Into the cloud

Outsourcing has long proven itself to provide companies with reduced complexity and access to the latest technology at a lower cost than can be provided internally, but the field is not standing still.

The move towards the use of managed services as a strategy for containing costs is gaining momentum, as more companies look to hosted services in order to cope with the increasing complexity of IT and telecommunications systems.

Angela Gahagan, MD of MTN Business, points out the benefit of using a managed network service rather than trying to provide the same service in-house is that it is becoming increasingly difficult for companies to stay up-to-date with the latest developments in technology.

“Allowing a specialist service provider to deliver these services allows companies to have access to cutting-edge technologies, without having to invest heavily in the skills needed to support them,” she states.

She adds that over the past few years, the broader network has moved from being a key piece of infrastructure to being mission-critical. “If people lose access to their e-mail or even to the Internet, productivity within the organisation tends to grind to a halt, which underscores the importance of properly managing this asset.”

Part of the reason behind the rise of managed services is that Internet service providers (ISPs) are looking for revenue streams beyond the traditional access business. Gahagan explains that five years ago, 80% to 90% of the company's revenue was coming from its access business. Today that has dropped to 45%, with the rest coming from managed network and security services.

As with the classical outsourcing model, the global economic slowdown has introduced a level of uncertainty into the managed services market as companies look to extract maximum value out of their infrastructure.

Simon Abrahams, head of products for Europe at Rackspace, comments that in spite of the slowdown, the company is still seeing a 3.5% growth in managed hosting services.

The change that is happening in the market is the confluence of managed services and the services provided by outsourcing companies. He points out that with the growth in software as a service (SaaS) and cloud computing, it is becoming hard to differentiate between a managed service and some outsourced services.

When applications are being hosted in the cloud, the line between application outsourcing, infrastructure outsourcing and managed services becomes almost invisible.

Hayden Pinnell, MD of Gallium, points out that while many have a view of managed services as a reinvention of the outsourcing field, this is typically an oversimplification of what has happened thus far.

Gahagan explains that in delivering a managed service, the focus is clearly on delivering on clear quality of service guidelines, and this is where managed service providers are aiming to deliver.

It is because of this focus on delivering a consistent service that managed services have moved out of their traditional realm in the corporate communications space, and are starting to make an impact even in the telecommunications field.

Gary Dewing, head of global services for Ericsson sub-Saharan Africa, explains that as the attitude of operators matures, they are more likely to see the value in outsourcing the management of their network. He adds that emerging operators that don't have the skills on-board to support the deployment of their networks are making extensive use of managed services.

Network and security services remain the two primary managed services in the market today, but with the rise of cloud computing and business process outsourcing, it will become increasingly difficult for companies to differentiate between the various flavours of outsourced services.