The Pros and Cons of the IT Managed Services Business Previous item Federal Forum Focuses on... Next item It Starts with a Ripple...

The term “Managed Services” has come to mean anything from the basic offering of a resource assigned to an account, to a cloud offering that supports a specific business (i.e., electronic medical records), to the management of expended natural gas tanks.  While all of those can be considered a type of Managed Services, at InterGrid we are focused on the services that support IT infrastructure.

In the past, most people referred to this type of IT as “outsourcing” (Infrastructure Technology Outsourcing “ITO”). While that is still an appropriate way to describe it, unlike traditional ITO, Managed Services is based more on “standardized” offerings to create economies, both financial and resource, that can be shared across multiple clients.  In the past, an outsourcer might stand up a customized infrastructure with support parameters that included custom service levels, custom reporting and support of multiple equipment types/manufacturers. That infrastructure was specific to a client and a myriad of dedicated resources (people, tools, facilities, etc.), and processes that were developed for – and dedicated to – that client.  This limited the ability to scale the service to other clients, or, frankly, within that client if the company wanted to add different technologies.

Today’s IT infrastructure Managed Services are designed so that resources are standardized and can be shared across multiple clients with minimal customization, saving money and time to implement and support.  A Cisco network is still a Cisco network, regardless of the customer using it, so a value-added reseller (VAR) can sell the infrastructure to a hotel, or a hospital, or a retail outlet with minimal customization.

For example, when each client’s infrastructure was highly specialized, it took time for an engineer to learn that client’s specific design.  And that engineering resource was limited to one or two clients. In today’s Managed Services environment, engineers focus in a discipline (data center, network, collaboration, wireless) and can be leveraged across multiple clients’ infrastructure by discipline, as opposed to being focused on a specific client.  This greatly reduces costs for services and thereby the price to a client.

Like the engineering example, standardization is used across service levels, reporting, and tools that can then be shared across multiple clients. In fact, over the past three years, VARs have moved to Managed Services, because it allows them to maintain relevance and remain competitive and offer their end customers the ability to scale with more flexibility, create competitive advantages and strengthen business outcomes.

Also, VARs who offer Managed Services create recurring revenue models with higher gross profit margins (over product sales). Multiyear contracts stabilize the revenue and increase the valuation of the business.  Client retention increases and “drag” business (Professional Services and Products) also increases.

Along with the above-mentioned pros, there are some cons associated with Managed Services. Standardization brings great economies of scale, but it also limits the ability to change service levels to meet a specific client’s needs, because there are not dedicated teams for every customer. Everything is handled the same way, so a priority-one (P1) call center response time is the same response time across the supported client base.  In the ITO world, by contrast, you could create a 30-second response time or a 3-minute response time, depending on that specific client or even an end user’s needs.  Trying to provide different service levels, by a client, in a centralized model is almost impossible.

Another challenge is keeping up with the tools, training and product offerings available through Managed Services because technology is changing more rapidly than ever.  That is exacerbated when the client does not have a “pure brand” IT infrastructure, because the Managed Services Provider (MSP) may not have the resources to support all the products the client uses.

There are many things to consider when determining what type of IT infrastructure support you will offer to your clients, whether you build your own, cobble one together or partner with an MSP for delivery.  Regardless of the approach there are other considerations. Along with how you deliver technology support, there are other considerations, including business operations, legal, sales compensation, etc.

I will focus on types of infrastructures and delivery models in future posts.

Reach out to David McGillivray and his team at to learn more about InterGrid’s JetStream line of Managed Services currently offered to Comstor VARs.