Managed Services: Branching Out to Branch Offices

Companies with branch offices are facing a technology paradox: On the one hand, businesses are expanding their branch office locations by 6.8 percent annually. On the other hand, only 15 percent of those remote locations have on-site technology staff members, according to Nemertes Research.

Those stats beg the following question: How do you empower branch office employees with the proper technology when you can't afford to staff those remote offices with more IT staff?

The answer (as our regular readers already know) is managed services. Increasingly, companies are moving their IT assets out of remote offices and into either (A) a centralized data center or (B) an Internet cloud.

The march toward centralizing and virtualizing IT has some benefits and some challenges.

Next Generation Empowered Branch
The good news: Centralizing applications and IT infrastructure can make networks easier (and less costly) to maintain. The bad news: Accessing centralized applications from remote offices can be a painful, time consuming process. And application performance over a Wide Area Network (WAN) connection can be horrendous.

A range of managed services, however, can potentially eliminate those challenges. Application acceleration services, hosted VoIP, hosted unified communications and managed 3G services are now all mainstream solutions for branch offices.

And the trend toward managed branch office services will surely accelerate -- especially as companies explore next-generation technologies such as TelePresence.

The lesson for readers: Keep expanding those branch offices.

But, check in with managed service providers (from big companies like Verizon Business down to small companies like your local VAR or integrator) to see what type of managed branch office services they offer.

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The IT Management Implications of SaaS Growth

THINKstrategies recently unveiled the initial findings of its fourth annual Software-as-a-Service (SaaS) customer survey, in conjunction with Cutter Consortium, which revealed that 63% of the responding organizations are using a SaaS solution -- almost double the 32% who were using SaaS solutions in 2007.

Over the past four years, we have seen tremendous growth of the SaaS market spurred along by rising frustration with the challenges of deploying traditional software products and the hassles of keeping enterprise applications up and running.

Our surveys were the first to find widespread interest and substantial adoption of SaaS in 2005.

Changing workplace requirements have led to more workers needing to access applications and corporate data remotely, which has also led many organizations to adopt web-based SaaS solutions.

The Shift Away from CAPEX
But, the most important consideration has been the financial savings generated by shifting from upfront capital investments in perpetual licenses and systems to a more flexible, 'pay-as-you-go', subscription model. This approach has become particularly attractive in today's tough economic climate.

Despite these advantages, many IT organizations were reluctant to accept SaaS, and even resisted its adoption in many cases because of concerns about the reliability, security and performance of these web-based applications.

However in 2007, THINKstrategies survey found growing acceptance of SaaS solutions by IT professionals who were not only learning that SaaS solutions could be trusted to successfully support their business units and end-users, but also discovered that a new generation of SaaS solutions were available to help them better manage their IT operations.

Business Case for Out-Tasking IT
Leveraging SaaS and a broader array of 'cloud' computing services is an extension of the same mindset which is driving many IT departments to recognize the benefits of contracting for managed services.

This 'out-tasking' strategy allows IT professionals to offload many of the day-to-day technology deployment and management responsibilities which can be performed in a routine fashion more economically by a specialized third-party, so the IT staff can finally focus their limited time and resources on more strategic initiatives or even innovative projects.

Click here to obtain the first of a series of three Executive Update reports based on the THINKstrategies/Cutter Consortium SaaS survey results.

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Introduction to Managed Network Services

Many companies find it expensive to keep up with new Business Technologies -- or simply prefer to devote their limited IT or Telecom resources to the core business, rather than routine ongoing network management.

Managed network services can quickly enable your company to evolve, by giving business decision makers access to leading network technologies and management expertise -- without requiring high initial capital expenditures (CapEx), or ongoing investments in technology upgrades.

Deploying a Managed Service Solution
When a company subscribes to a managed service, a service provider manages the network equipment and applications on the customer premises according to the terms of a service-level agreement (SLA) established to meet the company's unique business needs.

Some managed services are also hosted, meaning that the service provider hosts the equipment in its facility instead of the customer's, and delivers services to company employees over the Wide Area Network (WAN) to wherever they are physically located.

For small and medium-sized businesses (SMBs), managed services provide enterprise-class capabilities for a predictable monthly fee -- without requiring a large, initial capital investment.

The On-Demand Pay-as-you-go Model
Companies that out-task enjoy high levels of network support and availability, enabling internal IT staff to focus on strategic activities instead of network support, and pay only for those networking services that they need.

Managed services generally include software, hardware, and other Internet Protocol (IP) networking services. The service provider's highly experienced technical experts focus exclusively on providing the network services and support that customers need to meet their business requirements.

Companies have the option to out-task some or all of their network management and monitoring tasks and retain control of the rest -- even if the equipment is physically located at the provider's site.

Key Benefits of Managed Network Services:

• Reduces costs, including service call fees, hardware, operations, and network transport
• Eases adoption of new technology-enabled business processes
• Increases levels of support and network availability, without additional staff
• Makes your IT and Telecom budget more stable and predictable
• Provides access to the latest technology, with limited risk
• Provides access to an enhanced technical skills base
• Makes it easier to adapt to changing business conditions
• Enables the IT manager and staff to focus on your core business
  

In upcoming posts, we will outline some typical scenarios for deploying managed network service offerings -- including simplified application diagrams that explain the basic concepts.

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Is Cash Flow Holding Your Technology Back?

At first glance, some small businesses are caught in a technology paradox: They need modern technologies to drive revenue higher. But they don't have enough cash to acquire that technology.

A recent American Express survey found that more than half of today's U.S. small business owners are experiencing cash flow problems, reports StartupSpark.com. As a result, the top priority for most small businesses is maintaining current sources of revenue -- rather than building new ones.

Have Your Cake and Eat it Too
I say: Why not pursue both goals? Fact is, you don't need very deep pockets to leverage modern technology. What you really need is a predictable cost structure -- a way to know exactly how you're going to continue innovating without suffering from surprise IT costs.

By now, you likely know where I'm heading: Predictable managed services contracts can help many of those worried small business owners get a handle on their IT costs.

Our company, for instance, pays a flat monthly fee for e-newsletter marketing services from StreamSend.com. We use that service to launch new products, promote news or evangelize special offers to new target customers.

We're also learning to cut the hidden costs of business travel. One prime example: We used to pay hotel WiFi fees, which varied greatly from region to region. But now we're paying a flat monthly fee for Starbucks WiFi service, which is readily available in all the cities we visit. Also, we're thinking of shifting again, this time to a cellular Internet connections for our laptops.

Cash Flow Management Solutions
Those are pretty basic steps. But don't stop there. Look at every piece of your IT infrastructure -- applications, hardware, systems, etc., and determine if there's a managed alternative available for a predictable monthly fee.

Then communicate and innovate with minimal impact on your monthly cash flow.

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Managing Enterprise IT Operations, from Afar

According to a recent McKinsey & Company report, their research results demonstrated that the potential for managing servers and other IT resources remotely is essentially underutilized.

However, changes in the current business environment will increase the adoption of this approach. Plato, a wise Greek philosopher, wrote about how "necessity is the mother of invention." Certainly, that perspective is equally valid today.

The motivation for utilizing the resources of a service provider can be considerable. A case in point: Fortune 50 companies, with budgets of $2 billion, can save as much as $500 million of their IT infrastructure budgets.

How, you may ask? Apparently, it's mostly from reducing fully-loaded labor costs.

Evaluation of IT Assets and Liabilities
McKinsey surveyed 141 CIOs at multinational corporations, and 34 percent of them said that they anticipate utilizing some infrastructure management services over the next three years -- which is an increase from 19 percent of respondents in a similar survey performed during the prior year.

Economic justification is the basis for the expected growth. As hardware costs fall, labor has become the focal point. They estimate that costs for non-labor IT components -- the hardware, software, maintenance, and facilities -- declined by almost 44 percent between 2000 and 2008 as prices have dropped.

McKinsey also estimates that total costs will fall by nearly half from 2000 to 2010, however the labor component will more than double -- to 62 percent, from 30 percent.

Apparently, the attraction of a managed service solution is due to changes in the deployment of infrastructure. Many organizations have simplified their IT and network architecture, making it easier to decouple components, and utilize service providers.

Selectively Out-tasking the Drudgery
Besides, standardization has made some management tasks ready for automation. As a result, it is now easier to manage some complex IT tasks, like network security monitoring, from a remote location.

Furthermore, organizations can selectively out-task parts of their IT infrastructure management. Some companies will choose to only out-task network monitoring, while others seek assistance with the total management of their data center needs. Clearly, it's a flexible model that can adapt to shifting business requirements.

In summary, McKinsey believes that the greater speed and security of data networking has made interactions between the service user and their provider more stable. This progress has therefore increased acceptance of the managed service delivery model.

By the way, before you rush to reduce your Business Technology deployment plans, you may also want to reflect upon McKinsey's guidance on IT spending cuts: they believe that "IT investments deliver more value to a company's top and bottom lines -- by creating new efficiencies and increasing revenues -- than any savings gained from traditional IT cost cutting."

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