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The term Managed Services is very common now days. But is it a right solution for you? Experts say that while the practice of turning to a third party to manage some or all of your networking functions is growing, doing so does not always deliver the deep cost savings generally promised. Instead, they say, successful use of managed network services tends to be limited to a few primary situations:1) When a business needs entirely new capabilities for which it has no infrastructure in place. The main motivation here is that the organization would not have to fork over the time and resources to build it. Another reason might be that the capabilities desired are available only in the form of a third-party service.

2) When an organization suddenly must scale its IT environment dramatically and lacks the in-house resources to do so.

3) When an organization can turn over a function to a third party and actually eliminate the people on staff who were handling it. Often, however, those internal staffers are also working on other projects and are thus retained, which takes a bite out of the hard return on investment ROI that some companies expect.

So if the objective is to save money, that does not necessarily happen. The reality is that you save money when you outsource what you can not do well yourself. And if you are not going to completely outsource your entire network, there are not massive cost savings.

A recently conducted online survey by IDC found that 58 percents of respondents agreed with this statement: Managed services provide the ability to maintain or enhance existing or new networking and IT capabilities with a reduced total cost of ownership.

A third of the 400 plus online survey respondent bases, queried in July 2009, said they were using managed services for half or more of their IT networking services. And 38 percents intended to increase their use of managed services in the future.

What I found interesting was that while a majority of respondents agreed that using managed network services would save money, most also said they were not going to do it, says Steve Taylor, president of Webtorials and the primary author of the company’s study, Managed Services in the 2009 Economy.

That tells me that in-house vs. outsourced trends have more to do with social phenomena, business climate, resistance to change and job preservation than the promise of cost savings, he says.

As the industry moves toward more cloud computing, I think you will see managed services become more attractive because more of a given service will be residing naturally out in the cloud anyway.

When mulling the outsource or not, ask yourself two questions,

Do I have the expertise to manage [one or more functions] in-house?

Am I better able to manage contracts or technology?

If you answer yes to the first question and if your company is very efficient, is it worth paying an additional 3 to 4 percents to turn the tasks over to someone else?

On the other hand, if the company is more adept at managing contracts and relationships than technology, outsourcing might be a better way to go.

Outsourcing anything so strategic that any inflexibility [introduced by a third party] will come back to haunt you.

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