Every year TSIA benchmarks the growth rate of service revenues in over one hundred major technology companies. From this data, we know three things:
- For some original equipment manufacturers (OEMs), Managed Services has already become a core source of revenue and profits.
- For other OEMs, Managed Services become a new, hot services offering.
- On average, Managed Services is the fastest growing service line for hardware and software companies that have established support and professional service businesses.
So Managed Services is becoming an ever more important component of the economic engine for OEMs. The real challenge is to truly understand what is actually in this fast growing service line.
I have spent the past three months speaking with TSIA members about their Managed Service businesses. It is clear the lines between Managed Services and SaaS have blurred. CRN published an article titled Managed Vs. Cloud Services attempting to clearly define the difference between Managed Services and SaaS. I can tell you, the OEMs are not very concerned about following these definitions. In fact, many OEMs have Managed Service offerings that would comfortably fall into Gartner’s definition of SaaS.
To add to the confusion, the lines between Outsourcing and Managed Services have also blurred. Brainstorm states that the difference between Outsourcing and Managed Services is the length of contract. Sorry, OEMs are cutting very complex, multi-year deals that are being classified as “managed services.”
So, why does all this matter? Because at some point in time, CFO’s at OEMs will want to understand how their Managed Services business is performing. They will want to benchmark growth and profitability. But benchmark against what? If you own a Managed Services business, this question will become critical at some point in time. To help address this dilemma, TSIA has published a new white paper:
Service Insight: Framing Managed Services