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Leveraging managed services and the cloud to reduce infrastructure costs

TECHNOLOGY BULLETIN  | 

Technology has evolved significantly over the last few years, with platforms that were previously too expensive for midmarket organizations now priced for companies large and small. From an IT infrastructure perspective, products such as off-site backup were cost prohibitive for many years for smaller companies, leading to ineffective static or untested disaster recovery plans. Today, companies of all sizes can create a more affordable and secure virtualized backup environment through cloud-based solutions, utilizing technology that was seen as out of reach just a few short years ago. 

Increased access to on-premise and cloud technology allows you to deliver better service and infrastructure at a reduced cost. While more available technology presents a significant potential benefit, many midsized companies do not have the technical skills on staff to choose and implement the best IT solutions. Many of these companies have difficulty recruiting and retaining the right people to work with technologies like virtualized storage and servers and determining the right data to store off site. These technologies are sufficiently complex that you need people to deploy and maintain them that have done it before.

Within the middle market, IT spending is trending toward managed services contracts. However, there is a difference between IT outsourcing (handing the keys to a single vendor to maintain all IT functions) and managed services, where vendors are hired to perform specific tasks (monitor the network, support desktops, provision and maintain a data center, etc.). In many cases, all managed services may be contracted to the same supplier, but it is not necessary. For many companies, hiring managed services provider(s) can save 15-20 percent or more on IT infrastructure, help leverage available technologies and decouple technology components that have become commodities. Budget and resources can then be reallocated to more strategic business uses.

Outsourcing has actually decreased in larger enterprises, but the trend within the midmarket is to eliminate infrastructure because it is not strategic and a part of the core business. It is not cost-effective to continue to pay a large vendor to support an environment that is reliable, but comes with a very high price. A managed services arrangement can transition internal IT assets to an external data center with better security and disaster recovery capabilities at a lower price.

While an element of the trend toward managed services is due to the emergence of cloud technology, best practices dictate that your most important data should not reside in the cloud. However, from a backup standpoint, the cloud should be leveraged. With three major layers of service–infrastructure (IaaS), platform (PaaS) and software (SaaS)–each one is viable in particular instances. For example, products such as NetSuite® allow you to leverage SaaS solutions to greatly simplify your environment. It is a fully integrated enterprise resource planning (ERP) platform, with full functionality out of the box and very straightforward relative to provisioning.

While some cloud solutions are still reaching maturity, others such as Microsoft Office 365TM are ready for widespread adoption, and should replace exchange servers for most companies. With the Office 365 platform, you don’t have to buy and maintain a server, and upkeep, backup and support expenses are eliminated. An affordable per user fee is paid, diminishing licensing concerns. From a user standpoint, Office 365 has the same look and feel as Outlook, so familiarity means little time and effort is necessary for a transition. Email is simplified and more affordable, and access is available on desktops as well as mobile and remote devices.

The time to put together a road map for what to move to a virtualized off-premise cloud platform and what to retain in-house is before you make a significant capital expenditure. The business case deteriorates after you make a large internal investment. The associated depreciation over 3-5 years makes it more difficult to move to an operational expenditure (OPEX) model despite the increased security, access and streamlined infrastructure that comes with managed services.

In addition, if you find you don’t have the right people in place to support the future needs of your IT environment, it is smart to look for services that might be more appropriate to move to a managed services provider. A managed services arrangement provides you access to more experienced and technical resources than most midmarket companies can have on staff. Managed services providers also have more access to potential solutions, pulling from a pool of experienced staff that are constantly being exposed to new tools and platforms, while internal personnel are frequently only familiar with existing infrastructure.

Midmarket companies should take a step back and assess their IT needs for the next 3-5 years to take advantage of increased access to technology. Consider your current infrastructure, what information should remain in house or in a cloud platform, and what processes are more effectively performed by a managed services provider. With a managed services agreement and properly leveraging the cloud, companies can receive better, more reliable service while saving up to 20 percent (or more) depending on your environment.

For more information on managed services and other outsourcing options, read our new white paper, “Three essential outsourcing methods every business should know.”