Have Managed Services Become a Commodity?

In the mid-1990s, managed services and its close cousin application services (ASP) were viewed as temporary business models and never supposed to last. Managed services was supposed to be a temporary fling before moving on to another technological fad. Many in the analyst and press community shared this view, and probably helped it along. The pace with which new technology trends was progressing almost guaranteed managed services not staying around for very long.

A large number in the IT channel was heavily invested in managed services NOT succeeding, even if few would ever publicly admit to this.

Yes, you heard me right. Managed services was viewed as a direct threat to the status quo and challenged many existing business and political models within the IT channel. Everyone from hardware manufacturers, distributors, even the IT media was in on the game. Keep managed services from becoming mainstream...protect the VAR model.

Why? Simple. The VAR business model placed much of the control and power in the hands of the vendors. VARs were merely foot soldiers, taking vendor products and providing marketing, sales, and some integration services as value adds. Power resided with the vendor.

Managed Services Saved the IT Channel

Managed services was a disruptive business model. It changed the VAR from being a simple reseller of a product to the VAR actually selling a service of its own, separate from the hardware and software components. By delivering its own services, the reseller became less important, but not irrelevant. In fact, many MSPs will tell you they influence a lot more hardware and software purchasing decisions, beyond the hardware they actually sell through their business.

Beyond just changing the IT channel, managed services saved the IT channel. Remember, the IT channel went through a very tumultuous time in the late 1990s and early 2000s. Events such as 9/11, the end of the Dotcom era, and the global recession, . All of these factors contributed to the rise of managed services.

Although the business model migration from reactive to proactive IT management was not without its pain points, the longer term benefits far outweighed the negatives. VARs who successfully began the transition to managed services started to see stable and more predictable revenue, customer satisfaction began to rise, VAR business valuations increased, and the amount of proactive IT management work began to bring significant and positive change to millions of organizations throughout the world. Managed services did a lot.

I do not believe managed services is a commodity. I do believe there will always be components in IT which are commoditized. And, when these commoditized technologies are identified, a good MSP will either replace or sub-ordinate those technologies with newer, more valuable ones.

This is what I refer to as the constantly refreshing nature of managed services. Refreshing technology is also one of the ways we keep managed services perpetually in demand and valuable.