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Cut IT costs? Open your mind to managed services

Aug. 27, 2019

Keep the same amount of IT services—and even add new ones.

As trade issues and market uncertainties continue to roil corporate margins, manufacturers and other global companies are eyeing IT as one of the first expenses to cut. But in today’s operational environment, that’s like cutting a company’s own backbone. And for companies with in-house or contracted dedicated IT teams, costs really can’t be reduced much more without losing needed capacity.

However, there is a way that companies can swiftly pare costs while keeping the same amount of IT services—and even add new ones. But it’s one that many companies still resist. That’s because it calls for shifting away from dedicated IT teams to a managed-services arrangement. And that means sharing IT resources with other companies.

For some reason, this concept remains anathema to many Fortune 500 companies, even though they are effectively operating under a managed-services model with other vendors—from their legal counsel to their PR agencies. Sure, they have in-house people in these areas, but most big companies also have a number of large agencies and firms on call. As a result, they have a broad and deep bench of expertise to draw on.

CTG's Tom Niehaus

Moreover, shifting to a managed-services model for IT can save upward of 20% or more for many companies. In the case of companies that presently operate their own 24/7 support with low volume, the savings could be as much as 50%. 

Manufacturers can opt for a managed-services model that includes additional services that cost about as much as they currently spend on dedicated teams. The latter is especially attractive to companies that need in-house talent to focus on, say, analytics and development. These companies can operate other IT functions under a managed-services model.

One that immediately comes to mind is support—including daily user support of internal applications and the general IT environment. Outsourcing support to a third party often results in new efficiencies and savings even beyond the price point of the managed service. That’s because the third-party source is solely focused on support, and as such is more likely to detect patterns that eventually identify the root sources of repeat trouble tickets.

Yes, it’s true this party is also supporting these same systems for other companies. But that considerably increases their knowledge of the system they are supporting, which takes application support to a higher level. Results include decreased downtimes (less disruption to business), and—eventually—significantly less need for application support compared to when support was handled internally.

“Testing-as-a-Service” is another emerging option for the managed-service model. In Europe, an entire career vocation of application testing is being built from the ground up, complete with training centers. This is one of those new jobs that weren’t around even five years ago, but grew out of necessity to keep up with the velocity of change in a digital world.

We can expect to see more change-management-oriented IT services in the coming months. And who should be tasked with carrying them out? An internal IT team that has also been asked to harness the company’s data while incorporating more analytics and blockchain into operations and supporting new mergers and acquisitions by integrating offices around the world on the same systems?

Those responsibilities are beyond full-time jobs. To assure they’re done right, it’s a good idea not to also saddle internal IT teams with support and testing that could easily be done (faster and likely cheaper) through a managed-services model.

Sure, you’ll be sharing resources with other companies, but this is why managed services normally include service-level agreements. And you’ll gain more than you had before, which can’t be said for most business expenses.

Your talented internal IT team has always had the potential to be a source of profits. The managed-services model can turn this potential into reality.  

Tom Niehaus is executive vice president of North America Operations for IT solutions and consultancy company CTG.

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