What exactly are managed services?

  • November 30, 2017
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  • Posted by Kevin Gemeroy

Managed services has become the buzz phrase of choice across the IT industry.  While the concept has been around since the dawn of capitalism, the SMB world is now awash with companies offering to sell them managed services.  From their internet service provider, to their copier company to their local IT shop, there’s a range of options at a price point that’s a fraction of what it actually costs to do the job the right way.

When it comes down to it, managed services aren’t anything special.  The idea behind them is that a company provides a promise to “manage” a particular problem for a company in exchange for a fixed monthly fee.  Telephone and cable TV companies have been doing this for decades, offering a package of services to solve your entertainment or communication “challenges” for only (far too much) per month.

As these industries have declined, these companies have branched out into ancillary services.  They’ve got huge call center operations and their agents are used to solving customer service problems based on prepared scripts and solutions.  It seemed only natural to redirect this labor to “managing” the IT needs of small businesses, right?

Your printer and copier vendor has also made this move.  Over the past 20 years, these companies transformed their business models to operate on a pay-per-print basis.  They turbo charged their profits in the process by hiding the true cost of the machine they’re selling and the support contract to keep it stocked with supplies and working as intended.

But that created an unforeseen problem.  As the world become more digital and as the tablet and e-mail replaced the stacks of printouts that everyone carried around, these copier dealers started seeing their revenues decline.  The solution?  We can have our copier techs fix computers too!  We can use the same fixed fee model and keep our guys busy and our profits high, right?  Unfortunately, not.  The biggest IT disasters we see in small business were usually created by the copier company’s MSP division.

Then of course there’s the neighborhood IT shop.  It’s got a guy who’s great at fixing computers and he’s probably been doing it for 20 or 30 years.  If you stop by, you’re likely to get a story about an IBM 386 or how Bill Gates said that nobody would ever need more than 512k of RAM.  But he’s got a challenge as well.  His rent goes up every year and he’d like his salary to go up too.  But in order to do that, he’s got to charge about $200/hour, which nobody wants to pay for personal IT services.  So he decides to offer fixed-fee managed IT services as well.  Unfortunately, these mom and pop shops can’t really meet the needs of a growing or changing business that’s got more than maybe five or ten employees max.

The resulting managed services marketplace is one that’s commoditized as multiple big players race to the bottom in a fight for the cheapest price and the crappiest service.  This is the exact opposite of what most small business owners need.

So how does a buyer differentiate between companies offering “managed services”?  Well, the devil is in the details.  A true managed service provider is focused on one thing:  making your IT work amazingly well.  The reason for that is that if you continue to have IT problems, we continued to pay to fix them.  Since we’re working on a fixed-fee basis, the more problems you have, the less we make.

That’s why hiring a top-tier MSP is a great solution for a top-performing company.  We’re both incentivized by your success.  If your business and team grow and your IT enables that to happen, then we both win.  If your team is fighting problems and loses productivity, we both lose.

At the end of the day, a true MSP needs to understand your business first.  Then they need to figure out your goals and objectives and create a detailed plan to achieve them through the use of technology.

So the next time someone tries to sell you managed services, make sure they’re asking the right business questions.  If they’re trying to sell you a server, copier, or cable TV along with their “gold” managed services plan, you should run far, far away as fast as you possibly can.

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