The age of managed services

Richard Thomas, CEO and founder, Highlight, explains why the age of managed services has arrived, and what this means for stakeholders across the Channel.

Sometimes the market runs in cycles. New technologies come along, disrupting the way things are done and creating opportunities for innovative and creative solutions. Then, once the preferred method of running and selling those technologies is established, the focus of sellers starts to move to cost efficiency until the next big disruptor comes along.

Over the last 10 years, providers have been pushed to commoditise their products, selling them at the lowest possible price with all the helpful, value-add bits stripped away. This had resulted in a market where it is hard to differentiate and the only way to stand out is to charge even less. The managed portion of managed service provision got pared back to the bone.

However, in a ridiculously short amount of time, there has been a sudden realisation that there’s a big pot of money to be found in managed services if service providers have the determination to go for it. By adding a proper managed service layer on top of networks, providers can both differentiate their offering, make more margin and retain their customers for longer.

The rise of managed services

Cisco was one of the first to get the ball rolling about nine months ago by setting a three-year objective to deliver 45 per cent of its current $57 billion revenues via managed services rather than selling direct to corporates. To achieve this huge leap in such a short space of time, Cisco has shifted funding to support the move with training, incentives and commissions all designed to drive behaviours and sell more managed services.

Many MSPs are looking to capitalise on the opportunity. For example, in the last six months, Gamma, one of our largest partners, launched a new range of innovative managed services and is now selling SD-WAN solutions at scale, differentiated by the value of its service wrap.

So, why now? It’s difficult to pinpoint what prompted the move. Perhaps the race to the bottom finished and nobody won. Whatever stimulated the change, it’s going to drive a huge shift in the channel and reseller market.

SD-WAN technology is one of the catalysts to reignite the interest from customers. At the outset, SD-WAN vendors promised that the technology was so easy to manage that a customer no longer needed a service provider, all they needed were the wires.

However, this message turned out to be false, particularly when implemented on a large scale. Enterprises soon realised that it took far more time and effort to implement SD-WAN than they thought. The result is that they no longer want to manage the systems themselves and the big opportunity for service providers returned.

Build your own vision

There is also confusion in the market. Amongst both the providers and the end customers, there’s been much philosophical reinvestigation into what the term managed services actually means and what that means to each other.

People are trying to properly reengage with it and make it more significant rather than just using it as a marketing tagline. The beauty of this is that with no definition, providers can build their own vision.

In the past, some providers have been reluctant to grow their managed services. The main reason for hesitancy came from the market making it much harder to employ the expensive engineers who understand the technology, who can make it work and who can get the best out of it. What they do have is a large amount of less technical staff with a focus on selling services and managing the customer accounts.

Conversations are key

A managed service is built on understanding what the customer wants from the relationship, and this starts with a conversation. Many providers need to relearn how to build a relationship. This is where the smaller resellers and service providers have a head start, since they have built their businesses on a relationship basis, whereas larger providers have been largely focused on selling bandwidth.

Accurate information, overall visibility and communication of how services are being delivered is the starting point to building trust in both directions. The ultimate aim is for the provider to be viewed as a virtual part of the corporate’s IT team, where they are trusted, where questions are asked, and issues resolved together.

An interesting development amongst enterprises with experience of SD-WAN is that they have seen behind the curtain and now understand how their network works. Those moving back to a service provider are now demanding that their provider demonstrate how they will manage the proposed solution and communicate that what is promised is being delivered.

If a provider can show a service assurance platform like Highlight underpins the managed service, then the customer is more likely to sign on the dotted line. We have demonstrated that when this is done right, such as using Highlight, managing services effectively increases customer satisfaction and reduces failures. In Gamma’s case, the company achieved a 25 per cent increase in customer retention.

As we move into 2024, service providers will be rediscovering the lost art of delivering a proper managed service. Not only is it being pushed by the big vendors, but there is a huge demand from customers. Providers will need to engage with the customer properly and have overall visibility of the services in order to manage the customer relationships. And it starts with a conversation.

This opinion piece appeared in our December 2023 print issue. You can read the magazine in full here.

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