IT Managed Services – To be or not to be, that is the question!

It may be a definition by Wikipedia, but it aptly describes IT Managed Services:
“IT Managed Services are the practice of outsourcing on a proactive basis management responsibilities and functions and a strategic method for improving operations and cutting expenses. It appears as an alternative to the break/fix or on-demand outsourcing model where the service provider performs on-demand services and bills the customer only for the work done.“ (Wikipedia, 2017).

Under this scenario, the business entity owns the hardware/software and is financially responsible for its upkeep while the Managed Services Provider (MSP) is responsible for the efficient functioning of the network configuration, hardware, cyber security, and applications availability. The key element is that the Managed Services Provider is responsible for the strategic selection of equipment, network configuration, efficient functioning of the system, and contributes significantly to the ability of the Managed System to generate additional profits to the business rather than just being a necessary expense.

According to McKinsey & Company as digitization becomes more integrated into an organization’s operations it drives down revenue growth and profits; Earnings before Interest and Taxes (EBIT)! This is contrary to what most CEO’s and CIO’s think and requires an understanding based on deep-dive reviews of hundreds of organizations. The importance of understanding this cannot escape the business strategy of any company or you will be leaving money on the table or even more crucial, may in fact be jeopardizing the very existence of your organization.

According to McKinsey & Company research, IT is driving down growth in revenue and earnings before interest and Taxes by 4.5% to 12% across all industries.

“This finding confirms what many executives may already suspect: by reducing economic friction, digitization enables competition that pressures revenue and profit growth. Current levels of digitization have already taken out, on average, up to six points of annual revenue and 4.5 points of growth in earnings before interest and taxes (EBIT). And there’s more pressure ahead, our research suggests, as digital penetration deepens (Exhibit 2).” (Bughin, 2017)

How this is missed by so many companies is that we are still using the “value of money over time” to calculate ROI and if the NPV says it’s a better investment than other projects, we can enhance the IT System and thereby improve an organizations performance. Lost in this scenario are all the intangible and interwoven variables that are impacted by the IT System resulting in either growth in revenue and EBIT, or declines in revenue growth and EBIT. Based on the research presented by McKinsey and Company, most companies in today’s market are realizing losses due to their IT investments.

The typical scenario is a need to upgrade hardware, software, and cyber security driven by a slowing network or aging equipment or software updates driven by obsolescence; maybe enhance some specific areas where better performance is desired. So we look at the cost of the project over maybe three years and look at our budget to see if we can afford it or how to manage other cost to fit it in the schedule. But the end result is more money invested in the IT system and very little ability to track the ROI. In fact, since the IT isn’t looked at as a way to generate additional revenue growth and EIBT, in most cases it ends up costing the organization more money than they thought it would and worse yet, it’s hidden losses so very hard to document and fix.

This is where companies like Compudyne can provide valuable insight and indispensable professional guidance to ensure the desired outcome is achieved which is always revenue growth and increased profits. A qualified Managed Services Provider like Compudyne can assist their clients in evaluating their digitization in synchronization with the client’s business strategy to achieve the desired outcome of increased revenue and EBIT.

Compudyne works in Partnership with companies like Microsoft, NimbleStorage, Cisco, Veeam, VMware, HP, f5, NVIDIA and many more. Working in partnership means maintaining technical staff certifications on the latest state-of-the-art technologies and strategies for implementation of optimized networks for our clients. Our CIO’s can assist the synchronization of the IT system into a business strategy. The end result is a better IT system and higher revenue growth an EBIT.

McKinsey & Company sums it up as “Improving the ROI of digital investments requires precise targeting along the dimensions where digitization is proceeding. Digital has widely expanded the number of available investment options, and simply spreading the same amount of resources across them is a losing proposition (Bughin, 2017).” Whether you’re upgrading or venturing into a new project, the optimization of your IT system is a very complex business decision and investment for companies to make on their own, and it takes the resources of a company like Compudyne with certified experts in all facets of IT & Business Systems to enhance a business strategy to fully take advantage of your IT investment dollars.
References:
Wikipedia (2017). Managed Services retrieved on 02/10/2017 online from https://en.wikipedia.org/wiki/Managed_services.

Bughin J.; LaBerge L.; Mellbye, A. (2017). The Case for Digital Reinvention retrieved on 02/10/17 online from McKinsey & Company at http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/the-case-for-digital-reinvention?cid=reinventing-eml-alt-mkq-mck-oth-1702.