Was That a Managed or a Management Service?
By Corey Ferengul
November 1, 2001
Innovative service options are sprouting faster then they can be tracked. It seems that most vendors directly point to management as a key part of any service offering.
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Most commonly the terms management service providers (MSPs) or managed services are used to describe these new service offerings, but all too often the terms are used incorrectly (and interchangeably). For example, performance monitoring can be contracted for specific elements (e.g., servers, networks or databases), for specific applications (e.g., WebSphere, WebLogic), or as a supplement to a purchased service (e.g., managed VPN, managed firewalls, outsourced ERP application).
To better understand the different services, to enable comparison, and to best determine what services a company should engage, it's necessary — but difficult — to label and organize these services.
Knowing the Difference Between 'Management' and 'Managed'
META Group sees a distinctive difference between management services (MSPs) and managed services. The MSP services are purchased directly for management needs, while managed services are purchased as add-on to another mostly commodity service. The differences impact buying decisions, purchase targets, price and expected results.
Managed Services
Managed services are value-added options to what would otherwise primarily be commodity service offering (infrastructure elements, application hosting and so on) The "managed" portion is the operational component, whereas the "service" portion refers to the managed "target" (e.g., managed VPN, managed firewall, managed Web hosting).
The target of the purchase is not usually management per se, but rather some other outsourced service. Management is an add-on, and in many cases is not the core competency of the vendor. Also, these services are often not evaluated on their management capability, but rather the core service. The managed services market is very immature right now, with most services not living up to the promises made. Most vendors substitute people and tools for the required strong management processes. Vendors are beginning to invest in partnerships or acquisitions that will enable them to build stronger services, but this process will take a year or two.
Management Service Providers
MSP services are purchased directly for the management capability (e.g., performance monitoring, help desk). Users evaluate the service explicitly to provide a management process(s) within their organization. The vendor's management processes and management technology are at the heart of an evaluation. Survival of an MSP offering is centered on a vendor's ability to deliver more efficient management faster and cheaper (or better quality — i.e., better service levels) than an IT group could do on its own. The MSP offerings can target management of not only external services (e.g., Web sites) but also internal infrastructure and applications.
While both MSP and managed services terms have been used as descriptors of a type of company, it is more accurate to think of them as types of offerings. By 2003, 90 percent of those currently offering MSP services will offer both MSP and managed services, perhaps not directly through their own channel, but partnering with other organizations that need to add management to their service offerings to differentiate themselves.
While both MSP and managed service offerings will continue to grow, managed services offering and adoption will grow faster than MSP services (adding 100-200 new vendors a year through 2004). This adoption difference is due to users current willingness in outsourcing peripheral services (e.g., VPN, firewall, hosting), therefore adding discrete management to these base services is an easy transition and requires little change in thinking for IT groups.
For MSP services to be procured, a cultural shift must occur in IT groups, as they are used to doing management of the in-house systems themselves. We believe the MSP offerings will be ultimately successful, but widespread adoption in still at least a year or two away.
Challenges Ahead
Managed services vendors are not without their challenges. As an outsourced service commoditizes (and prices drop), vendors move to add on management (and other additional services) to expand their business.
While it is easy to "add a service" to the product list, the vendors are typically not well-versed in core management processes and tend to try and build too much internal technology, creating costly and difficult-to-maintain environments (which is leading to vendor failures).
When evaluating management services, pay close attention to the management processes and technology used, do not stop the evaluation at the core purchased service (e.g., VPN, Firewall). These management add-ons are currently immature (through 2003). Managed service vendors must be able to illustrate detailed operational processes, strong management technology, and communicate how their staff is trained to meet the task at hand. Expect to see a lot of partnering among vendors to round out managed service offerings, which we view as a good move.
Overall managed services and MSP services are here to stay, to be determined is what shape the vendor market takes and what services are most successful.
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