Downturn prompts growth in managed services

Businesses will have to invest at a time when capital is in short supply

A new report from analyst firm Forrester Research suggests that managed services could get a big boost from the current economic downturn.

Despite the economic situation the analyst points out that the rapid growth of technological areas such as metro Ethernet, videoconferencing and high-end telecoms, means that businesses will have to invest at a time when capital is in short supply, which makes lower cost managed services more attractive.

"Year over year the story for all types of managed services is the same. About 10 per cent of potential customers buy, and 30 per cent more say that they are interested. Is this the destiny for the industry? No," said principal analyst Henry Dewing.

"Forrester believes that a perfect storm is brewing. Technological change, the technology investment cycle, and difficult economics are combining to push some types of managed services over the chasm."

Dewing predicts that, while the very largest firms may be able to afford the investment needed in the coming decade, small and medium-size businesses will not, making them a prime market for managed service offerings that minimise initial capital cost and do not require an investment in IT staff.

For example, research found that 67 per cent of firms used managed telecoms services to reduce costs. More than half chose this option to simplify management, and nearly half felt that they could get better reliability of service than if they used in-house staff.

However, much of the possible success of managed services will depend on providers offering hybrid services which can handle companies keeping some systems in-house while outsourcing others.

As managed services vendors shift their focus to offering these hybrid deployments, integration between managed and non-managed services, often from different solutions providers, will be critical, Dewing added.

"Managed services vendors will need to offer these integrations seamlessly, co-ordinating and co-operating in a variety of different structures with other managed services and solutions providers," he said.