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Managed Services Summit

Managed Services Summit. Thomas Lah, TSIA May 10 th , 2012. Agenda. 3:00-3:30 p.m. Introduction and Overview of TSIA Research on Managed Services Thomas Lah, Executive Director, TSIA 3:30-4:15 p.m. Lessons Learned from a Career in Building Managed Services Businesses

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Managed Services Summit

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  1. Managed Services Summit Thomas Lah, TSIA May 10th , 2012

  2. Agenda 3:00-3:30 p.m. Introduction and Overview of TSIA Research on Managed Services Thomas Lah, Executive Director, TSIA 3:30-4:15 p.m. Lessons Learned from a Career in Building Managed Services Businesses George Humphrey, Director Global Strategy, Managed Services, Avaya 4:15-4:45 p.m. Managed Services Critical Information Needs Group Discussion 4:45-5:00 p.m. Next Steps J.B. Wood, President and CEO, TSIA

  3. TSIA COVERAGE: Five Major Service Disciplines MS SS FS PS ES SRG Managed Services Field Services Professional Services Education Services Support Services Service Revenue Generation Strategy Engineering Finance Marketing Operations Sales Staffing Technology WWW.TSIA.COM

  4. 2012 PS Research Activities

  5. Comparison 1: Benchmarking Practices In Alignment? Peer Group Majority Practice Yes = Better Your Practice No = Worse Industry Majority Practice Yes = Good Required Practice No = Bad

  6. Comparison 2: Practice “Zones” Required Practice Recommended Practice Practices are business processes that help companies achieve target results.

  7. Metrics/Results Zones • Metrics are analytical measurements intended to quantify the state of a business. They are independent variables or leading indicators for the performance of a PS business. Examples are attach rates, billable utilization, and project duration • Results are analytical measurements intended to quantify the state of a business. These are dependent variables or lagging indicators for the performance of a PS business. Results are produced by practices and metrics. Examples are project margin, field margin and net operating income. +/- 10% of Avg “On Target” Average Off Target (High) Off Target (Low) • Important Exceptions • Results or metrics that are off target relative to both the industry and peers, but in a clearly positive way are rated as “differentiated” (Ex: extremely high project margins) • Key metrics or results that are off target relative to both the industry and peers and in a clearly negative way are rated as “critical off target” (extremely low project margins)

  8. Evaluation Framework • Each self-reported practice was compared to the majority practices of the industry and the target peer group • On target industry practices were worth 3 points; on target peer group practices were worth 5 points • Each self-reported metric and result was compared to the average metrics and results of the industry and the target peer group • On target or better industry metrics and results were worth 3 points; on target peer metrics and results were worth 5 points • Differentiated practices/metrics: points taken off the table • Missing of off target critical practices/metrics: points doubled • Scores are expressed as % of total possible points and assigned color coding as follows: • 0% - 24%: RED • 25% - 49%: ORANGE • 50% - 74%: OLIVE • 75% - 100%: GREEN

  9. Putting It All Together: An Example Overall Rating (Points divided by total possible) Practice or Metric Missing or Off Target (Possible points unchanged) CRITICAL Practice or Metric Missing or Off Target (Possible points doubled) Differentiated Metric or Practice (Points taken off the table)

  10. Service Line Dashboards

  11. The Services Continuum Technology Intensive Human Capital Intensive

  12. Parameters of Managed Services Location: How are the services delivered? Hosted Off Prem On Prem Ownership: Who owns the hardware, software?

  13. Group DiscussionHow do you define “Managed Services?”

  14. Where Managed Services Lives

  15. Managed Services Research Thomas Lah| TSIA

  16. 2008 TSIA Research Study

  17. Charter and Organization 62%: “Managed Services is a semi-independent business unit with tight integration to another services line of business (e.g., CS or PS)”

  18. Organization: Who has primary responsibility for management of the managed services function? C-Level Executive Services Executive Sales Executive 15% Channels Field Services Professional Services Customer Support Managed Services Exec 62% 15% Pre-Sales Eng. Technical Services Education

  19. Core Functions • Onsite managementof customer systems and applications that may include actually owning the systems • Remote managementof customer systems and applications • Software-a- a-Service (SaaS)—license and environment provided in one offering • Hosted application support—customer buys software license separately, managed service provides application environment • The management of IT related processesfor the customer (capacity planning, adds/moves/changes)

  20. Core Functions

  21. Process areas • In what process areas does your Managed Services business currently operate? • (Please select all that apply) • Infrastructure management • Business integration • Application or application life cycle management • IT service management • Desktop management • Server management • Network management • CIO or Strategic assessment • Security management • Back-up or recovery services • Support Services • Other

  22. Core Functions

  23. Managed Services BU Basics

  24. Managed Services Business Model

  25. Contract Metrics: Summary

  26. Key Practices Summary

  27. Managed Services Business Model

  28. Managed Services Business Model

  29. Managed Services Business Model

  30. Managed Services Business Model

  31. Managed Services Business Model

  32. Managed Services Business Model

  33. MS Business Model Takeaways • Pattern Recognition • Direct cost model for MS: about twice as profitable as PS • MS is more profitable including allocations than PS is without allocations • Main reason 1: much lower field costs (expected) • Main reason 2: much lower below the line investments (not expected) • Relatively, MS invests much more in direct sales and much less in direct G&A than PS • Relatively, allocations are much higher than direct investments for Engineering, much lower for G&A • Pattern Differences • Business model line items ranges are wide

  34. Key Takeaways from 2008 Study • Key On Target Results • Contract margin: 30% - 35% • Operating Income: 20% - 25% • Investment level: 7%-10% • Sub-contracting margins: 10%-19% • Aligned with typical PS sub-contracting margins • Growth rate: 20%-29% • Key Common Practices • Charter weighted toward revenue growth • Break out from CS and PS into semi-independent BU • Pricing: monthly • Contract length: 3-year • Fund dedicated Services Engineering for MS

  35. Lessons Learned from a Career in Building Managed Services BusinessesGeorge Humphrey, Global Strategy and Product Line ManagementAvaya Operations Services May 9, 2012Common success factors and failure points, open Q&A

  36. Four Things To Focus On • Defining Managed Services (Offer) • Selling Managed Services • Delivery • Operations

  37. Background Managed Services Definition: • Out-Tasking, Selective Sourcing and Outsourcing • Remote Management leveraging vendor IP

  38. Offer • Definition • ITIL Alignment • “Productization” • Differentiation • Breadth of offers in your domain • Unique value-prop • Intellectual property • Marketing • Leverage analysts and press • Must have references (best form of advertising) • Advertising/email campaigns not very effective • Metrics backing P&L by offer Must Measure: P&L by Offer

  39. Selling Managed Services • Dedicated MS Sales Specialists – MUST HAVE • Typically sales force sells something else (Hardware, Transport, etc) • Front line sales force identifies and shepherds day 1 • Compensation • Must sell on TCV not Revenue • Find compelling event • Technology refresh, IT downsizing, restricted budgets, M&A, transport transformation, etc. • Focus on the value proposition • TCO Reduction • Accelerated ROI • Improved performance Must Measure: Funnel & TCV Bookings

  40. Delivery • Service Automation – MS Platform • CMDB • Capture, correlation, remediation • Performance monitoring and management • Portal for service transparency • ITIL Aligned ITSM architecture/tools • Process • ITIL Aligned • 90% of engineers just follow process • Don’t need cowboys! • Customization • Based on standard offer • Delivery team must be part of customization Must Measure: % Proactive % Resolved in xHrs % SLAs hit by client

  41. Delivery (Continued) • Onboarding • First 6 moths is key • Client participation key • Offshoring • Yes – non country specific functions • Major cost advantages • Governance is crucial • Organization • Delivery and Sales tightly linked • ITIL Aligned Must Measure: % Proactive % Resolved in xHrs % SLAs hit by client

  42. Operations • 3yr P&L by Offer • Revenue • Cost • Expense Plan • Proactive Contract Management • Typical is 3 yr seeing requests for 5yr+ • Obsessive forecasting down to each client • Vendor/Supplier Management • Gartner: 60% of Outsourcers outsource to other outsourcers • Business Process Governance • Accounting, Finance, HR Governance, etc Must Measure: All Metrics of the entire organization

  43. Managed Services Critical Data Needs Thomas Lah| TSIA

  44. Service Line Dashboards

  45. Top Industry Metrics

  46. Top Industry Practices to Benchmark

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