Managed service is the practice that clients of the IT/Telecom industry follow to outsource their day-to-day management responsibilities and functions as a strategic method for improving their operations and cutting down expenses.
The client is fully accountable for the management and control of the organization or system – including the functionality and performance of the managed service.
A Managed Service Provider basically manages the processes within the client’s IT Infrastructure and end user systems and handles the internal processes on a proactive basis under a subscription model.
The billing for a Managed Service is generally flat monthly fee under the subscription model. This system of billing provides the Managed Service Provider with a monthly recurring revenue system rather than billing to be one time transactions for any current IT project. The outsourcing engagement is generally under a service-level agreement that defines the contractual arrangement between the MSP and its clientto ensure that the performance and quality of the delivered service is maintained that will govern the relationship.
Managed services work differs from other business models in the IT solution provider and channel partner space. One key departure is recurring revenue. Solutions providers pursuing the break/fix model, for example, usually price their services on a time-and-materials basis, billing an hourly rate for repairing a customer’s IT equipment and charging for parts or replacement gear. Companies performing IT project work, such as computer systems installation and integration, may charge a fixed price for products and services. Either way, those solutions providers generate revenue on a one-time basis from each project.But, in general, the conventional solution provider business is mainly transactional. An MSP’s recurring revenue stream, on the other hand, potentially provides a more stable and predictable base of business.
Managed Service Provider helps telecom operators who are under persistent pressure to manage capital expenditures related with network deployment and to reduce network operating costs. The next stage in evolution is to outsource value-added services including content, commerce, and next generation communication services. This is a key development as network operators are poised to lose revenue and margins both do to marginalization of bearer services (voice and data both) and the need for value-added service (VAS) applications.
Because of the increasing competition and commoditization from traditional telecom products, Managed Service Providers are either in the process of or planning for making a move to the next generation, converged, network infrastructures in order to offer new, revenue-generating services. Making this transformation can be complex and difficult. However, if done correctly, working with a managed services provider and outsourcing all or part of the next generation network planning, implementation and management, the transition to the new infrastructure can occur quickly and efficiently and with reduced risk.