How to Choose a Managed Services Provider With a ROI-Driven Service Model

By Saurajit Kanungo

Organizations have a bad habit of thinking about managed services as a cost center rather than an investment that can (and should) drive measurably improved business performance. In other words, as I’ve written previously, “your support cost on business applications need not be a sunk cost.”

To realize a clear and quantifiable ROI, it’s key to find the right managed service partner, one that can do more than tinker and trouble-shoot. But how do you find this needle in the haystack when the landscape is crowded with Managed Service Providers (MSPs) who are either unprepared to innovate or present only niche offerings?

To start, understand the landscape of managed services.

If we look at today’s marketplace of MSPs, we can roughly segregate providers into two categories.

  1. Technology outsourcing companies with a background in technology staffing during the Y2K period. These “Custom Provider” MSPs typically start with a clean slate. They review with the customer their specific needs and then tailor recommended solutions out of a broad menu of support services. When pricing, they’ll figure out how many people they need to dedicate to the client, adjust for the service level they need to meet (e.g., meeting promised response times or application availability), and multiply their standard rates against those modifiers.
  2. Specialized managed service providers who focus on one clear niche. For example, this type of MSP might take over server availability but do nothing when your database or network goes down. These services tend to be much less expensive because their revenue model is different: they typically have a successful methodology to automate server availability that they can offer to thousands customers instead of a hundred. Their solution scales much more easily than the custom MSP

Next, understand how those differences play out for the customer.

Now, imagine you’re a customer of one of these MSPs.

The Custom Provider will hand you a Service Level Agreement that makes guarantees specific to your needs. That approach gives you predictability and consistency in service. However, there’s no continuous improvement built into this process; and if you want to improve service, it will cost you more money. For example, what happens if application performance has gone down after the latest OS upgrade, but that contingency was not scoped in the original statement of work? Then everything becomes a change order discussion.

The biggest problem with Customer Providers is that improved business performance can be achieved, but it is the customer’s obligation to anticipate problems/opportunities at the outset. Ultimately, the customer is paying just to maintain status quo.

Another challenge is that in some cases you will require a dozen or more different Custom Providers – one for server, another for database, a third for security, and so on. It becomes unmanageable, and interoperability suffers as a result. Problems tend to lead to more finger-pointing than problem-solving. One provider will tell you the server went down because the network guys messed up, but the network team will say, “No, it was the Operating System people.” You get the picture.

Inevitably, service from both sides is too narrow. One side is too focused on specialization, the other on service agreement or service level. If an opportunity for improvement becomes available, neither side will recognize the opportunity to seize it. If there’s any kind of problem that falls outside of their narrow specialization or service agreement, neither side will take responsibility for it or recommend the best ways to improve the situation.

Find service providers who adopt a value-driven mindset, rather than service level or specialization-driven.

If you want to be able to achieve and measure the ROI from these relationships, you need an MSP that vigorously takes a value-based approach that incorporates continuous improvement. The provider needs to offer (1) a reliable support structure and (2) a business-minded ROI focus.

How do you spot these MSP unicorns? Look past the technical aspects of their services and understand how they connect the dots between what they offer and what outcomes they will produce. That starts with the provider having the right business improvement mindset and a well-defined, tiered service catalog.

Look carefully for a provider who can sit down at the table with a list of tiered packages that range from “we’ll deliver just the bare bones services you need” to “we’ll do everything.” When they show you that, it clearly demonstrates that they distilled their past experiences into a mature service model and can match the value produced to the service needed (see the diagram below).


In this relationship, the customer can choose the right service level for each element of their application or business, and the right expectations are set at the beginning. The customer knows what they are getting from the provider, and they equally understand what they are not buying.

Ultimately, mindset and business philosophy always precedes service delivery. A well-considered, organized catalog of services demonstrates the MSP’s experience delivering service to very satisfied customers and understanding how to deliver their services effectively, for the greatest value.

These are not trivial decisions. They can affect the day to day operations of your business in a big way. With the right analysis and selection of your MSP, you can turn a cost center into a business improvement solution center with a powerful ROI. A little extra homework can have a radical impact on costs and service outcomes.

Saurajit Kanungo is President of Cyber Group, Inc. With over 20 years of technology consulting experience focused on the intersection of business and technology, Saurajit’s specialties range from application development and integration to technology planning. He is passionate about helping enterprises attract, serve and retain customers by leveraging cloud, mobile and analytics technology platforms.