Minimizing Managed Service Costs

save MSP costs

Cost efficiency, along with convenience are two of the prime reasons why businesses are progressively adopting managed services. A survey carried out by the Computing Technology Industry Association revealed that enterprises relying on MSPs for IT services have successfully reduced their operation costs by at least 25%. While half of them reported costs savings of between 1-24%, 13% pleasantly revealed that they had effectively cut their IT budgets by more than 50% thanks to the cost benefits of managed services. Overall, close to 96% of the survey respondents admitted that MSPs have indeed helped them reduce IT costs and alternatively channel the funds to other critical business operations.

Although business owners have achieved this, many are still yet to realize the full cost benefits of managed services. They are executing services at considerably high costs, thus under-leveraging managed services’ cost-savings potential. They can still be drastically reduced by strategizing, readjusting and implementing managed services accordingly. By doing this, the bulk of companies within the 1-24% cost savings bracket can shift to the plus 50% bracket, which enjoyed by just 13% of the managed service users.

So, what are the most efficacious methods of reducing and minimizing your managed service provider costs?

Leverage Affiliates

In a bid to attract more prospects and emerge dominant in an already increasingly competitive market, many MSPs are partnering to offer their clientele a wide range of services. Some hardware-as-a-service providers for instance, are partnering with software-as-a-service to distribute their services as a comprehensive, single package. MSPs who are interested in becoming FileCloud partners click here

Its benefits, fortunately, also extend to consumers. In addition to acquiring services in single, comprehensive packages, they are saving a lot of costs on subscription. Subscribing to affiliated services is considerably cheap, with costs savings extending up to 50%, compared to paying for the services individually. Going for a cloud vendor affiliated to an enterprise application software company for instance, is substantially cheaper compared to subscribing for cloud services from a vendor and paying for an EAS separately. Enterprises should therefore keep an eye out for managed service providers who have extensively partnered to offer them a wide range of services at a single, reduced fee.

Spread the Operations to Multi-Platforms

Many enterprises are operating under the notion that the fewer their managed service platforms, the lower their costs. They consequently subject all their operations to single platform environments which are not fully optimized for their individual processes. Over time, this increases CAPEX and OPEX costs because of poor process compatibility.

The best way to reverse this is adopting multi-platform environments, just like IBM- which has managed to reduce its managed service costs by $2.3 billion through this strategy. Multi-platforms allow workloads to run on systems which have been optimized for them. Instead of relying entirely on x86 architecture for instance, an enterprise could consider shifting some of its applications to managed services running on RISC servers. The latter can effectively process up to 8 work threads on each core as opposed to the former which only processes 2 threads.  This makes it very suitable for operations like transaction processing while other platforms handle the lesser cumbersome enterprise operations. Such efficiencies gradually build up to high OPEX and CAPEX savings.

Scale Up and Down Accordingly

One of the biggest advantages of managed services over standard in-house services is scalability. But unfortunately, plenty of enterprises do not scale their resources up and down accordingly. Firstly, overprovisioning is a common mistake, especially among ambitious entrepreneurs running startups. They subscribe to excessive resources without comprehensively assessing their actual requirements. Consequently, they end up paying for resources which they do not even use.

Secondly, a significant number of enterprises are mostly focused on a single aspect of scalability- up. Without a holistic approach to managed service flexibility, they only consider of scaling up and fail to consider the possibility of scaling down redundant resources. Over time, they are left with idle, redundant resources still consuming a significant amount of their periodic subscription costs.

To minimize costs, enterprises should strategize on starting small and upgrading as the needs increase. All the resource requirements should be comprehensively analyzed to ensure a systematic adoption of managed services according to their relevance and significance. Additionally, all the services which begin to get redundant as operations proceed should be dropped to cut the subscription fees and reinvest in the most critical applications.

Monitor the Services

A serious entrepreneur understands the importance of monitoring and tracking all the elements in his/her business- including IT resources. Without real time monitoring applications, an enterprise will operate blindly and conduct its decision making based on assumptions, rather than facts. Ultimately, poor decisions are made regarding managed services and related finances.

An organization should implement an analytic system on its managed services according to their impact on their core processes. It should contain key metrics detailing the state of the individual services and processes in real time. Through that, enterprises will track all their services and make informed decisions on how to invest in each of them, subsequently managing and reducing the overall managed services costs.

The execution of these strategies is dependent on the type of business and the individual operations reliant on the managed services. For optimal results, business owners should consult experienced IT professionals to assess their business and system requirements to subsequently advise on the necessary steps to take to completely minimize their operation costs.

Author: Davis Porter
Image Courtesy: ratch0013,