Managed Services Sophistication Underscores OPEX Shift

Author: Saad Doukali, Director of Business Development & Strategic Projects

The movement from capital expenditure (CAPEX) up-front investment to operating expenditure (OPEX) services is popular with many organizations. More broadly, we can say there is an increasing demand for “as-a-service” types of delivery for enterprise applications and infrastructure. The adoption of cloud services has encouraged that trend but did not start it – instead, cloud and other OPEX services have evolved in tandem, frequently growing in synergy within a customer.

Aside from the financial benefits of smoothing out costs and applying greater control over spend, services offer key advantages that deal with CIOs’ specific pain points. The common reason for this preference includes:

  • Financial considerations, transitioning from CAEPX infrastructure acquisition to OPEX service procurement. Depreciation of datacenter assets is an example of this, especially in an environment where server consolidation is making the DC real-estate itself a risky investment
  • Access to specialist expertise may be too expensive or risky to invest in, including ongoing certification in key technologies. Managed security services are an example of this: it is costly to staff a top-notch security team, keep its skills at the cutting edge, and retain the personnel who in practice are likely to leave in search of fresh challenges, regardless of remuneration. Furthermore, emerging technology such as IoT, Blockchain, or AI requires high investment in skills, which is expensive and risky for a pilot project or innovation exercise
  • The agility of deployment and delivery: services, whether on a project basis or as an ongoing managed service, can often be provisioned and deprovisioned faster than an on-premise installation, reducing the time-to-value and improving ROI
  • Business focus, allowing the customer to keep its resources optimally focused on its core business, with IT execution and delivery outsourced to a specialist provider.
  • Offsetting risk: this is often the core of moving to an as-a-service delivery model. By making the responsibility for maintaining underlying infrastructure, updating applications, securing the environment, sourcing the skills, and delivering the business outcome, the equation is one of transferring risk from the customer to the service provider, and the premium you pay for this transfer of risk is the supplier’s margin.

The as-a-service feedback loop

The advent of cloud services has accelerated the adoption of services-based delivery by turning enterprise applications into services. The additional value-added on top, such as self-provisioning and native integration between components, form the feedback loop: deploying cloud-based solutions improves business outcomes, and so the business moves more services to the cloud, where it interacts with the existing applications to achieve greater compound value.

In short, once applications start to move to the cloud, they tend to draw others along behind them. This applies equally to on-premise and hosted private cloud as it does to public cloud – so long as the value proposition remains intact, the dynamics don’t change.

The same cycle applies to other services, such as infrastructure management, security management, IT outsourcing, and so on. Each offers a set of clear value propositions, but when combined, can yield significantly greater returns.

Technical debt vs. complexity debt

In IT, we often talk of technical debt, the looming spectre of hidden costs that mount up as technical flaws go unresolved until they reach a critical mass and cause disruption and damage. In a more abstract sense, this is an example of complexity debt – the combination of flaws across systems builds up pressure and eventually gives way. This can happen just as easily in the cloud as in datacenter infrastructure and within managed services the same as in-house delivery teams.

Resolving complexity debt can be extremely sensitive; it’s not uncommon to find enterprise applications that actively rely on certain flaws or infrastructural quirks to maintain integration. For this reason, a key part of the best practice in an as-a-service model is to focus on interoperability, not only with existing services, applications and infrastructure but as a platform for future applications. If a service provider cannot demonstrate a sufficiently wide and deep enough degree of interfaces, extensibility, interoperability and support, that should be considered high risk and weighed accordingly.

Managed services vs. COVID

The global COVID pandemic clearly demonstrated the value of service-oriented IT in both end-user organizations and service providers.

In customer organizations, the sudden need to transition to a remote workforce, with unattended infrastructure and application delivery, was extremely challenging. After many years of optimizing enterprise IT around efficient operation, some systems were revealed to be inflexible and brittle in the face of disrupted supply chains hampering maintenance, security policies stretched to breaking point as the entire user-base moved outside the firewall, and business processes accustomed to manual intervention scrambling to adjust or find workarounds.

Conversely, organizations that had embraced as-a-service methodologies often found the transitions easier since the underlying processes were already structured around flexible deployment, automation and remote management. From business processes to infrastructure management, from IT outsourcing to cloud computing, the maturity and sophistication of the as-a-service culture within an organization was instrumental in weathering the changes required by pandemic lockdown but could apply as easily to any other urgent business imperative.

On the other side of the equation, IT service providers had to hasten to revise their strategies to deal with managing infrastructure which was no longer physically accessible, to delivering applications to users in unmanaged home environments, and more. Most managed the change with minimal visible disruption, having already embraced as-a-service digital transformation. That maturity of capability, centered around the ability to deliver and manage infrastructure, applications, and business outcomes on an as-a-service basis, is a key indicator of sophistication and capability.

Next steps

Regardless of how extensive their use of managed services, cloud, or other as-a-service solutions today, every CIO is under pressure to evolve CAPEX expenditure to managed OPEX, to improve financial efficiency, deliver greater busines agility and resilience, and reduce risk.

Reviewing an organization’s infrastructure and applications through the business lens with those imperatives in mind, and the flow of services underpinning the operation of the business become clear, as well as opportunities to evolve the ecosystem towards deeper, more complex and more sophisticated as-a-service models, to the benefit of all concerned; CFO, CIO, end-user, customers.

Actual implementation requires partners who are not just able to save costs but who can bring a depth of skills, experience, and strategic alignment to your business to unlock new business value and enable the organization to flourish in the new as-a-service world.

To find out more on how GBM Qatar and IBM can help you on your shift, visit Cloud managed services | IBM