3 Major Trends in Managed Services You Should Know About

In TSIA’s ongoing mission to track the performance and evolution of managed services, one thing has become abundantly clear: managed services continues to be one of the fastest growing segments of the entire technology industry. More and more manufacturers are expanding their service offers to include managed services as they begin to understand it’s important connection to technology-as-a-service and the Cloud.

In fact, for many TSIA Managed Services members, managed services are a natural extension of their cloud solutions, and vice versa. Not only are manufacturers rapidly embracing managed services, most non-manufacturers are beginning to realize their process and practices are showing serious signs of aging and underinvestment. In this post, I’ll share 3 exciting trends across all managed service providers and what they might mean for your business.

#1. Standardization of Managed Services

In last year’s look at the state of the industry, I talked about the growing trend of managed services providers offering a standard set of managed services and standard service catalogs. At the end of 2016, 43% of managed services providers offered standard managed services, but by the beginning of 2018 that number has risen to 68%!

At TSIA, the OPIs (observed performance improvements) show that offering a standard set of managed services directly impacts the financial success of your business. For a refresher on the types of managed services you can offer, you can learn more in my webinar, “Defining Managed Services,” or also by reading my report, "Defining Managed Services." More than two-thirds of managed services providers even include managed XaaS as part of their standard offering, so that’s also something to consider when building out your catalog of offerings.

#2. Establishing a Customer Success Function for Managed Services

Managed services is different from every other product and service line in a company’s portfolio of solutions primarily because the customer isn’t just buying technology, they’re buying the operation of technology. They’re not just buying a solution, they’re buying “peace of mind,” and as such, they need assurance that their MSP understands their business, not just their tech.

While general sales reps are great at selling technology and solutions, they’re not as in-tune with a customer’s day-to-day issues, long-term strategic objectives, or their financial challenges as a customer success rep would be. That’s why having a dedicated customer success manager for managed services is a must. Their job is to not only understand the technology being operated, but also be the strategic, trusted advisor to the customer on helping them achieve their ultimate goals, as well as identify potential upsell and cross-sell opportunities.

In many cases, the Customer Success team is the face of service to the customer. As a result, we’re seeing more and more companies invest in dedicated customer success roles for managed services, growing from 42% in 2015 to 59% in 2017. TSIA has found that managed services that have a dedicated customer success function not only ensure higher contract renewal rates, but also experience better recurring revenue retention and revenue growth from your existing customer base. 

#3. Evolving and Scaling Managed Services Delivery

This last trend really consists of several parts. One of the most common inquiry topics TSIA receives from our Managed Services membership is about getting delivery right. After all, the delivery organization is the heart of the managed services organization; it’s the product, and the organizational capabilities in delivery will either make or break the business. Lacking standard, scalable, and repeatable processes will tank profitability and scalability. If delivery is the heart of the MS organization, then the delivery platform (tools and technologies used to deliver the service) is the heart of delivery. With that said, we’ve identified several key practices in managed services delivery that have evolved quite a bit over the last few years. 

Keep in mind that before 2010, most managed services were custom and delivered through on-site, staff-augmentation models. Although many companies are still employing the on-site model for a significant portion of their MS revenue, we’re seeing a steady increase in the amount of remote management of customers’ technologies, as much as 83% in 2017! 

There has also been an industry-wide increase in focusing on the time it takes to onboard a client. Not only do longer onboarding times directly delay revenue recognition, but the onboarding period is when a customer gains their first impressions of a managed services provider. If they experience long wait times, this can negatively impact their opinion of your company, which can be difficult to overcome.

Managed services platforms (tools and technologies used to deliver the managed services offer) have also seen some significant evolution. Historically, many managed service providers felt the need to develop their own service management tools, feeling that commercial off-the-shelf tools didn’t provide the capabilities they required. That is rapidly changing as proactive monitoring, automated event correlation, and intelligent remediation through machine learning gains momentum. The number of managed service providers using commercial off-the-shelf tools has actually increased 17% from 2015. 

We’re also seeing more companies move toward having a dedicated IT service management (ITSM) platform. Organizations with multiple service lines (professional, support, managed, etc.) often use many of the same tools (CRM, ticketing, etc.) for those different service lines. Today’s managed service providers are learning that delivering managed services is a different practice altogether, requiring a much more sophisticated and broader set of proactive, predictive, and preventive technologies. By the second half of 2017, 89% of managed service providers had deployed a platform and set of tools dedicated the managed services business. With the rapid growth of managed services, many companies find themselves trying to find the most optimal way to organize their service delivery resources. Should they build a dedicated delivery organization, or should they leverage a shared delivery organization that delivers all service lines (professional, support, managed, etc.)? Today, 54% of companies offering managed services have opted to invest in a standalone, dedicated managed services delivery organization. TSIA has identified that this is clearly a key practice in driving bottom-line profitability for the business, and has many benefits. 

Keep Up with Managed Services Trends

We saw major growth for managed services last year, and this momentum is only continuing to build. In addition to the trends mentioned above, keep on the lookout for these top trends we expect to see in 2018: 

• Continued growth in managed XaaS (as well as remote managed services)
• Build-out of emerging, priority-one managed services service capabilities
• Standardization and scalability of the managed services offer and delivery model

If you want to make sure you’re staying on top of these breaking trends, talk to TSIA today to learn more about membership in our Managed Services area of research. That way, you can get the inside scoop of recent developments in this rapidly evolving area and get expert advice on how to apply managed services best practices to your organization. In the meantime, take a look at a preview of what’s to come by reading my “State of Managed Services: 2018” report, which covers the points in this blog in more detail, and also discusses some of the challenges your organization might be facing that TSIA is actively working to help organizations like yours solve. As always, thanks for reading!