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Cross-Practice

Managed Services Vs. Professional Services: What’s the Difference?

How to Use Each to Drive Adoption and Renewals

5 min read
By Jeremy Blanton
It’s one thing to sell your technology, but it’s a completely different task to make sure  customers know how to use it. Both managed and professional services can help your customers enact your solutions and bring about a faster time to value. But when do you call in professional services and when does it make more sense to hand it over to managed services?

Don’t think about “managed services versus professional services” as a competition. While the implementation will look different, their importance to a company’s success is the same and can even be used together to accomplish outcomes. When deployed correctly, both can be used to drive better renewal rates and customer satisfaction. However, their differences mean it’s crucial to make a strategic decision on when to use which service.

Let’s look at the difference between managed services and professional services, the boundaries of what each offers, and what that looks like in the real world.

What is Managed Services?

Managed services is the practice of outsourcing day-to-day technology management to a third party. This allows your customers to spend more time on the specialized aspects of their business while managed service providers take on some of their workload.

One way you can identify if something falls under managed services is to ask yourself:

Who owns the password to the technology being managed?

A simple rule of thumb to keep in mind is that if you as the vendor own the password, then it’s managed services. However, if the customer has the password, then you are helping them manage the technology.

I think of managed services’ unofficial slogan as “leave the management to us.” The customer might have your technology, but they may not have the know-how to optimally use it or the time to get better at it. Managed services, sometimes referred to as managed IT services, “owns” the operations of the technology platform and can take on a spectrum of duties depending on the kind of offers in a provider’s portfolio.
Managed Services portfolio offerings
Managed Services Portfolio Offerings

The portfolio of managed service providers can be broad and consist of anything from basic monitoring services to hybrid managed services. You are likely to have managed service solutions that fall into multiple categories, and how your team operates will look different depending on the needs of your customer.

These five categories are part of the offer continuum of managed services. We go into more detail on the mechanics of the offer continuum in our report, Defining Managed Services, but another way to visualize this is as a stepladder.
“managed services offer continuum”
Managed Services Offer Continuum

As you move from left to right on the graphic above, the amount of responsibility that falls under managed services’ purview increases. In our product-focused and on-prem centric past, managed service offers were often focused on proactive monitoring and simple “operate” offers, but the emergence of XaaS solutions is rapidly changing that. XaaS has pushed both born-in-the-cloud and legacy companies towards heavier reliance on managed services. Companies are less and less interested in owning and operating the technology, and instead are focused on using it to reach outcomes.

With a managed services team, customers have a clearer path to value and can accelerate a return on their technology investment than they would have otherwise been able to accomplish on their own. Managed services takes a proactive, preventive, predictive, and prescriptive approach to make sure customers achieve their outcomes.
“Managed Services defined”
Managed Services Definition

What is Professional Services?

Professional services organizations are made up of specialized experts that have extensive knowledge in a given field. Technology solutions can be highly sophisticated and require expertise to understand its full capabilities–this is where professional services steps in.  

Professional services delivers the expertise to help your customers take full advantage of their purchase. This might include an initial consultation after purchase, walking with customers through the onboarding process, and doing what is necessary to ensure product adoption. A professional services team can be deployed for a whole host of technology solutions, including:
  • Consulting
  • Design
  • Implementation
  • Systems integration
  • Migration (including cloud migration)
  • Custom development
  • Adoption
  • Project and program management
  • Optimization, tuning and performance improvements
  • Resource management
These services reflect the project-based nature of professional services, often brought onto a specific project to help customers achieve a specific outcome.

Professional services can look and function differently from company to company. However, in all iterations it’s important to remember that your professional services’ strategy starts with your charter strategy. From there, you can build, sell, and deliver offers to your customers that meet their needs and grow your organization. 
“Words”
Professional Services Business Model

Nowhere has this growth been more evident than with software-as-a-service (SaaS) and anything-as-a-service (XaaS) companies. Professional services can be a massive accelerator for companies that are trying to run a SaaS business or transforming into one.

In the “State of Professional Services 2022,” my colleague Bo Di Muccio explains how professional services is often the first service that XaaS firms monetize. This is with good reason–research shows that having a defined professional services revenue stream is the number one predictor of XaaS profitability.

XaaS and SaaS have also had an impact on professional services. The industry has begun to shift from overwhelmingly project-based to increasing subscription-based offers. Still, the mission and value of professional services remains the same.
“Professional Services”
Professional Services Definition

What Is the Difference between Managed Services and Professional Services?

You might already be able to see how managed services and professional services differ, but it’s important to understand the larger implications of those differences.

Management vs. Adoption

The most obvious difference is this: managed services is responsible for managing the daily use of the technology; professional services empowers your customer to better manage it themselves.

For example, you might hire a professional service organization to onboard your staff to use a new accounting tool. While many professional service offers provide problem solving sessions and ongoing training, the customers will be the ones managing and using the accounting software. Managed services, however, would manage the tool day-in and day-out. (How involved managed services will be is dependent on where your offers fall on the offer continuum.)

Continuous Vs. Set Scope

Timeframe and scope of work is another significant difference. Managed service offers  can span a large continuum of work, with the scope not usually confined to a singular, short-term project. They manage all aspects needed to cover an organization’s daily needs, even tackling unforeseen issues that may arise. Additionally, they are not constrained by a short, project-based timeframe as it is a continuous service for the length of the contract, often multiple years in length.

This differs greatly from what we see with professional services, which usually has a narrower defined scope of work and timeline to complete a project. While projects can be comprehensive and span a long length of time, professional services is brought on for that specific project. They work with you to complete the project or address a specific challenge before leaving it in the customer’s hands.  

That is why being crystal clear about “what’s in the box” (what the offer entails) is so important for professional services. You don’t want your customer to encounter a problem outside the scope of the offer and be surprised that they are charged more to resolve it.

“Inside” vs. “Outside”

Managed services oversees the day-to-day tech operations, while professional services comes in to provide expertise for a specific project. While I’ve made this point before, it’s important to see how it changes how a provider positions their service offerings in the market.

A managed services provider (MSP) is often taking over responsibilities that an organization would otherwise perform themselves. They are “owning” a role or responsibility inside of the customer’s organization and embedded into the daily structure and workflow. Their work is continuous for the length of the contract, and viewed as a more permanent “member of the team.”

With professional services, you can view their role more like that of an outside consultant. They are hired on to complete a specific project and leave once it has been completed. While professional service practitioners will no doubt work with a large number of the employees, they are not there daily or long-term. Depending on the scope of the professional services offer, there may be an ongoing subscription element. However, it will likely not entail daily maintenance or management.
“Words”
Managed Services vs Professional Services

The Connection

Despite the above stated differences, we actually see a lot of crossover with managed and professional services and what they can offer your customer.

Here are the three areas of overlap that stick out:

1. Both contribute to customer outcomes

Digital transformation has instilled an expectation for customers that you (not just your tech solution) will contribute to their success. This shift means going from making sure the product is up and running to making sure the customer achieves their outcomes. We see this play out in both professional and managed services, with more advanced organizations building outcome-based offers.

In these advanced organizations, we often see professional services as a baked-in component of managed service offers. Professional services offers a laundry list of capabilities that you can fold into managed service offers. This will allow you to better provide outcome-based offers. I think of professional services as a portfolio option I can extend to my managed service customers and that I can embed to better lead my clients to their desired outcomes.

2. Both help solve the consumption gap problem
The consumption gap is the gap between the value your tech solution can offer and the rate at which your customers are using that solution. Back in 2009, we called out this problem in our book Complexity Avalanche. Just this year, we highlighted it again in our State of Managed Services webinar.
 
“Words”
The Consumption Gap Explained

The fallout from the consumption gap can affect the relationship with your customers, and for SaaS and XaaS offers, hurt your chance at renewals. Even if customers can see your technology’s value, they aren’t going to renew if they haven’t been able to effectively use its features and achieve their desired outcomes.  

This is where managed and professional services steps in. Both organizations were created to help consumers more effectively adopt your technology solutions, whether through consulting and training or taking on the daily management of the solution themselves. They are crucial for closing the gap between offer and consumption, which can lead directly to renewals.

3. Both require a different sales motion

Since managed and professional services are not traditional “products,” they will require a different approach and sales tactics. This is why it is crucial to communicate with your sales team when selling these services and creating the offers.

The question to ask is this: how do you articulate the value of these services to the buyer differently from a product sale? Make sure your sales team is armed with a complete understanding of how managed and professional services functions and the value they can bring. Neither should be viewed as an “add on,” but instead a central piece to the success of your technology solution.

As I’ve already mentioned, professional services needs to be clear about what is included in the offer and what the customer is getting. Confusion in the sales stage can lead to disappointment from the customer and hurt your chance at renewal.

Take time to sit down with your sales team and come up with a plan to best integrate professional and managed services into the sales plan. A deeper understanding on their part will go a long way. 

Deciding Between Managed and Professional Services

Remember, professional and managed services are not at odds with each other. The correct implementation of managed and professional services can lead to higher consumption, adoption, and, ultimately, renewal rates.
 

 June 3, 2022

Jeremy Blanton

About Author Jeremy Blanton

Jeremy Blanton is the senior director of managed services research for TSIA. He is an experienced IT Services executive with 25+ years of experience in IT and Managed Services businesses, In his role at TSIA, Jeremy is responsible for leading and delivering TSIA member organizations with operational best practices, fact-based education, and insight into the performance and operations of their managed services business.

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