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Infrastructure MSPs That Only Offer Operational Management of Internal Enterprise IT Environments Will Fail to Grow

By Rene Buest | October 08, 2019 | 0 Comments

Product Life Cycle Management

For years, speed and agility were the two imperatives for organizations while executing their digital strategies. To reduce costs, many outsourced their internal enterprise IT to infrastructure managed service providers (MSP) with expertise in operating and maintaining infrastructure environments, both on-premises and in the cloud. As a result, providers’ services have continued to become less expensive due to the use of, for example, intelligent automation, and more commoditized.

Hence, the main focus of many of the largest infrastructure MSPs is on enterprise IT workloads, which is limited to building, running and maintaining internal enterprise IT environments (e.g., traditional IT managed services). This is indispensable to ensure that an organization is able to work internally. However, the growth of managing enterprise IT environments is limited; in fact, it is a flat and highly competitive market with a focus on operational excellence at the lowest cost.

Our research shows that six of the top 10 infrastructure MSPs are growing less than the market because of a focus on internal enterprise IT environments, and only a few infrastructure MSPs have outgrown the market by better addressing the digital business opportunity.

The Evolution of Infrastructure Managed Services

For decades, infrastructure MSPs successfully focused on operating and managing their client’s internal enterprise IT environments (e.g., “keeping the lights on”). As organizations adopted cloud infrastructure, providers added cloud managed services to their portfolios. However, even today, these activities predominantly focus on cloud migration strategies of traditional infrastructure – using the cloud to handle enterprise IT workloads. As a result, many infrastructure MSPs are missing an increasingly important opportunity, since about one in three business leaders (31%) says their organization is planning to engage with a MSP while operating digital business solutions. Hence, by focusing offerings on using the cloud to just support internal enterprise IT, infrastructure MSPs are missing an increasing demand by organizations that are looking for a provider to operate their digital business environments.

However, while many infrastructure MSPs still position their offering as a dedicated service to allow IT to offload low-value tasks and focus on core competencies, demand in the MSP market is changing. “Magic Quadrant for Data Center Outsourcing and Hybrid Infrastructure Managed Services, Europe” shows that more than 80% of digital infrastructure deals are transformational. While managing internal IT environments and digital business may sound the same, their support of specific business outcomes and business value is actually very different. In particular, internal enterprise IT workloads are not transformational, do not contribute to business outcomes and do not create specific business value.

Digital business workloads directly support digital business initiatives at digital touchpoints and are bound to specific business outcomes that add business value, improve customer satisfaction and increase quality through digital business operations. High-performance organizations are transforming to digital business with urgency and are demanding support for digital business workloads that have very specific characteristics in terms of “what is managed” and “where it is managed” compared to internal enterprise IT workloads.

In our research note “Market Insight: Product Managers of Infrastructure MSPs Must Seize Growth Opportunities Through Digital Touchpoint Services” we provide essential insight into how product managers of infrastructure MSPs can realign their product strategy toward managing digital touchpoint solutions for their clients to help them achieve their digital business ambitions.

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