Do Managed Services Really Save Money?

By Pedro Pereira  |  Print this article Print

While cloud computing has yet to demonstrate it can save users money, the jury is in when it comes to managed services.

Cost savings always comes up as one of the main selling points of cloud computing. It is also one of the most compelling reasons for businesses to hire managed services providers (MSPs).

How much of a beneficial impact cloud services will actually have on IT budgets remains to be seen. The expectation of long-term savings is certainly reasonable, but depending on which iteration of the cloud a business adopts, an upfront investment may be necessary. That is certainly the case with private cloud implementations that require the deployment of a hardware stack. Of course, a lot of cloud services work on a pay-as-you-go model without upfront expenses.

When it comes to managed services, however, you could say the jury on cost savings is in. Close to 100 percent of end user organizations polled earlier this year indicated they have enjoyed substantial IT budget reductions as a direct result of working with MSPs.

A Computing Technology Industry Association poll of 400 IT and business professionals in June found that 46 percent of organizations that rely on MSPs for some or all of their IT needs say they have reduced annual IT budgets by at least 25 percent as a result of adopting managed services. Those respondents include 13 percent who estimated their savings at 50 percent or more. Another 50 percent of poll participants said they have cut annual IT costs by 1 percent to 24 percent.

That is a whopping 96 percent of respondents saying managed services save them money.

If any skeptics are left out there, you’d have to admit this is pretty good evidence the managed services model makes budgetary sense. For their part, MSPs that still face resistance from client prospects can use these statistics to back up their cost-saving promises.

Add to those promises the prospect of reducing downtime to an absolute minimum through remote monitoring and management, and it’s hard to imagine that too many customers will continue to resist this approach.

They shouldn’t, especially when you throw another significant statistic at them: The CompTIA survey found that 89 percent of current managed services users are very, or mostly, satisfied with their experience, citing uptime, security, agreeable contract terms and flexibility as reasons for their satisfaction.

Such high levels of satisfaction have a direct correlation to loyalty. So it’s fair to say that MSPs have customers right where they want them.

Let me explain. Remember my Channel Insider column published on August 17, "Getting It Right in the Post-Managed Services Era?" In that piece, I argued that MSPs were entering a new era of services delivery, thanks to all the buzz around the cloud. In this post-managed services era, I posited, MSPs have an opportunity to assert themselves in cloud services delivery.

After all, who is better equipped to remotely manage IT services than the companies that for the better part of a decade have been remotely monitoring and managing client networks?

Now, having built customer loyalty by delivering on the promise of managed services, these same companies can use their record to entice clients with cloud-based services. Remember, your track record is one of the most powerful selling points you can use in promoting new offerings.

Of course, don’t forget the basics. While cloud services open new opportunities to expand existing client relationships and find new customers, remember the managed services market is still a growing business. Insight Research Corp. has predicted the U.S. managed services market will grow at a 12 percent rate through the next four years, to $47 billion in 2015 from $29 billion in 2010.

In other words, you can still sell a whole lot of managed services in the post-managed services era.

In the meantime, you can start working to deliver on that other promise – that cloud services also save you money.

Pedro Pereira is a columnist for Channel Insider and a freelance writer. He can be reached at pedrocolumn@gmail.com.