The impact of cloud computing on managed services

With the inception of cloud computing and the uptake seen across a multitude of industries, many managed service providers (MSP) are assessing the impact on their clients.

September 27, 2012

With the inception of cloud computing and the uptake seen across a multitude of industries, many managed service providers (MSP) are assessing the impact on their clients. Certain cloud based technologies are still perceived as “locking in” a client to one MSP making it difficult, if not impossible to switch providers.  “The process of moving business applications between cloud providers can be substantially more challenging than just changing an outsourced IT service infrastructure provider,” says Gavin Halse, Director of Product Strategy at Adapt IT.  As a result, IT Directors have identified this perceived lock-in as one of the major inhibitors to moving their strategic applications to an external provider, or seeking out a managed service provider.

“One of our key offerings at Adapt IT is the provision of managed services across server, database, disaster recovery and hosted environments, but with the increase in our cloud based offering, we are still seeing hesitation from the CIO’s we deal with,” says Halse. To mitigate the possible risk, some CIO’s are investigating on-premise private cloud solutions which allow them to learn the technology in a “safe” environment and partially reduce the risk of vendor lock in.  “This approach is entirely rational; because choosing a cloud provider is highly strategic and there is still relatively little experience a CIO can rely on to assess the longer term impact on the business.”

Halse says along with the impact of cloud on managed services, another key element is the current economic climate. “In several industries, specifically those that have been under cost pressures for a long time, such as manufacturing, the additional cost savings when adopting managed services are small, and the total cost over three to five years may even increase in an outsourced model.  While infrastructure costs will certainly decrease, the cost of specialised applications could rise owing to increased complexity of a distributed system.  This needs to be carefully weighed up against the value achieved by making the transition.”

He says that companies that are unable to offer career paths around specialised IT skills and that might need the ability to rapidly scale up (or down) usually choose an outsourcing model where the responsibility for managing IT staff is transferred to the service provider.  “Clients who partner with service providers with a good understanding of their particular industry domain and business will benefit by being able to outsource more than pure ‘commodity services’, and ultimately reduce the risk of losing key skills.”

Halse warns that smaller companies frequently do not have the skills needed to craft an effective SLA contract and this is another key risk in assessing an outsourced model. He says that in all companies the pendulum can swing between an insourced model and an outsourced model and back again over time.   “This requires flexibility in the contracts and a good understanding of the risks associated with handing over parts of your key business systems to a third party”.

“Understanding the fast moving and dynamic nature of the technology environments, including cloud, should be the role of service providers like Adapt IT.  However in many situations, owing to the high rate of change, end users can bypass the traditional IT function and look to opportunistically sourcing a portfolio of managed services from several providers.  In this sense cloud computing can be introduced into enterprises by stealth for example: mobile mail, social media, cloud storage and backup.  This introduces new risks to the business that IT will need to deal with” concludes Halse.