Cloud Services Interest Erupts in Groundswell

The anticipated benefits from adopting managed cloud services have reached the executives suites of many corporations. Proactive CEOs and CFOs are pushing their IT leadership team to seek out actionable information and guidance.

There's also a constant stream of service providers announcing new offerings -- and the momentum is becoming a global phenomenon. As a result, Forrester Research has witnessed an expanding number of client inquiries around cloud computing.

The acceleration in market development has been building for some time now. Forrester analysts responded to more than 264 client inquiries about cloud computing between January 2008 and April 1, 2009 from companies of all sizes and industries.

IT Teams are Adopting Cloud Strategies
Once considered a niche business technology where awareness was viewed as optional, Forrester now says that knowledge of cloud computing has become an IT organization necessity. Interest is fueled by expectations of major cost savings, scalable and dynamic environments, on-demand infrastructure, and much smaller maintenance requirements.

In a recent research note, Forrester outlined the most common questions about cloud services.

Twenty-three percent of cloud computing inquiries were about the types of applications that companies were moving into the cloud and how best to leverage cloud service environments. People want to know the spectrum of possibilities -- what apps to put in the cloud?

Some questions are motivated by the need for improved business agility. The promise of better scalability and versatility makes cloud services appealing. Moreover, innovation is often stifled by the investment needed to acquire and deploy new IT infrastructure and associated application environments.

Fifteen percent of the inquiries were on challenges, risks, and the effects of cloud-based services on IT -- such as, what are the typical use cases, and how much enterprise data should live in public clouds?

Clouds are Coexisting in Hybrid Models
Forrester believes questions regarding when to build internal clouds, and the "internal vs. external" debate, will be at the forefront of cloud computing due diligence in the coming months -- which cloud service scenario is a best-fit for our particular needs?

Forrester concluded from their client engagements that cloud computing represents a significant shift in the way IT operates today -- it's not a passing fad, it's a trend that's based upon solid business need for a change in the status quo.

The following are Forrester's recommendations:

• Know your costs, requirements, and potential areas for cost saving.
• Businesses with basic requirements can begin to pilot public clouds.
• Evaluate internal clouds, while also considering a hybrid model.
• Formulate standards, and a cloud policy to govern procurement.
  

As the momentum for managed cloud services continue to build in 2009, we'll be on the lookout for additional sources of insight.

Managed IT Services Buyer's Guide - part 3

Here are the final three questions from our ten-point Q&A that's designed to help guide your procurement process. Part 1 included the first three managed and hosting service buyer's guide questions and Part 2 had the next four questions.

8. What are the type and scope of management capabilities that you routinely offer?

• Request a list of capabilities and associated benefits, relative to your needs.
• Historical reporting is essential, forward-looking insight is valuable.
  

Examples of typical basic management tools include a service desk and management of various activities including assets, configuration, fault, change, release/update, performance, capacity reporting and planning, and trend reporting with recommendations.

9. If required, how will you support existing or acquired IT/networking infrastructure?

• Service providers may have policies that limit the device types they support.
• In addition, some providers only support devices they install and configure.
  

If you are like many managed service users, then you have an environment where a combination of self-managed and out-tasked infrastructure will need to coexist -- at some point in time. Service providers should be able to delineate how their role and responsibilities start and end in a multifaceted scenario. Likewise, they should explain their role in the event that they are asked to operate in a multi-vendor or multi-service provider environment.

10. How do you price and deliver professional services, beyond the scope of the managed service?

• Examples of advice, support, and guidance should be included as standard.
• Ask for non-standard consultation examples, and associated fee structure.
  

There will likely come a time when you will ask your service provider to perform an activity that is beyond the scope of your managed service agreement. You should anticipate this event by asking the service provider what constitutes routine (non-billed) information and guidance, and in contrast what is the fee structure for time and materials work -- or other billable activity.

In Summary
Managed services have a long and successful history of helping businesses like yours to reap the full benefits of IT and networking technology capabilities -- without the drudgery and distraction of the ongoing equipment operation, management, maintenance, and perpetual updates or enhancements.

You can download the complete checklist "How to Select a Best-Fit Managed Service Provider" as a .pdf document.

Also, the "Managed versus In-House Service Comparison Calculator" may help you build an internal business case. This build vs. buy expense comparison tool should only be used for basic estimates. We recommend that you consult a managed service provider to obtain an accurate comparison, based upon your actual requirements.

Managed Service Buyer Checklist – part 2

The following are questions four through seven of a ten-point Q&A designed to help guide your managed or hosted service procurement process. Here are the first three buyer questions and service provider answers.

4. What is the depth and breadth of your current managed service portfolio?

• A service migration path provides the means to adapt to your growth needs.
• Service providers that are specialists may offer services through their partners.
  

It helps to have a forward-looking view of your needs when selecting a service provider. Sometimes a specialist is preferable to a multi-service provider. Otherwise, try to anticipate future service requirements, and consider giving preference to a provider with those combined skills.

5. How can I be sure you will apply the best people, processes, and tools? Is your company certified by a leading vendor, and are your offerings delivered using industry-leading technologies to meet the highest quality of service?

• Service providers have data on how they've qualified to meet standards.
• Providers are often required to attain a "qualification level" that is tiered.
  

The good service providers will achieve basic industry-standard technical certifications. The better service providers will comply with the ITIL foundation practices. The best will have passed the stringent qualifications of a service designation process that requires an independent third-party audit of their performance. They must pass rigorous annual assessments of their network operations center. Technical design and operations staff must also complete advanced training.

6. Where are your network management facilities located, and what are the hours of operation? Describe your escalation process, in the event of an outage.

• Service providers typically have both primary and backup facilities.
• Find out whom to contact when your primary support contact is not available.
  

Depending on your needs, service support during regular business hours may be enough. However, some businesses have requirements for 24-hour operation. Help desk coverage, staffing levels, and backup planning are important aspects to consider in this scenario.

7. What are the assurances for levels of availability, serviceability, performance, and operation? What is the process for remedy if and when levels aren't maintained?

• All service providers establish and maintain benchmark measurements.
• Service contracts detail the metrics, and references have results data.
  

It is now common for service providers to offer service-level agreements (SLAs) as an integral part of a service contract, where the "level of service" is formally defined. The SLA can include the common understanding about services, priorities, responsibilities, and guarantees -- sometimes specifying financial remedies as a result of failure to comply with SLAs.

Next step: The remaining Q&A will be featured in part 3. We'll also provide a link to a complete list, and an ROI calculator to help you start to build a business case.

Best MSP Procurement Checklist - part 1

The process of researching, reviewing and selecting a managed or hosted service provider can be a daunting task for those business and technology decision makers that have never performed this task before. Like any other process, there are some best practices.

The following candid questions will help you determine if a provider of managed services can meet and exceed your expectations. Also included are examples of specific details that you should seek.

How do you select a best-fit service provider? Ask all the right questions. Where do you start the selection process? Focus primarily on how the service offered will help to solve problems or create new opportunities -- not merely what it does (its features and functions).

1. Are you prepared to offer only the features and functions that my business needs, instead of the ones that you include in your one-size-fits-all service bundle?

• Ask for a list of all the "standard" items included in the base bundle.
• Request details of all optional items that can be added and/or subtracted.
  

According to recent market research, decision makers at companies of all sizes now prefer that service offerings only include essential features as mandatory elements in a bundle. All other features may then be selected from a menu of options.

2. Can you describe the services that you offer -- and their business benefits -- in terms that I, and the other members of my executive team, will understand?

• The salesperson or sales support person should address your specific needs.
• Ask the service provider to explain any terms that you don't understand.
  

If you can't determine how the managed services will directly benefit your business, then you'll be unable to make an informed decision. Qualified service providers should be able to describe their offerings within the context of your specific business requirements.

3. Will you provide case study materials to demonstrate how you delivered a managed service solution that solved a business challenge similar to mine?

• Documented customer success stories provide useful insight.
• Reference checks should include details on the business impact.
  

While a service provider with limited experience may be able to meet your application needs, those that can clearly articulate the methodology they use to meet their existing customer needs will likely provide a better fit. Moreover, a basic knowledge of how your industry operates will help to avoid misunderstandings.

Note: these are the first three questions from a list of ten. The remaining Q&A will be featured in part 2 and part 3. We'll also provide a link to a complete list that you can download, and a useful ROI calculator to help you build a business case.

The More Things Change, The More They Stay the Same

I received an email the other day congratulating me on a column I wrote for NetworkWorld nearly three years ago entitled, "Why Managed Services Fail."

The 'shelf-life' of web content always amazes me, but it is gratifying to have people stumble across my past writings and still find them timely.

What struck me as I revisited this 2005 column was how many of my points were still true,

• "...Almost every supplier and service provider I talk to admits that selling managed services has been harder than expected."
• "The first problem these managed service providers face is packaging."
• "The second issue is pricing."
• "The third challenge is positioning these services properly."
• "But the biggest obstacle to selling managed services is poor sales skills."

Sound familiar?
Although industry research clearly shows that customers are becoming more receptive towards managed services and the economy is even driving an increasing number of customers to actively pursue managed service alternatives, many MSPs are still suffering from poor sales and marketing skills to respond to these opportunities.

They are still thinking in terms of selling products rather than services. They are still promoting the 'speeds and feeds' of their technical capabilities rather than the business value of their service capabilities.

As a consequence, many MSPs end up selling their services to IT managers who are only interested in continuing to buy systems and software rather than selling solutions to higher level decision makers who are interested in the business impact of their services.

Worthy of Your Business?
So, if you are an IT or business decision-maker who is seeking to acquire managed services, don't be surprised if your potential MSPs are talking to you in the wrong terms and trying to sell you the wrong value propositions.

Managed Service Scenarios: Choosing the Best-Fit Solution

Are you puzzled about how to choose the best-fit managed service solution for your particular business needs? As a basic guide, the following are three typical high-level scenarios for deploying managed network services.

Scenario 1: Customer Owns Network and Shares Management Responsibility

Companies that already have an internal IP network can continue to manage it while out-tasking the management of onsite equipment -- usually known as customer-premises equipment (CPE), used for the managed service (see Figure 1).


The Roles and Responsibilities are as follows:
Managed service provider -- Sets up, maintains, and administers the equipment needed for the managed service, including company-owned equipment such as servers.

Company -- Managed service customer maintains and administers its internal network.

Scenario 2: Service Provider Owns the CPE; Customer Can Share Equipment Management with Service Provider

Some companies do not own a LAN, either because the location is new or the company already out-tasks its LAN services. In this situation, the service provider can manage the equipment needed for the corporate network as well as the managed service.

Many large enterprises like this arrangement because they can maintain physical control of the equipment while relying on the service provider for 24-hour network operational support (see Figure 2).


The Roles and Responsibilities are as follows:
Managed service provider -- Sets up, maintains, and administers the equipment for the managed services as well as the corporate network.

Company -- Monitors its corporate network through a Web interface provided by the service provider, receives regular reports on the network status and managed services, and is notified in case of a defined emergency.

Scenario 3: Service Provider Owns Equipment in its Own Facility; Customer Monitors Service Provider's Management of the Equipment

The difference between this scenario and the previous one is that most of the equipment is physically located in the service provider's "hosting" facility instead of on the customer premises.

The Roles and Responsibilities are as follows:
Managed service provider -- Sets up, maintains, and administers the corporate network and related managed services; most of the network equipment is physically located in the provider's computing center; the exceptions are the equipment for the LAN and network connections, as well as gateways for computers and IP telephony.

Company -- Monitors performance of its systems through a Web interface provided by the service provider, receives regular reports on the network status, and is notified in case of a defined emergency.

Summary: each of the three basic scenarios can be customized to meet your particular requirements. In upcoming posts, we'll identify some more specific application examples.

Getting Down to Basics About SaaS

I was interviewed today by a journalist from one of the CIO-oriented pubs who surprised me by asking a series of questions which came back to many of the same fundamental misconceptions about Software-as-a-Service (SaaS) which I thought I had dispelled in a BusinessWeek commentary I published in 2006.

The first misconception the journalist had was that SaaS solutions are not robust enough to satisfy large-scale enterprises, as well as small- and mid-size businesses (SMBs). I pointed out to him that large-scale enterprises have been leveraging SaaS solutions for a long time, but have only recently begun to talk about their successful experiences.

One of the most recent announcements of a major deployment of SaaS by a large-scale enterprises was by Flextronics who is adopting Workday's on-demand human resource management (HRM) solution to support its 200,000 employees.

Real Total Cost of Ownership
The second misconception the journalist revealed was the old "buy vs. lease" argument against subscribing to a SaaS solution. This argument suggests that after 2-3 years it doesn't pay to subscribe to a SaaS solution because it costs more than it would to simply purchase a perpetual software license.

This argument doesn't hold because the cost comparisons are flawed. In order to do a more accurate side-by-side comparison, IT and business decision-makers must calculate the full cost of deploying and maintaining a software application, and also calculate the risks associated with these processes.

Some research firms have suggested that it can cost as much as ten times the original software license fee to install and maintain the application. They have also found that over a third of enterprise software deployment projects fail to be completed and of those which are fully deployed many are under-utilized.

Avoiding the Old Software Trap
In addition, many organizations do not implement software updates and upgrades because they are afraid they will disrupt their operations. As a result, they are not taking advantage of the vendor's latest software enhancements.

SaaS eliminates the upfront software costs, and additional deployment and maintenance costs. It also eliminates the implementation and utilization risks. SaaS also ensures that every customer benefits from the vendors' latest updates and upgrades.

Finally, this journalist asked why a organization of any size should subscribe to a SaaS solution if they have an inhouse IT team that is talented enough to deploy and maintain software applications themselves.

My response was to ask why should today's overworked IT people waste their time simply deploying and maintaining software applications when they can be performing more valuable tasks supporting their organizations' strategic initiatives or enabling new business innovations?

If you are an IT or business decision-maker, you should be asking yourself the same question in these increasingly challenging economic times.

Can You Rely On Your Current Resellers For Today's Services?

Managed services, Software-as-a-Service (SaaS) and 'cloud computing' are gaining increasing attention in the press and among IT and business decision-makers because they promise to alleviate many of the day-to-day hassles of deploying and administering technology and applications.

While these new forms of remote and web-based services have demonstrated many tangible business benefits, they have also disrupted the traditional value-chain of the technology industry.

Traditionally, technology vendors relied on channel partners to extend their reach into market segments they couldn't address either by offering lower costs of sales or by delivering more customized solutions. Often the channel partner also took on the role of pre-sales consultant and on-site support provider.

This model worked well when customers needed help with the initial planning and design, as well as the installation, integration and ongoing maintenance of the hardware and software. And, customers needed plenty of help in all these areas because of the complexities and costs of traditional hardware and software.

A Different Set of Challenges
Today's SaaS solutions and cloud computing services were designed to eliminate, or at least substantially reduce, these challenges. They have been architected so that the vendor now operates the hardware and assumes responsibility for the deployment and ongoing availability of the software functionality. This approach fundamentally changes the relationship between the customer and vendor, and raises questions about the role of the channel partner.

However, while the burden for the success of the 'solution' has shifted from the customer to the vendor, THINKstrategies believes that there is still plenty of room for channel partners to play a role in this relationship. Once again the SaaS and cloud computing vendors cannot afford to help individual customers with adopting their solutions to meet their unique requirements. They also cannot afford to customize their solutions to address these requirements. Channel partners can help with these tasks, as well as helping their customers with change management and training.

However, those channel partners who are wedded to the past formula of hands-on software deployment and maintenance will be adversely affected by todays' SaaS and cloud computing movements because these new services substantially reduce these opportunities.

Adapting to the Change
Even the many channel companies who have tried to transition their businesses from traditional on-site support to remote managed services have found the shift difficult.

Rather than sell the value of their rapid response to system failures or software problems, channel partners must demonstrate their ability to keep customers' systems and software up and running with limited on-site presence via managed services. This requires a different set of service systems, skills and operating policies.

The Right Skills for the Task
For IT and business decision-makers within customer organizations, today's new service alternatives represent an important time to reevaluate their supplier relationships to ensure that your traditional service providers are adjusting to the new market opportunities and challenges.

Questions to Ask a Managed Service Provider - Part 2

With more and more managed service providers (MSPs) entering the market, your choices are expanding. If you choose the wrong one, however, you might wind up with more challenges than benefits.

How do you know? According to Matt Cowall at Appia Communications, it’s often as simple as asking.

In part one of this post, we covered three of the top five questions to ask a managed service provider: How long has an MSP been in business? What kind of support does the MSP offer? And what kind of redundancy does the MSP offer?

Today we’ll cover the remaining two questions that Matt recommends you ask, and they’re arguably the two most important:

What quality of service does the MSP provide?
This is probably the most important question, of course. You’ll learn quite a bit about an MSP’s service quality when you check its references. Be sure to ask what happens when there are issues. Does the MSP respond quickly and take ownership of the problem?

Another key indicator is the MSP’s service level assurances. A service level agreement (SLA) is a document describing the minimum performance standards an MSP promises to meet. It should also clearly describe remedies — and even penalties — if the MSP ever fails to meet the minimum standards. An SLA is an essential part of a contract between you and an MSP.

Does the MSP have formal SLAs? Do the assurances cover what you’re buying? And do the assurances have ramifications? The willingness of an MSP to offer SLAs with significant penalties for service interruption is a sure sign that the MSP is a high-quality provider. No MSP can remain in business if it has strong SLAs and can’t deliver on its promises.

How willing is the MSP to meet your specific requirements?
Your company or organization is unique; it’s often that very uniqueness that has resulted in your success. Unless an MSP is willing and able to tailor its services to meet your specific requirements, you may find yourself bending your operations to suit the MSP — instead of the other way around.

You can tell a lot about an MSP’s flexibility during the procurement process. Do they ask a few questions and then send you a quote, or do they take the time to listen to your specific needs and develop a custom proposal? And since no MSP can meet every requirement, are they forthcoming about what they are able — and not able — to do, so you can make a fact-based determination of how well their offerings fit your needs?

Lastly, ask about a roadmap for their products or services. Your needs will evolve over time, sometimes quickly. Therefore, your MSP should have a plan that aligns with your future business needs.

Questions to Ask a Managed Service Provider

The benefits of outsourcing make a simple and strong case, and more organizations are choosing to do so. As a natural result, more and more companies are entering the managed services provider (MSP) market.

According to Matt Cowall at Appia Communications, some of them are well-qualified; others are simply trying to take advantage of a market opportunity. Price is important, but it's not the only consideration, and the benefits of using an MSP can quickly evaporate if you choose the wrong one.

Matt recommends five key questions to ask before selecting an MSP. We'll discuss three of them today.

How long has an MSP been in business?
As in any business, there's an art and science to offering managed services. One obvious way to separate the experienced MSPs from the wannabes is to ask how long they've been in business.

If they've been operational for some time, they probably will have already addressed any service delivery issues they may have experienced in the beginning. Length of time in business is also an indicator of financial stability and client satisfaction.

What kind of support does the MSP offer?
One of the reasons you choose managed services is to turn your headaches over to someone else. If the MSP's support is weak, then you'll need to manage both the MSP and the problems you thought you were outsourcing.

Does the MSP have a support center that is staffed 24/7/365 (as opposed to being on call)? Does it have formal ticketing and escalation procedures? And does it monitor your services for you, or are you expected to bring problems to its attention?

What kind of redundancy does the MSP offer?
As you shop for an MSP, you'll learn about the infrastructure they use. Don't forget to ask if that infrastructure is redundant. Redundancy is the duplication or repetition of critical components in a system to provide alternative functionality in case of a failure. Even the best equipment fails from time to time, so it's essential that there are sound backups in place to ensure service isn't interrupted.

This is part one of a two-part blog post. In part two, Matt will share his thoughts on questions that managed service buyers should ask about provider quality and flexibility.