Since I started up TSIA’s Managed Services discipline at the tail end of 2012, I’ve received a lot of questions both from members and non-members about the definition of managed services. I figured that it was worth addressing these questions in a blog post, specifically, what is managed services, how TSIA defines both the concept and considers examples of managed services, what we’re seeing in the industry, and explain the different types of managed services offers.

In TSIA's definition, managed services is the practice of outsourcing day-to-day technology management responsibilities to a third party as a strategic method for improving operations and accelerating a return on their technology investment, but the truth is, “managed services” is an umbrella term for a variety of different kinds of offers.

Categories of Managed Services Offers

If you look underneath the umbrella concept of managed services, you’ll find several major categories or offer groupings.

Monitor

I sometimes call this offer “monitor and notification," and it’s usually the first entry point for companies into the broader world of managed services. This is where the customer has purchased your technology and some support services, but is experiencing some level of pain from operating these solutions and therefore needs a bit of help. The managed services provider (MSP) monitors those technology solutions for them, notifying them of any issues affecting the performance of that solution, which they then bring to the attention of the customer. The customer is still ultimately responsible for the operation of the technology in this instance, and it’s up to them to fix things when they go wrong.

ITIL is a set of thoroughly defined, best-in-class processes for operating technology.

Operate

This offer takes “monitor” to the next level, where a customer might still be having trouble addressing all of the issues brought to their attention and therefore hands over the keys of all operations to the managed services provider. For MSPs who are operating the solution for the customer, I would like to underscore the importance of leveraging the Information Technology Infrastructure Library (ITIL) framework. ITIL is a set of thoroughly defined, best-in-class processes for operating technology.

ITIL was started in the 1980s by the CCTA, a government agency in Great Britain, because of the lack of quality and consistency in services procured by the British government. It is now globally recognized as the defacto-standard of best practices in IT Service Management (ITSM). Simply put, it is the preferred “language" of IT operation by customers and managed service providers. ITIL is comprised of standard service catalogues containing foundational capabilities such as incident management, problem management, configuration management, change management, release management, and more.

ITIL is the preferred “language" of IT operation by customers and managed service providers.

Optimize

Today’s technology solutions are constantly evolving, and therefore require continual performance tuning and optimization. Historically, optimization services were professional services (PS) offers where the PS org would go into a customer’s technology environment, assess their current operations, look for performance and configuration issues, make recommendations and changes, and ultimately turn operations back over to the customer.

Today’s technology solutions are constantly evolving, and therefore require continual performance tuning and optimization.

Due to today’s living, breathing, and constantly evolving application-centric, network-dependent environments, it is crucial to constantly perform these optimization services. As a result, many MSPs have converted their “one-time” PS optimization services into annuity-based, recurring optimization services that can easily be layered on top of the “Operate” offer.

Transform

Once you’re in the customer environment caring for their solutions and optimizing them, this is a great opportunity to turn this agreement into an ongoing service you provide. In this category, you become the trusted advisor for the customer when it comes to their technology demands and can help get them on board with next generation solutions. More often than not, we see these next generation solutions turning into cloud or subscription offerings, which brings us to our final category of managed services offers.

26% of all managed services revenue comes from managed XaaS/cloud offers.

Managed XaaS/Cloud

Once your customer starts leaning towards next generation solutions, they’re likely also moving towards a new consumption model. Our research has shown that percentage of overall managed services revenue has been doubling over the last couple of years, to where 26% of all managed services revenue comes from managed XaaS/cloud offers. Clearly, this is a massive growth area for managed services! If you’re already in the customer’s operating environment optimizing their solutions and transforming them to a new solution, this is a good way to lock them in and have a customer for life.

Understanding The Bigger Picture of Managed Services

The important thing to remember about managed services is that each of these offer categories consists of a group of service elements that are designed to enable a customer to achieve an intended outcome. At their core, managed services are designed to help address a number of your customers’ pain points. No matter which service offers your company provides, they should be thought of as logical groupings of standard service elements, which is the first step to productizing your managed services portfolio.