Just like their larger counterparts, SMEs are coming under
massive pressure to squeeze as much value as possible from their IT
and telecoms systems. James Rogers looks at whether managed
services are the solution to this problem.
With ebusiness
continuing to grow and the amount of data produced by companies
rising at an alarming rate, it is hardly surprising that firms are
considering third-party suppliers to handle their ICT. But
outsourcing deals, such as the £2bn contract that Procter &
Gamble awarded to Hewlett Packard to manage its IT infrastructure
earlier this year, are simply out of the reach of most SMEs.
Apart from the
cost involved in outsourcing deals, SMEs are simply not as
attractive a business proposition to outsourcing suppliers. Robert
Morgan, Chief Executive Officer of outsourcing consultancy Morgan
Chambers, says, “There has always been a problem in getting
outsourcers to look at SMEs.”
Managed services,
however, could provide you with the answer. Unlike outsourcers, who
take control of entire services within a business, managed services
firms handle parts of a company’s IT infrastructure. A good example
of this is storage on demand, which provides users with extra
storage capacity when they need it.
There has been a
great deal of hype surrounding what is known as utility computing
over the past few years, although experts admit that the likes of
storage on demand could help SMEs reduce costs and avoid capital
expenditure. Morgan says, “If an SME has to put in a new storage
system and do lots of testing, they would once have had to buy
extra storage for testing, but now they can hire the storage.”
Mike Tobin, Chief
Executive Officer of independent co-location provider Redbus
Interhouse, agrees. He says, “If you are trying lots of new
products or new ideas you need the ability to expand and contract
your resources.
“If an SME needs a
terabyte of disk, it may only need it for two weeks. The concept of
renting utility storage is good for SMEs, it’s like having an
application service provider (ASP) for hardware.”
However, Morgan
advised SMEs to be wary of putting pen to paper on lengthy
contracts for storage on demand. He says, “SMEs should not sign
long-term contracts with managed service providers for storage on
demand, because if the concept takes off we expect the price to go
through the floor.”
This touches on
one of the key reasons why SMEs look to managed services – cost. If
you can’t afford to buy new systems outright, then why not make use
of someone else’s?
But there are also
other reasons why SMEs should consider managed services. These
include company growth, rising demand for bandwidth, security and
the growing need to link networks. With IT becoming more complex
and more business-critical, managed services could enable a company
to stick what it knows best – running its business.
A varied
role
But Martin Sexton,
Director of IT at systems integration specialist London Market
Systems, urged users to see managed services as much more than just
specific applications. “It’s a misnomer to look at managed IT
services purely as web site host or a managed storage service.”
According to
Sexton, managed service providers can fulfil a varied role for
SMEs. “The role of a managed IT service provider is far more
complex; he must be able to offer advice on the latest
technologies, supply fast, support efficiently and be a single
point of contact for IT issues.
“This, coupled
with a knowledge of the client’s business, can ensure the
successful continuity of the business without the disadvantage of
employing expensive IT resources,” he says.
Service level
agreements (SLAs) will be an important part of your agreement with
the managed service provider, because they determine the
performance levels provided. David Foster, Chief Executive Officer
of Burns E-commerce Solutions, says SLAs were a key part of his
company’s decision to choose IBM as its managed services
provider.
“SLAs are
critical,” he says. “One of the reasons why we chose IBM was the
extent to which they stood up to the plate on SLAs with the amount
of uptime they were prepared to guarantee us.”
However, Tobin
advised SMEs to adopt a rigorous approach in their negotiations
with any prospective managed service providers. He says, “The SME
has to go and kick the tyres a bit, they could get three quotes to
manage a firewall, for example, but rather than just talking to the
salesman, they should make a visit to the managed services
site.”
It is also worth
quizzing the managed service company’s engineers about how they
would deal with certain situations, says Tobin. “It’s all about
‘what if’ scenarios,” he says. “Also, ask the managed service
provider for customer references of your size – and talk to
them.”
With businesses
constantly coming under threat from virus attacks, SMEs are also
thinking about the security benefits of managed services. Recent
attacks such as the Blaster worm highlight the need for secure IT
at a time when systems between businesses are becoming more and
more interlinked.
The problems
caused by viruses at blue chip companies may hit the headlines, but
this doesn’t mean your business is not going to be affected. Tobin
says, “An SME typically doesn’t have the public gaze on it that a
large corporate would – but now they are talking about security
because their systems may have to link up with those of a larger
corporate and they don’t know when a denial of service attack will
happen.”
Getting
the message
The initial signs
suggest that companies may be getting the managed service message.
Research produced earlier this year by international market
consultancy Frost & Sullivan predicted that sales in the
European managed web hosting space will reach $1bn by the end of
2005. However, this will leap to $4bn by 2008.
The reasons for
this include increasing penetration of broadband, the growing shift
of business processes to the Internet and the rising adoption of IP
virtual private networks, coupled with the falling cost of
bandwidth.
Admittedly, Frost
& Sullivan’s report touches just one part of the managed
services market, but it is worth nothing that SMEs are still
subject to the same business and technology pressures as larger
companies.
But, at the end of
the day, could it be that your business is simply too small to
exploit managed services? Foster disagrees. On the contrary, he
believes many SMEs are unrealistic about the hidden costs involved
in handling complex IT projects in-house. He says, “A lot of SMEs
have a ‘can-do’ attitude but many don’t look at what is the total
cost in terms of lost management time and production.”
It is also worth
noting that a managed service avoids the disputes that often ensue
when in-house staff are transferred to the supplier as part of
outsourcing deals.
As Morgan says,
“Managed services have all of the advantages of outsourcing, but
none of the traumas for staff.” N
Benefits
of managed services for SMEs
- Cuts out the need for significant capital investment. This
limits risk associated with high fixed and capital costs of a DIY
network solution.
- Reduces the resources required to manage a DIY network
solution.
- Benefit from a supplier’s expertise and IT resources, which can
be both difficult and expensive to provide in-house.
- Having the flexibility to grow and change your network
end-to-end as your business demands.
- Assist you with the ongoing network planning as requirements
and applications change.
- Provide proactive management to monitor, maintain, fix and
measure network performance.
- Provide guaranteed times for new installation and guaranteed
times to repair.
Source: BT
Business
Case
study
Earlier this year
Manchester-based company Burns E-commerce Solutions, which employs
50 people, signed a deal to obtain a managed service from IBM to
host its Bex e-purchasing service.
Bex is the key
weapon in Burns’ armoury of epurchasing services, linking the
company’s own corporate customers with their respective trading
partners. Balfour Beatty, BAA and Office Depot are just three of
the firms using Burns’ e-business platform, which connects over
30,000 suppliers, handling over 100,000 transactions a week.
Burns’ ebusiness
service was originally hosted internally, although growing customer
demand prompted the company to opt for a managed service provider.
Burns Chief Executive David Foster, pictured below, said, “This is
partly about cost, but it is also about capability – running the
infrastructure is not our core competency.”
In addition to
Internet connectivity and hardware, IBM also provides Burns with a
high level of security and availability. Foster said, “They are
providing a secure environment, and systems admin and monitoring,
delivering us a round-the-clock service.”
Now the company
can look to future business opportunities, according to Foster. He
said, “It gives us the ability to take on clients and suppliers
around the world because we can now say confidently that we have a
service that runs 24x7.”
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