Managing the providers of managed services

I wish I had a nickel for every time an IT executive told me he wanted ‘better managed services’ from providers. Yet this perennial request seems to be perennially unanswered by service providers … Obviously, the carriers are failing somewhere.

I wish I had a nickel for every time an IT executive told me he wanted “better managed services” from providers. Yet this perennial request seems to be perennially unanswered by service providers: Nearly half of the companies I work with are looking for their carriers to offer better managed services (in some types of companies, such as those with distributed knowledge workers, the percentage is as high as three-quarters). Obviously, the carriers are failing somewhere.

Part of the problem is a fundamental disconnect between providers and users when it comes to the definition of a “managed” service. Providers tend to think that if they provide statistics on circuit and device uptime, along with the ability to troubleshoot and reconfigure malfunctioning components, they’re “managing” the service.

Users have a broader definition: A managed service is one that ensures that critical applications are performing effectively for users. Moreover, they feel that a managed services provider should detect issues that compromise business functionality and take immediate action, not wait to be informed. Carriers clearly need to get with the program when it comes to understanding – and implementing – user requirements.

But part of the problem also lies with IT executives, and it’s a symptom of an overarching problem. Managed services are a form of outsourcing, and most companies do an extremely poor job managing outsourcers. Dissatisfaction with outsourced services overall runs as high as 75%, depending on whose figures you believe.

The major problem, from what I can see, is that IT departments have gotten too good over the past few decades. Most IT executives I know have a broad understanding of the specifics of their organizations’ businesses, and the role IT plays in ensuring the success of that business. Their detailed customer knowledge and insight would probably amaze the marketing and sales department. They understand operations and ROI as well as the folks in finance and operations. They’ll often go above and beyond to make sure the technology’s in place to maintain a competitive advantage – often without being asked, and sometimes in the face of resistance from lines of business whose employees may not fully understand how technology can help them.

The catch is, when IT departments turn over some or all of their functions to outsourcers, they subconsciously expect the same dedication to detail and attention to the bottom line that they themselves deliver. And that’s not likely to happen: Outsourcers need to pay attention to their own companies’ bottom lines. As they say in economics class, the interests of outsourcers and IT organizations are not necessarily aligned.

How can IT executives keep those interests aligned? The first and most critical step lies in architecting an agreement that provides incentives to outsourcers to meet the business needs of their customers. One airline I know pays its outsourcer based on the percentage of on-time flights in a given month, for example. The second step is to invest in effective people and product management. How? Stay tuned.