) make no significant changes to their current IT staff, you have to wonder if it’s just something businesses do when they have some funds to spare. Because if you keep your current staff mostly intact, signing up for a third-party’s services can only cost you money. And yet 93% of businesses surveyed by the trade group CompTIA said that their Managed Services arrangement either met or exceeded their cost-saving expectations. Where did these savings come from?

Helping IT Finally Get Ahead

First, you have to look at what most IT departments were focusing on before the business contracted an MSP. Companies frequently have great ideas for technological initiatives, but undertaking them would require IT to get far enough ahead of repairs and daily maintenance to be able to devote a substantial amount of time to the projects. Much of the time spent on those repairs, it should also be noted, wouldn’t be necessary if the team could get around to doing more preventative maintenance.

Instead, what tends to happen is that IT at some point starts to get a bit behind, daily tasks get neglected, and then issues start snowballing. The team has to sprint just to stay in place. This is why 61% of businesses admit their current IT management methods could be better, and 9% of those said it could be “significantly” better.

When asked what their initial motivation was for partnering with an MSP, 56% of businesses said it was to improve the efficiency or reliability of their IT. Another 27% said they wanted to take a more proactive approach to maintenance. When asked how exactly they are using Managed Services, 70% said it was for repairs and troubleshooting. 

Commoditized IT Services

At this point, you may be thinking that the companies responding to the survey simply had inadequate staffing; maybe most of these companies didn’t lay off any workers after partnering with the MSP, but in lieu of Managed Services they probably would have needed to hire some extra staff anyway. This is only partly true though.

The tasks that IT deals with can be divided into two categories. The first is comprised of the all the practices that are pretty much the same no matter what company you’re talking about. For example, every business needs infrastructure for storing data and hosting applications, whether in the cloud or in on-site environments. What this means is that a substantial portion of routine infrastructure maintenance can be treated as a commodity. Outsourcing commodity services like this can result in significant cost savings over hiring dedicated staff.  

MSPs have access to tools like Network Operations Centers (NOCs) and Remote Monitoring and Maintenance (RMM) software that make performance tracking and preventative upkeep much easier and less costly. But these tools would be prohibitively expensive for any single IT department. MSPs are also particularly well-equipped to undertake security and compliance measures.

Basically, the MSP pools the resources of all its clients so that together they can afford services that benefit them all collectively but that would be out of reach for them individually. (This is very similar to how cloud services make infrastructure resources more affordable.) So outsourcing commodity IT services is more cost-effective than hiring more internal staff.  

Turning toward the Future

Doesn’t this mean we’re back to partnering with an MSP in place of employing more IT personnel? This brings us to the second category of IT tasks. While some duties are well-suited to being treated as commodities, others will always be unique to your individual company. You probably wouldn’t rely exclusively on a third-party firm, for instance, to come up with innovative applications for increasing customer engagement or improving worker productivity.

An MSP could potentially play a role in your efforts to out-innovate your competitors, especially if the firm you partner with specializes in a variety of tech offerings. But the driving-force behind the innovative ideas is often the conviction that something the business is currently doing could be done better. Innovation therefore requires a good deal of knowledge and insight into what the organization does and how it does it. So many companies (38% in the CompTIA survey) decide to partner with an MSP primarily to free up existing staff to focus on strategic projects.   

The independent tech research firm Gartner recommends that businesses use a Bimodal approach to managing IT, dividing tasks and teams between operations and innovations. This recommendation is based on the observation that most businesses already bifurcate their IT, whether they ever planned to or not, and most of them that didn’t plan to do it don’t end up doing it very well. You can save money with Managed Services by letting your provider handle the types of stuff everybody routinely has to handle, and that means you can often go on to actually make more money because you can start to do stuff that nobody else is doing.

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