Managed service providers are becoming strategic partners

Managed service providers are becoming strategic partners

A conversation with Deloitte’s Jacques De Villiers taken from workflow

For decades, corporate IT leaders have enlisted outside help to supplement internal resources. In the early days of mainframe computing, they worked with companies like EDS that could run entire IT departments. Today, they lean on third-party firms to help manage business operations—such as sales, finance, logistics, or human resources—in the cloud.

In the 1990s and 2000s, a new breed of middlemen firms, called managed service providers, rose to prominence by helping companies outsource operation of software apps or IT functions—typically in low-cost countries—allowing MSPs to do the jobs more cheaply. As a CTO or CIO, you could manage “your mess for less.”

Much has changed in recent years. MSPs have grown far more sophisticated, in step with advances in enterprise technology. Among other services, MSPs today help companies manage major IT shifts—the rise of public cloud services, the shift from legacy apps to cloud-native SaaS platforms, and the increasing ubiquity of machine learning.

Companies can hire MSPs to take over some or all of these challenges. Annual revenue from MSPs is expected to reach $329 billion in 2025, a 47% jump from $223 billion in 2019, according to MarketsandMarkets. The COVID-19 crisis has put MSPs in even higher demand.

“Many customers are accelerating digital transformation initiatives in response to the pandemic,” says David Parsons, SVP of global alliances and channels at ServiceNow. “Companies are now asking how fast we can get them there. Service providers are in a great position to deliver the expertise and IP that customers need to digitize their workflows on platforms like ServiceNow.”

More than 56% of business leaders, in fact, are looking to MSPs not just to run their apps but to help them develop and upgrade services and customer experiences, according to research from Gartner. To understand how MSPs are adapting, we sat down for a conversation with Deloitte Cloud Operate Leader Jacques De Villiers.

How has the role of the MSP changed from the early days when it was seen mainly as a cost-reduction strategy?

It’s not just a question of doing the same thing over and over anymore. It’s about helping companies get rid of technical debt so they can pivot more quickly. Look, if you’re still running an old legacy IT infrastructure, you’re probably not going to be around for long. These days, you can’t wait weeks and weeks to spin up new services anymore. Speed to market and first-mover advantage are key.

How has the COVID crisis changed the outlook for MSPs?

There’s definitely a negative impact in the short-term. We are seeing market projections adjusted downward for 2020. But nobody knows how long this will last. Longer term, I expect some increased reliance on MSPs as the new normal is defined. If I had to guess, I’d say probably an increase of probably 15%.

56% of business leaders look to MSPs not just to run their apps but also to help them develop and upgrade services and customer experiences.

Small and medium-sized businesses strapped for cash are turning to MSPs, either to augment or replace their IT function. Large businesses currently using MSPs are broadening their usage to include services to support all their people working from home.

What are you hearing from clients about the degree to which work from home will be the new normal?

For the foreseeable future, whether it’s six, 12, or 18 months, I think the new normal will be for less than 25% of employees to go back to the office. Think of all the companies that have moved to open office layouts. If you have to keep everyone six feet apart, you’re probably shrinking your usable floor space by 50% to 70%. Companies aren’t going to go out and get more office space right now, so instead they’ll have as many people as possible work from home.

Longer term, more organizations are going to lean on MSPs, who are already geared up to manage large-scale collaboration in the cloud and support large work-from-home workforces.

How will it change how you work with clients?

MSPs will need to communicate and collaborate with clients in new ways to ensure service continuity, including things like reprioritizing tasks and adjusting to personnel changes. They’ll also want MSPs to reduce their security risk and focus on best practices and process improvements.

What’s driving the need to modernise IT?

A lot of organizations are looking at their technical debt that is costing an arm and a leg to manage in this environment. We’re hearing from companies who feel they are at the tipping point—either they make their move now or they may not be in business in the near future.