Why are more IT executives moving to managed services? Here are five reasons (Part 1)

Today, more and more IT companies are under significant pressure to keep up with customer expectations, application and service functionality, and security compliance — all while delivering value and keeping costs in check. As a result, many IT executives invest in more predictable cost models.

If you're one of those executives in the process of weighing up the pros and cons of staff augmentation versus managed services, then you're likely among the 74 percent of IT leaders who are frustrated with their current software delivery speed.

In this article, our Chief Services Officer CJ Montano gives a brief overview of these engagement models, and an explanation of why more organizations are switching to accelerate and evolve their IT practices.

What is managed IT services?

Managed services is a software delivery model that involves the partnership of an IT or software development company and an outside vendor. The outside vendor manages all or some of the hiring company's software development. The managed team works with the client to map out a product development plan and also accepts responsibility and accountability for delivery.

What's the difference between managed IT services and staff augmentation?

Managed services focuses on delivering value rather than a set list of tasks, features, or user stories.

An accomplished managed team can build a sustainable, reliable process that blends and integrates teams to generate more predictable, valuable, and sophisticated outcomes through frequent, iterative software delivery cycles.

The goal — and potential — of a managed team is to get the job done, and while doing so, to evolve practices to achieve greater organizational value as delivery processes mature with each delivery cycle.

What are the benefits of managed services?

In addition to having more value-based development and delivery iterations, here are some other advantages of having a managed IT services model:

1) Value-based outcomes

As explained above, managed services models are typically tied to delivering valuable outcomes — and this is also reflected in the pricing model. Rather than paying for a set number of hours, pricing is based on iterations (usually two-week "sprints") and product delivery through a service-level agreement (SLA).

2) Accelerated evolution

Because managed teams are financially incentivized to deliver, the value of the software features they produce is typically higher than that of staff augmentation or internal IT teams. As a result, managed teams can help define reliable processes that lead to delivery systems that accelerate over time, ultimately evolving the organization.

3) Sustainable and reliable processes

In addition to value-based delivery, managed services teams focus on defining and improving processes, which drives value with each delivery cycle. By defining reliable processes, teams focus on the quality of outputs rather than inputs. Reliable processes are results-driven, which means that organizations can evolve — and at a lower cost than working with staff augmentation or another outsourcing model.

4) Lower costs

As mentioned briefly above, most IT organizations that adopt staff augmentation models often pay for hours rather than value. This can mean elevated development and production costs that sacrifice quality and overall value. However, managed services models often present fixed costs based on specific iteration deliveries. This helps the hiring IT company to more effectively budget and predict costs. Such engagements are also easier to scale over time when compared with hiring an in-house team.

5) Improved risk management

Every business, project, or experiment carries a certain element and amount of risk. Although most IT teams that work within agile environments accept that there will always be uncertainty with projects and initiatives. Managed services can help reduce overall risks and uncertainties related to deliveries by absorbing the delivery risk, as defined in the SLA. Companies that attempt to implement and support all IT services in-house often struggle with significantly higher research and development and product development costs, as well as longer deployment times.

Will managed services work for your organization?

Depending on the goals you want to achieve, sometimes it is more cost-effective to stick to simpler software delivery models like outsourcing and staff augmentation. However, managed IT services utilize a more comprehensive approach and focus on business value rather than just engineering a working software solution. Furthermore, when managed services are executed smoothly, the software development process ramps up much faster.?

Part two is out: Does your IT organization need to switch to managed services model?