Are Customers Getting Real Value from Their Managed IT Services?

Is It A Bait-and-Switch?

As 2016 comes to a close, we in the managed IT services industry can say with some confidence that our customers really do understand the value proposition of our offerings. This was not always the case, even into the recent past. Time and again, when we begin the engagement process by positioning the value proposition (and weren’t we taught always to start with that?), most customers are quick to tell us to move on, that they get this part and want instead to get into the details that really matter to them—what are we proposing to deliver to and for them, and at what cost?

Many factors have contributed to the maturity of managed IT services as an industry and the acceptance of the notion that managed services may be the most viable option for most enterprises moving forward. These factors range from the spiraling costs of IT operations through to the wide range of emerging technologies promising to revolutionize the enterprise but that require very specific technical expertise to implement and manage.

Cloud-based services, digitalization, device proliferation, the highly mobile and collaborative knowledge worker—all of these are great in concept, but they are very hard for the Enterprise to deliver and manage. Where IT personnel are concerned, CIOs and IT Directors know painfully well that the shortage of experienced IT professionals to manage and upgrade their IT infrastructures ranks up there with overall costs and security assurance as top barriers to overcome. Yes, we can safely assume that those CIOs and IT Directors are well aware of the potential value that a managed services provider brings to the table. The operative word here is potential!

It is very counter intuitive, then, to state that another growing trend points to customers feeling as though they aren’t extracting the real value from their managed services. It’s one thing for them to understand their IT needs and how managed services propose to alleviate the pain—it’s quite another for those managed services, put into practice, to deliver on that promise. We really need to understand what causes this gap between proposed and actual value and then figure out, as an industry, how to bridge that gap and truly deliver the promised value to our customers. Not doing so could blunt the continued sharp growth in the managed services industry in the long run, adversely affecting us all.

Let’s Focus on the Value Proposition Model

We just mentioned above the factors contributing to the maturity of the managed IT services industry. Note that we started where every managed services provider starts the pitch: spiraling costs and helping to stabilize or even reduce them for the customer. We’re all just following the standard model of selling value: look how much money you will save, Customer A—here’s how we’ll reduce your overall operating costs. But does Customer A ultimately get shorted? It’s like getting the receipt at the grocery store and being told you saved n-dollars when you just shelled out over a hundred on a small hand-cart of items. Yeah, whatever. Did I get what I really came here for, though? Remember: our customers are always asking themselves that last question.

When we think about it, we should all know better about obsessively focusing customers’ attentions on cost-saving propositions. A business model built upon the bedrock of cost-cutting has obvious limitations, not the least of which is over-commoditization and a race to the bottom of the pricing spectrum (with a simultaneous reduction in the deliverables). That may sound attractive for the customer initially, but in actuality it’s not a very good thing at all, especially for the customer. What’s the old adage about value? You get what you pay for.

But let’s be honest here—we’ve all done it! Each one of us in our business or personal lives has chosen the cheaper product, lowering our expectations in the process and hoping that just a little of the promised benefits materializes. Most of the time, what we find is that we really didn’t want the cost savings in the first place, at least not at the expense of real value and an outcome that actually solves the original problem. Hope really is not a strategy when dealing with an enterprise IT infrastructure.

This is where most organizations are with their managed services providers—they might have been attracted to the bottom-line savings reflected prettily on the pricing slide of a slick sales presentation, but what they really needed (but unfortunately they often don’t get) is a beneficial outcome, a solution to the actual problem. What did they really need from their managed services provider? Improved uptime, increased visibility, access to productivity-boosting technologies, adequate technology refresh, and better security. They needed outcomes, not raw deliverables.

The Mirage of Customization

For many managed services providers, the answer to the cost-cutting business model is to try to add value through heavy customizations. Again, it sounds good in theory—promising to tailor every capability and deliverable to match the customer’s unique infrastructure and environment. This model is built on the proposition that the value resides in getting something non-standard and maybe even personalized, away from cookie-cutter commoditization and one-size-fits-all delivery. I mean, it works for the clothing industry, right? We all know that tailor-fit clothing matched to exacting measurements is always better than standardized off-the-shelf sizes.

Unfortunately, we’re not talking about clothes here. IT infrastructures underpinning an enterprise’s entire operations are much more complex, and complexity is best managed through well-documented best practices of a finite range coupled with intelligent and reliable automation. This is the reason that industries—the IT industry included—adopt frameworks and protocols while reducing variations. Manual processes introduce too much variability and are overly susceptible to error. Automated processes, if designed correctly to a standard, produce the same high level of output every time.

So it’s really not debatable that doing things differently in every situation, a constant one-off as it were, increases the complexity and introduces error (and risk). We have to be honest here: a customized approach doesn’t really ever work out for the provider, either, no matter how much the customer is charged for the “privilege” of customization. Both parties, the customer and the service provider, really like the sound of it; when finally implemented, customized managed services are laborious, costly, and ever-changing. Both parties quickly get over the elation of the original deal.

A Better Way of Delivering Managed Services

So we see that in either case—a managed IT services model of cost-cutting through expediencies or a model of customization through manual one-offs—the customer suffers and does not extract the value needed to maintain IT infrastructure stability and then grow the enterprise. Both models actually become a burden for the customer, a distraction that damages at the most basic level—it takes the customer away from their core business. That’s hitting a customer where it really hurts.

Fortunately, Cisco’s Cloud & Managed Services  (CMS), adopts an alternate model built upon three factors proven to give the customer true value:

Standardization of Offers through consistent capabilities

Repeatability of Processes through well-tested and accepted frameworks

Platform Automation that redirects expert human intervention to the critical touch points in the overall workflow of managed services delivery

We need to delve into each of these to substantiate the desirability of our managed services model.

Standards exist as points of comparison. More so, they represent the model of production or performance by which every piece of output is measured. Having a standard implies that the ideal state of the product or deliverable has been established, the process of creating it is well defined and replicable, and the quality of output is accurately gauged every time. Standardization in managed IT services, then, is ensuring that the highest level of delivery is spread across a wide body of activity (i.e. a portfolio), ensuring consistently optimal output every time regardless of the component activity; for example, regardless of whether the capability is incident management or change management, it should be equally and consistently effective and of highest value to the customer when compared to all other capabilities.

Through both experience and research, CMS has identified and codified the optimal standard for each capability and deliverable (based upon widely accepted practices discussed next) throughout the larger managed services spectrum. Regardless of technology area, we have determined how each deliverable provides the customer with the highest level of business value as well as the capability by which to produce each deliverable. Again, this value is not based solely on cost-savings but upon more impactful factors such as how it enables our customers to focus on their own innovation rather than on their IT infrastructure. And we’ve standardized all of this across our multiple technology portfolios (such as Networking, Data Center, and Collaborative technologies). What this means is that our different offers and technology portfolios all encompass a similar collection of deliverables geared toward helping our customers achieve solid business outcomes.

We would not be able to implement standardization in our portfolios without a set of processes by which those standards could be consistently achieved. In CMS, our processes are informed by the widely accepted ITIL framework. ITIL incorporates best practices and standardized deliverables/activities/roles. It is a framework employed around the globe to guide IT services organizations in delivering the highest quality of IT management to their customers. Our ITIL-based methodology enables us to provide our customers with consistently repeatable, high-value deliverables. Without standardized portfolios and well-defined processes, we feel that managed services would be inconsistent, unrepeatable, and inferior in quality and value.

We’ve been using the word “repeatable” to describe one of the most attractive aspects of our standardized deliverables, capabilities, and processes. Nothing deters repeatability quicker than manual human intervention, where an overload of data or inputs leads to distraction, which in turn leads to error and unpredictability, resulting in outright risk. To overcome this, we have invested significantly in platform automation.

Our approach to platform automation is not one of facilitating resolution of the same type of problem over and over again carried out by human intervention. Rather, CMS platform automation incorporates sophisticated tools, analytics, and correlation logic to filter out the noise created by innumerable events, isolate the actual incidents and problems, and focus our professionals and their expertise where they can make the most impact and quickest restoration of service. This is critical, because humans are not able to manage the 19 billion devices expected to interconnected within the next 5 to 7 years with the maturation and explosion of the Internet of Things (IoT). And humans are not good at the minutiae of repetitive tasks—we excel at root-cause analysis once the problem is properly framed.

When combined together, these three elements—standardization of capabilities, repeatable and reliable processes, and platform automation—enable us to provide our customers with consistent outcomes that free them up to focus on their core business. Customers are then able to grow their market share, help their own customers, and increase shareholder value. These three elements help us ensure maximum uptime, minimal time-to-resolution, and a stable and adaptive IT infrastructure that can grow with emerging technologies. Our customers can then innovate and deliver quality products and services for their own customer base, unhampered by IT-based distractions.

The Real Value to the Customer

At this point, the real value to the customer of this managed services model should be abundantly clear. We intentionally avoid creating offers and capabilities with the sole purpose of reducing our customers’ costs. We look at our customers and their industry segments, we seek to understand the outcomes that most significantly and positively affect their core business, and then we define offers and capabilities that adhere to the following elements:

Standardized offers providing portfolio and delivery consistency

Well-defined processes that ensure repeatability and reduce error

Tool and platform automation positioned at the most appropriate point in the delivery workflow

If we give our customers this, then we give them the real value that they require.

How Cisco’s Cloud & Managed Services Can Help

CMS has many different resources you can access to find out more about how managed IT services done right can really help your organization. Start here to learn more about Cisco Cloud and Managed Services, and contact your Cisco representative to get started today! Don’t settle for over-promised and suboptimal managed services— learn more about CMS for the real story and expertise.

Authored by:  Trevor Morgan, CMS Offer Manager