(This is a shortened version of part 2 of the Businessperson’s Guide to IT Service Providers; full guide can be downloaded here)
A great aspect of our market economy is that one company’s challenges become another company’s opportunities. That’s why numerous IT service providers offer businesses the ability to offload their technology headaches so they can focus on scaling and innovating.
However, IT service providers have very different business models and very different capabilities, so you have to carefully consider a variety of factors in selecting an IT management partner.
It’s important to choose a service provider whose business model best aligns with your objectives. These IT service provider business models can be classified into six categories:
1. Staff augmentation
You are provided with additional staff on a temporary (but usually full-time) basis from a company that maintains an ongoing inventory of trained, qualified IT professionals.
- Spares you the time and effort of recruiting and hiring the IT talent you need
- Eliminates HR issues such as on-boarding, benefits administration, and termination
- Can be the most expensive model – You pay a premium on personnel costs and still have costs of management, tools, software, and process development
- Limited coverage of skillsets – Similar to hiring internally, you have to pick the most important skillsets for general coverage. Usually not able to fund resources across all requirements.
2. Managed hosting
Your IT infrastructure is hosted at a service provider’s facility and the service provider offers management of that infrastructure as a value-add.
- Management costs can be reduced in the short term due to the hosting provider’s economies of scale
- Better physical security and operating environment for IT equipment
- Incomplete solution when looking for outsourced IT help. Limited management and support scope (for example, does not typically include end-user support or end-to-end troubleshooting)
- Focus is on upselling additional rack space
3. Consulting/SI firms with managed services offerings
A firm primarily focused on technology-based business innovation provides you with IT management services as part of a broader engagement.
- Steady stream of forward-looking ideas for potentially high impact IT projects
- Often strong competency for project work, ranging from infrastructure implementations with specific vendors’ products to specialized industry niches
- Managed services are not their primary focus as a business model, so offerings are generally not highly resourced
- Usually your first call /contact is with a dispatch service versus an actual engineer
4. Local value-added resellers (VARs) with managed services offerings
A firm primarily focused on sales of technology solutions from selected vendors (HP, Microsoft, Citrix, etc.) provides you with IT management services as part of a broader engagement.
- Strong competency with selected vendors’ technology products
- Onsite technical assistance may be available when necessary
- Despite marketing material, managed services is not their primary business model. Profits come from infrastructure project work and hardware or cloud sales (typically tied to a limited number of vendors). As such, managed services is not their key focus and offerings may be under-resourced.
- Not vendor-neutral; tend to have weaker competency in products other than those of their selected partners
5. National/global managed services provider (MSP)
Your IT management needs are addressed by a large company providing services across a broad geographic footprint, often using off-shore employees for day-to-day delivery.
- Strong technical competencies for common, widely used technologies
- On-site support in multiple cities around the world can be available (depending on contract negotiated)
- Off shoring is widely used in this model;end-user experience, especially for first level call support, is often not high quality
- Outsourcing engagement follows their methodology and covers only general technologies; will likely not be customized to
your environment or cover specific and unique technologies in detail
6. Local managed services provider (MSP)
Your IT management services are addressed by a specialized company that focuses exclusively on your local or regional market.
- Focus on managed services as core business, resulting in all resources (personnel, financial, investment in tools/technology) focused on Managed Services, not other practice areas
- End-user experience is usually much higher in this model
- Significant variation between different providers’ service levels and process maturity
- Little or no on-site support for geographically remote facilities
There are many other factors that distinguish the categories of service providers from each other. Narrowing in on the right category before you begin your search for your specific IT partner will save you a lot of time and unnecessary headaches.