How Canada can be a leader in the G7 by using managed services to spur innovation

In Canada, labour productivity growth has been slowing down, with less than 1 percent growth today compared to 2.7 percent in the 1960s and 1970s. The Organisation for Economic Co-operation and Development (OECD) has ranked Canada last among all advanced economic countries in the world in its predictions for real GDP per capita growth from 2020-30 and 2030-60. This is mainly because Canadian organizations use less capital and technology, are less innovative, and operate at a smaller scale in an economy plagued by insularity.

One solution to this issue is to offload non-differentiating business functions (especially in IT), that are becoming commoditized and are too resource-intensive to run internally (the hottest ITSM tools in the market, like ServiceNow, come to mind here). These technologies require specialized skills and expertise to drive business value and by trying to cover all IT functions with internal staff, it becomes difficult to execute technology initiatives that directly support core business objectives and global competitiveness.

This is where managed services can be a real enabler for Canadian organizations. Managed service providers can be leveraged by Canadian organizations to offer specialized expertise, resources, and best-in-class technology to help manage and maintain complex IT applications and infrastructure.

What do managed service providers (or MSPs) bring to the table?

1. Specialized expertise: MSPs have deep expertise in many IT areas, including cloud computing, corporate applications, trading systems, IT infrastructure, and data management. This expertise can help businesses address complex issues including turnover, ever-changing technology, and staying abreast of best practices that they may be lacking internally.
2. Cost savings: Managed services can help businesses reduce costs by providing access to shared resources, automation from best-in-class technology, and economies of scale.
3. Proactive monitoring and management: MSPs can provide proactive monitoring and management of IT systems by identifying and addressing issues before they become major problems. This can help reduce downtime and improve system performance.
4. Service level agreements (SLAs): MSPs typically offer SLAs that define the level of service they will provide and the penalties they will incur if they fail to meet those service levels. This provides businesses with a clear understanding of what to expect from their managed services provider and incentives for the managed services provider to act as a true partner.
5. Scalability: Managed services can be scaled up or down as needed, allowing businesses to adjust their IT resources quickly and easily as their needs change without having to worry about labour forecasting.

Using managed services to handle commoditized IT services reduces the burden on internal IT staff and allows them to focus on technology solutions that directly support their business objectives and competitive advantages. For example, a pension fund may use managed services to manage its cyber security, overnight trade processing, and corporate applications, freeing up its IT team to focus on initiatives that generate alpha (absolute returns from capital investments), such as architecting best-in-class data platforms for their investment team.

A common theme we see is that organizations tend to build internal teams to handle each area of their IT environment instead of bringing in outside support for IT areas that have become routine for a managed services provider. This approach drains internal resources and ends in mediocrity as it becomes impossible to provide a competitive service in every IT area. Canadian organizations need to look instead at putting as much management time, capital, and IT resources into the strategy and execution of technology differentiation. I challenge Canadian business leaders to take a hard look at how managed services could fuel our country's economic growth for generations to come.