Acadia’s ‘service’ model is presently Build-Operate-Transfer.  My question is, can (or will) the organization work to address the growing requirement for a Build-Operate-Manage model where the user is more reliant on partners to manage the growing complexity of their solutions?  The JV wasn’t formed with any intent towards becoming an outsourcer, but bringing a JV to market based on deep expertise and an ability to ensure architectural predominance for Acadia’s investors must make some form of ongoing ‘managed services‘ fairly appealing.  I look forward to what Acadia will bring to the market.

The challenge to creating MQ criteria is to make the field of vendors relevant to the greatest part of the market.  Generally we work to focus on providers that will openly bid, and service, mid size as well as large Enterprises.  Revenue is usually the most imposing impediment to entry for most providers.  I’d like to also apply a few filters to assure that we represent mid-market requirements and providers as well.

I’m offering the following criteria for your review.  One set is for the NA MQ and one set is for the WW MQ.  I’d love to hear your feedback and/or respond to requests for the rationale for the chosen (draft) criteria:

COPS MQ – North America

• In 2008, service providers recognized at least $200 million dollars in revenue in communications IT services. 
• Service provider competes for, and deliver, standalone COPS opportunities to address a growing need for communications selective sourcing.
• Service providers may not recognize more than 70 percent of COPS revenue from a single vertical market.
• Service providers must be able to demonstrate the ability to provides communications outsourcing services as a sole-source, direct provider (communications outsourcing delivered entirely by partners or subcontractors are excluded).
• Service providers must operate in at least 80 percent of the lower 48 states of the United States; and/or,
• Service providers must operate in 8 of the 10 provinces in Canada.
• Service providers must not recognize 80 percent, or more, of their revenue in a single business process or IT service category as the MQ seeks to exhibit broad value.

COPS MQ – Worldwide

• In 2008, service providers recognized at least $300 million dollars in revenue in communications IT services. 
• Service provider competes for, and deliver, standalone COPS opportunities to address a growing need for communications selective sourcing.
• Service providers may not recognize more than 70 percent of COPS revenue from a single vertical market.
• Service providers must be able to demonstrate the ability to provide communications outsourcing services as a sole-source, direct provider (communications outsourcing delivered entirely by partners or subcontractors are excluded).
• Service providers must operate in at least (4) of the (7) geographies tracked by Gartner.  The geographies are: Asia Pacific, Eastern Europe, Japan, Latin America, Middle East/Africa, North America and Western Europe.
• Service providers must not recognize 70 percent, or more, of their COPS revenue in a single geography as the MQ seeks to exhibit broad value.

I’ll admit it - I’m changing my opinion – I believe RIM is a Mode, not a Market.  I’ve been working with RIM services for nearly 10 years at Gartner.  I’ve also been responsible for Gartner’s forecasts on RIM services for the past 8 years.  All along, I’ve strongly believed that RIM services were a discrete market.  

Prior to my employment at Gartner, I was the product marketer a number of years ago for Bay Network’s ServiceLink RIM services.  If service providers think RIM is a tough sell now… they should have experienced selling RIM services in 1995.  Our best successes were follow on contracts cemented after our sales teams integrated core router management as a benefit within aloyalty program we built for Bay’s most strategic customers.   It was never profitable in that setting.  The principals of the ServiceLink offering left Bay Networks (John Igoe, Robert Klotz and Deb MacCallum) and started Silverback Technologies (now part of Dell).  They were trailblazers.

In the late 90s, private equity was pouring into standalone managed services providers (MSP) and life was good.  Netsolve (purchased by Cisco) at one time had a market cap of $1 billion on revenue under $50 million.  A niche MSP could command significant gross margin rates on their services.  They could also live on RIM services alone.  Then the bubble burst, customer acquisition models changed and user organizations never really returned to the boutiques. 

The days of MSPs are gone because pure, RIM-based MSPs don’t really exist anymore.  Most MSPs have been forced by their customers to expand their value.  They been asked to sell pass-through maintenance contracts or resell hardware or software or to offer professional services to prop up slumping monthly recurring charges (MRC).  In fact in the recent past, the first clear sign that an MSP was in trouble was when professional services revenue grew to more than 50 percent of overall revenue.  That’s because an MSPs business plan was predicated on recurring revenue.  Professional services are non-recurring.  There are a few significant standalone companies providing RIM services but those companies are outliers.  IPSoft remains one of the most compelling in the market.  

Anyway, I’d like to get the readers of this post to let me know their opinion about RIM services:  Market or Mode?  

Please reply to this post directly or you can also provide your opinion in this very, very short survey.  Paste this link into your browser:

Andy Wood, the CIO of Wilton Re a life reinsurer based in Wilton CT, provided an interesting customer presentation validating Logicalis’ message from a user perspective.  Andy made some excellent points and validated my belief that managed services represent an intermediate step towards accepting ‘The Cloud’.  It is a point not well represented in the media, or in analyst presentations, that the drive towards Cloud services will require some intermediary step for user organizations to become familar, and comfortable, with IT resources that are shared and not owned, located or managed by the user.  

Andy made other interesting points supporting my belief that IT markets will not ‘sublimate’ to cloud computing and indicated that his relationship with his managed services provider, Logicalis, will change as his company embraces maturing cloud offerings. 

Another reinforcing observation I took away from the Logicalis event is that the promise of ‘Managed Services’ is very interesting to small, medium and large companies without significant experience in traditional outsourcing relationships.  A noteworthy gating factor in their decision making is their lack of knowledge in structuring deals and underlying agreements such as statements of work, SLAs (including escalation policies and thresholds) and other Ts and Cs.

IT services in the communications market have been doing very well.  The adoption of IP communications has inserted complexity in businesses and as a result, user are requiring more third party services.  Given the economic pressures in the US (and the world) over the past months, I decided to reach out to 15 large multinational companies planning network outsourcing or managed services deals.

Their response didn’t reduce any concern that user demand for communications IT services will soften; however, their responses didn’t contribute to any prevailing FUD that the bottom will fall out.  All agreed that the drive for outsourcing deals will continue.  But, the complexion of most of these deals will change.  Two prevailing views came across in my conversations – Cost reduction is King and Time equals Money.   Focus on waste and execute as soon as possible.  Remote management and Telecom Expense Management will be key outsourcing tools to realize user expectations.

What was missing from my conversations was the users’ original desire for strategic, transformative initiatives focused on the integration of more communications services to create real Unified Communications.  I imagine that transformative initiatives will be pushed out past year 2 or 3; probably in a wholly separate agreement.  What was clear in my conversations is that these companies were not planning, or considering, to migrate to broader UC capabilities through hosted or, Unified Communications-as-a-Service.  Of course, these were only 15 companies, but they also represented the market’s next mega- or near-megadeals for communications outsourcing.

In separate conversations with smaller companies, it is clear that there will be more pricing pressure on managed services.  Managed services pricing in the communications sector has already been halved in the past 32 months. 

Hold on.

Today the answer is a definite – Maybe.

Right now ‘buy’ decisions are trailing hype when it comes to users who are looking for integrator/outsourcer-based solutions.  Conversations with software publishers, carriers, integrators and outsourcers reveal a lack of investment, in terms of capital and personnel, to prove to the market that they are serious about providing MDM services.  User conversations present interest but with the acknowledgement that the return-on-investment arguments by the vendors still seem unconvincing.

Of course, the market needs to be tested.  I’ve been working on a User Wants and Needs survey to determine when, and if, MDM-as-a-Service will become established as an addressable market for vendors and a viable solution for users.  The intent of the survey is crystallized in the survey introduction:

The purpose of this survey is to identify how companies manage mobility assets (e.g. devices, service contracts) from a financial and IT management perspective. Our primary focus is to determine the decision points that would lead to the adoption of managed services or outsourcing agreements for third parties to mange elements of your mobile communications.  Many of the services included in such agreements include:

• Expense management
• Helpdesk services (as part of an ordering and provisioning service)
• Over-the-Air (remote) handset and application management

What I think will distinguish this study is how  we capture user decision points in terms of value required of a ‘Service’ and determining the user calculus as they identify the price-to-value ratios they require for a buy decision.

The survey is going through some fine tuning before it is released.   Let me know if you have any thoughts on the subject.