Partner with TSIA
TSIA Giving Program
Service Revenue Generation
XaaS Channel Optimization
XaaS Product Management
Become a Member
XaaS Speaking Engagements
One of the top challenges facing today’s managed service providers is the shape and structure of their managed services organization. Whether you’re starting or will be starting a new MS business in the near future, here’s an example of an ideal MS organization structure and the functions of each of the key roles.
The most common, core functions of a managed services organization are made up of product management (offer and strategy), sales, marketing, business operations, service delivery and supporting functions. These supporting functions include, but are not limited to, finance, HR, procurement/sourcing, legal, etc. This is how your MS org structure should look:
At the nucleus of the MS organization is product management, which is the primary interface into all of the functions required to sustain the success of a managed service business. Product management is responsible for defining an organization’s business strategy and managing its execution, but also defining offers and building the business plan for those offers. They must have, at a minimum, basic knowledge of all facets of the MS business, as they need to work with all of the other departments to walk through the entire MS offer journey, from planning stages to market.
Though having a marketing function for your MS org might seem like a given, marketing managed services is different than marketing any other technology or service. In a product solution, hardware or software, you’re marketing capabilities of a product, such as features, functions, technical attributes, etc. Managed services, however, is more tied to outcomes, such as risk aversion, reduced total cost of ownership, improved uptime, accelerated return on investment, financial predictability of operating expenses, and so on. You will need a marketing team that can adequately communicate the difference between a product P&L and a managed services P&L to other departments and ensure that customer outcomes are at the forefront of marketing efforts.
Like marketing, selling managed services is significantly different than selling hardware, software, or traditional services. This is because, unlike selling technology, the CIO of a company is usually not the key decision maker, but a key influencer. Purchasing managed services can be a very strategic decision for a corporation, and the key decision maker is often the COO, CFO, and even the CEO. While technology is still a factor, it’s the intended outcome of the implementation and operation of that technology that can make or break a deal, which makes them far more complex and can take longer to close. Your managed services sales team needs to be able to establish C-Level relationships, demonstrate financial acuity, and understand the long-term business goals of their customer, as well as understand how technology and operational outsourcing will impact the business strategy and goals of their customer.
Once the deal is closed and the customer is on-boarded, it’s time for the delivery team to take over. The success of the deal is often determined with the first 90 days of activation, so a strong, process-oriented, scalable operation dedicated to outcomes is incredibly important. Once your client is under active management, it’s the “Day 2” team’s turn, which includes a service desk (level 1 engineer), and level 2, 3, and 4 engineers. Fortunately, your service desk or level 2 engineering team can resolve most initial customer incidents. However, if an issue become chronic or difficult to resolve and/or reproduce, the issue is then handed over to level 3 and level 4 engineering, which typically consists of your most highly skilled, senior engineers who possess an in-depth knowledge of both the products and service portfolio supported by the managed offering.
Business operations handles the non-technical aspects of a managed services organization, such as P&L governance, budget planning, resource management, client management (if not part of delivery), contracting (renewals, upselling), vendor and supplier management and forecasting, just to name some examples. Given the list of responsibilities of this team, it is important that individuals in this role possess good financial judgment. Most managed services organizations work within companies that are primarily focused on product revenue, so understanding how different the financial governance of MS is compared to products, and even other service lines, is extremely beneficial.
Also, as a result of the need for a different client and contract governance model, many managed service providers have developed a team within their organization that is responsible for the caring and feeding of clients. Your business operations team should know that how a customer feels about the performance of the managed service provider is just as important as the data behind the actual technical performance, which will allow them to make informed decisions based on overall satisfaction.
The thoughtful and deliberate development of your managed services organization structure is crucial to the overall success of the business. As the managed services market continues to grow and evolve, many providers are experimenting with alternative models for all core functions. Will there be a better model in the future? At TSIA, our goal is to keep bringing you the latest data on what’s happening both in managed services and across the entire technology services industry, so stay tuned! You can also watch my free On-Demand webinar, “Growing Managed Services” for insight on how some of the industry’s leading managed services providers operate and their best practices.
Post Date: July 23, 2015
George Humphrey is the vice president and managing director of service and delivery research and advisory for TSIA. He also serves as TSIA’s vice president of managed services research. He is a networking and communications industry veteran with over 28 years of experience. Throughout his career, he has held several leadership positions in managed services, including global strategy, product line management, marketing, operations, and client management.
The Technology Services Industry Association (TSIA) is dedicated to helping technology and services organizations large and small grow and advance in the technology industry. Find out how you can achieve success, too. Call us at (858) 674-5491 or we can call you.