February 21, 2014
The world of tech is changing. Consumers of enterprise technology have voted with their wallets. They are concerned with the lack of return on investment for their infrastructure technology expenditures. They are frustrated with the ever-increasing complexity of their IT solutions driven by the rise in software centricity and network dependency.
One of the toughest gigs in a company today is being a leader of an IT organization. Their CapEx budgets are shrinking. Their training budgets are shrinking. Their resource budgets are shrinking. Their technical skills are aging. They are losing control of their ability to dictate to the enterprise what solutions they are to use.
For example, if a sales vice president doesn’t care for their current sales management and reporting tool, they can simply use their budget to procure a software as a service (SaaS) solution such as salesforce.com. If IT doesn’t like it―tough. On top of that, IT still has to manage the underlying network that the cloud application traverses to get to the end user’s desktop.
If the end user has an issue they call IT for help. To further exacerbate the issue, end users are bringing their own devices into the workplace and expecting corporate applications to perform flawlessly on them. If they don’t, IT gets the call.
he net result is a withdrawal of traditional tech spending with a favor toward a consumption model where the technology purchaser can shift some of the risk―financial or operational―back to the provider of the technology.
It’s often said that a picture paints a thousand words. The below illustrations are graphical depictions of the technology market transforming right before our eyes.
There is a disturbing trend in the overall tech market that we see, as evidenced through TSIA’s Service 50 index. The Service 50 is a quarterly snapshot of the revenue and profitability performance of the technology industry. TSIA aggregates the financial performance of these 50 companies from the public record. We identify service revenue and profitability trends, and provide critical observations based on the current quarterly update of 50 of the largest global providers of technology services.
There is a major trend of overall technology revenues declining. This is followed by two minor trends: The product revenues, hardware and software, are declining. The services revenues have been growing. According to TSIA benchmark analysis, the fastest-growing service line among professional services, education services, support services, field services,and managed services is managed services.
These trends support the overall theory of a shift in buying behaviors for technology solutions with managed services being the most desired technology procurement model. These are the trends that were predicted the leading-edge tech business books Consumption Economics: The New Rules of Tech, and the basis of the assertions in B4B: How Technology and Big Data Are Reinventing the Customer-Supplier Relationships.
The net result is that many companies are now starting to realize that a managed service play is no longer a “nice to have” part of the portfolio. It is a requirement and critical to the long-term health and evolution of a technology company.
If you currently do not have a strategy for a managed services offering, it is time to start considering one. If you already have a managed services offering, it is critical to understand where you are compared to your peers and the industry. The world of managed services is rapidly evolving, with powerful solutions being offered by manufacturers, service providers, system integrators, and value-added resellers alike.
TSIA’s Managed Services Discipline is helping managed service providers understand the key practices that are driving the best business results through market research and benchmark analysis. Contact a TSIA member success manager today to find out how we can help you make this journey, whether building a managed services business from scratch or revamping and modernizing your current managed services offers, operations, and go-to-market models.
George Humphrey, is the vice president of research, Managed Services, for TSIA. He is a networking and communications industry veteran of over 20 years with extensive experience in managed infrastructure and application services. Throughout his career, he has held several leadership positions in managed services, including global strategy, product line management, marketing, operations, and client management.
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