Kaplan: Managed Services Are Transforming the Market

Customers' expectations for IT services have shifted from remediation to prevention, according to Jeff Kaplan, managing director of analyst firm ThinkStrategies. No longer are customers calling on IT services providers only to fix broken-down systems and applications.

"They want proactive management that can ensure the ongoing availability of the technology rather than reducing its downtime," said Kaplan, who delivered the keynote for the Ziff Davis Virtual Trade Show on managed services on March 20.

Shaping the attitude of customers regarding IT services are technology developments that first affect their personal lives, such as YouTube and MySpace.com. Users become accustomed to the way the technology is used in those contexts and start to expect the same level of functionality in the workplace, Kaplan said.

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The personal use of Web-based on-demand technology services has made business users more amenable to IT models such as managed services, through which providers take over remotely some or all of their customers' IT functions, and software as a service, whereby providers host and maintain applications over the Web for customers.

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So prevalent are these models becoming that the industry already has experienced a disruption to the traditional ways of doing business, Kaplan said.

He cited eBay and Amazon.com as examples of consumerism that are contributing to the way technology is delivered and used. And he cited the acquisition of Siebel by Oracle as a result of match-up between Siebel and Web-based CRM (customer relationship manager) vendor Salesforce.com, whose new business model forced its competitor into being acquired.

Kaplan said consumerism and the type of on-demand services pioneered by Salesforce.com figure among 10 major trends that are reshaping the market. The other eight, he said, are globalization, commoditization, differentiation, worker dispersion, Web 2.0, social networking, reliability/security and operational efficiency.

Such trends as worker dispersion and globalization lend themselves to managed services because customers can hand over IT tasks that become difficult or expensive for them to handle themselves.

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Kaplan said that contrary to the prevailing belief that managed services is geared to SMBs (small and midsize businesses), ThinkStrategies has found through research that companies of at least $500 million in revenue are more comfortable with the model.

Sixty-two percent of representatives of such companies polled said they are already using managed services, compared with 31 percent of companies with revenue of less than $50 million. The number of polled companies with revenue of $50 million to $500 million that said they are using managed services was 55 percent.

Kaplan said providers still need to overcome a number of barriers to deliver managed services. These include marketing hype, customer confusion, office politics and billing challenges.

Ultimately, he said, providers have to not only deliver the services, but they also must ensure reliability and network security.