Organizations opting for outsourced managed services put themselves at risk if they do not manage their providers properly.

Managed services – which involve the use of telecom carriers and other service providers to deliver and oversee IT and network operations – will increase significantly over the next five years, yet enterprises lack the discipline of closely managing these relationships, asserts Butler Group, an IT research and advisory organization.

“The management of a managed-services agreement should not be left to chance,” says Maxine Holt, senior research analyst at Butler Group. “Organizations must understand that they need to commit time, effort and money to looking after these contracts, and this is usually undertaken by having an in-house management team.”

Butler Group cites DuPont as an enterprise that saved a considerable amount of money by establishing an in-house team to manage the contracts of its service suppliers, Computer Sciences Corp. (CSC) and Accenture. DuPont had a 10-year, $4 billion deal with CSC and Accenture, signed in 1996, whereby the providers managed all of DuPont’s global information systems and technology infrastructure, including mainframe, midrange distributed computing, telecommunications, desktop units and disaster recovery functions.

The in-house team, with 50 to 100 people, saved the company $150 million by carefully examining the contracts with CSC and Accenture and correcting errors within them, Butler Group says.

“Even with 100 people in it, the team would not have cost $150 million to run, [and] therefore proved its worth,” says Butler Group.

Almost 40% of organizations probably will outsource aspects of their infrastructure in the next two years, Butler Group says. Network infrastructure, voice and data convergence, and security services are the highest-growth managed-services markets, with security, privacy and business continuity growing at 15% per year through 2010.

“The benefit of increased business and financial flexibility, through the reduced need to commit to a long period of involvement with a single supplier, can make the proposition attractive to [small and midsize businesses] and larger organizations alike,” says Holt. “However, customers need to retain control of their managed services contracts, through the provision of an in-house management team.

“Only by being properly prepared can organizations hope to realize these benefits.”