January 11, 2018
Congratulations! You are a managed services (MS) contributor and leader in a hardware or software original equipment manufacturer (OEM). You’ve been struggling with your company’s love/hate/embrace/ignore approach towards MS in the past. You’ve had your share of successes and failures acting as a change agent for your business and sometimes wondered if you were alone, if it was worth it, and if the business was ever going to realize its full potential.
And now, your executive management made a big splash about a new or renewed focus on MS! Maybe it was a call-out highlighting your MS capabilities in a 10k or a quarterly report, or even a press release or internal announcement about the importance of your company’s MS practice or key MS customer wins. Or, just maybe, MS was identified as one of your company’s “strategic pillars” going forward, and all your dreams about one of the hottest growth areas in tech are about to come true!
But, how do you know if this is more of the fits and starts you’ve seen in the past or if it is really going to catch fire this time? How do you know if this is just (managed) lip service, and if it is, what are you going to do about it?
Managed services now represent over 22% of service revenues. Incidentally, managed services is now equal to professional services as a revenue contributor for these members.
The growth in MS over the past five years is undeniable. TSIA began covering managed services as one of our core focus areas 5 years ago. In that time, we’ve been talking about, analyzing, tracking, and encouraging the growth of managed services with our member companies. Here are some year-by-year highlights:
(Click image to enlarge.)
Managed services growth rates.
Managed services growth rates.
So we can see that, over the years, the emphasis, focus, and growth of MS has been progressing strongly. There is no denying that customers are increasingly accepting of, and demanding, MS models, especially from OEMs. So, OEM executive leadership gets excited about growth areas, especially when they are seeing consistent declines in their core product and support lines of business.
Yet, many OEMs with a MS practice often haven’t given the business unit the care and feeding required to take advantage of one of the fastest growing markets in tech.
There is no denying that customers are increasingly accepting of, and demanding, MS models, especially from OEMs.
We’ve written repeatedly on why this is the case, most recently summarized in our book, the Technology-as-a-Service Playbook. Here’s an excerpt from the book that illustrates this:
“[Executive leadership at OEMs] are extremely reticent to sign off on any offers that may increase company risk, reduce cash flow, or impact the margin profile of the company. The customer is asking for managed services, but the CFO and other executives at your company are quick to raise the following concerns:
So, the growth of MS is undeniable, as are the tensions within an OEM to resist this foreign object within the OEM host body, and all the white blood cells (traditionally-minded leadership) come out to attack.
And if your organization is now highlighting MS (again), how do you know if it is going to stick this time, or if it is just more lip service?
In my previous blog, “Managed Services is an Orchestra,” I identified the key cross-functional players that help support a thriving MS practice, including Sales, Marketing, Channels, Theaters, Legal, Services Operations, Engineering, and Executive Leadership. In a perfect world, all of these key players would understand that they were working together in an orchestra and playing off the same sheet of music.
However, if your organization isn’t at least starting to line these players up together behind your MS initiative, they may be just providing lip service support. Here are some ways to tell:
If you have most or all of these in place, congrats! If not, here’s what you should do.
In the immortal words of Douglas Adams from The Hitchhiker’s Guide to Galaxy, “Don’t Panic.”
Your company is in the MS market because customers are demanding it, the market is growing quickly, and opportunities are more abundant in this space than in most other areas of tech.
Leadership comes and goes, but in business, eventually people are going to follow the money. If you are stuck in the middle of a sea of lip service, here are some of the things you can do to stay afloat:
Managed services is at the forefront of change in the tech industry and there should be no surprise that the tip of the spear is first to get scratched.
The secret of change is to focus all your energy not on fighting the old but on building the new.
Way of the Peaceful Warrior: A Book that Changes Lives, Dan Millman
Organizational capabilities that technology services businesses must master
Jeff Connolly is the senior director of managed services research for TSIA. He is a video and telecommunications industry veteran, with over 20 years of experience in managed services and Cloud delivery models. In his role at TSIA, Jeff provides members with fact-based education and insight into the performance and operations of managed services providers of all sizes.
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