MSPs: To switch or not to switch?

Have you, like me, been with the same bank since you were at school? Have you politely declined those calls from energy providers offering a switch to lower tariffs because of the hassle of moving? Or perhaps, in your corporate life, you’re sticking with your existing IT Managed Services Provider (MSP) because it’s in the “too hard” box with everything else on your plate at work?

Let’s examine these three situations in a bit more detail:

Changing Banks

Traditionally, like me, people signed up with a bank when they were at school and then stuck with it. Over the years, perhaps they have tolerated a sub-standard service at times, as changing your account is seen as complicated, time-consuming, and risks getting you into real difficulty if it goes wrong.

In 2013, the UK government introduced legislation that guarantees a switch of accounts between banks in 7 days, and the customer is fully protected against any financial loss in the event a problem occurs during the switch.

Has the scheme worked? Based on recent government data, just over one million bank accounts were switched in the UK over the last year. Given that there are approximately 65 million accounts in the UK, this movement is actually fairly minimal (1.5% annualised), and in fact was down by nearly 5% on the previous year. This is despite the banks offering generous incentives for moving, preferential interest rates and promises of a better service.

Switching Utility Supplier

The supply of energy is very much a commodity service, and price comparison sites provide easy access to the best tariffs in the marketplace. Personally, I’ve also noticed a recent upturn in cold calls, attempting to persuade me to change utility supplier.

I’ve moved homes a few times in recent years, and so have first-hand experience of a number of utilities suppliers. It’s surprised me how cumbersome and time consuming the process of changing gas and electricity suppliers between addresses has been. Equally, the quality of the ongoing service provided by some suppliers has been below reasonable expectations even struggling with the simple act of timely and accurate billing!

Based on government figures, in the first quarter of 2016, 1.1m electricity consumers and 850,000 gas consumers in the UK switched suppliers. Looking at the previous year, it’s actually 13% of all energy consumers. Of course, a proportion of this is down to switches as a result of moving home, but a significant proportion of customers have chosen to make a switch in search of better tariffs and service. Looking at prior years, there is actually a downward trend in the number of switches overall.

Managed Services Provider

There is a parallel between banks and utility suppliers in our personal lives, and IT Managed Services Providers in the corporate world: There is a similar inertia to stick with the current provider. Of course, this could just be that the customer is happy with the service that the MSP is providing. It is also partly because of the perceived cost and hassle of making the change. Added to this, traditionally customers have been tied into annual or multi-year agreements with their managed service provider, further reducing the likelihood of change.

The truth is that there is a large spectrum of service quality and pricing with MSPs. There are surveys showing that a significant proportion of customers admit that the service provision by their MSP is actually more expensive than planned.

There is also evidence to suggest that a switch to the right MSP could result in some very significant cost reductions, and also result in a much better service provision that delivers greater value back to the business. An independent survey of our own managed service customers in the Oracle E-Business space, conducted earlier this year, provides some support to this claim.

Perhaps the traditional tender process to choose a new MSP is also a barrier to changing, as these processes can be cumbersome, time consuming and costly. With the growing availability of information on-line, as with banks and utilities providers, the buyer of IT Managed Services can do a great deal of research for themselves. In doing so, it’s possible to short circuit the tender process by compiling a short shortlist of potentially compatible MSPs, thereby at least bypassing the RFI stage of such a process.

With the increasing adoption of Cloud services, contracts are changing too, with more flexibility being provided in contract durations.

There may not be a 7-day guarantee in place for switching MSPs, but the process can often be done far less painlessly, more cheaply and faster than you might imagine.

Bringing it together

The evidence suggests a relatively small proportion of customers opt to make a change in their bank account or energy supplier, and if anything, these numbers are falling over time. Competition is fierce, and there is no shortage of information about the respective services of alternative suppliers. However, the benefits of changing are typically small when compared to the time and hassle involved in making the change, and hence people stay put.

The same could be said about IT Managed Services providers, but I would suggest that the potential benefits of moving could be sufficiently material to outweigh the costs of moving, and at least warrant some closer investigation into alternative options when it comes around to renewal.