Managed Services: Key to Digitalization and Cloud Success

When companies digitalize, the path today usually leads via cloud solutions. And since very few companies are implementing this transformation on their own, managed services providers (MSPs) are more important than ever. This is also confirmed by the “Managed Services 2022” study, which NTT DATA Business Solutions Germany conducted together with the team from CIO Magazin, CSO online and COMPUTERWOCHE: 78 percent of respondents use additional services when moving to the cloud, and 79 percent additionally obtain (strategic) consulting services.

Laptop, notebook and survey chart on a table represent the managed services study by NTT DATA Business Solutions

The study initiated by NTT DATA Business Solutions Germany identifies the most important success criteria for working with an MSP, the added value of outsourcing, and what the situation is with regard to data security and data protection in the context of managed services. (Definition of “managed services”: operation and further development of software and infrastructure in the SAP context; a distinction is made between application management services and managed cloud services).

In addition to the assessments and experiences of the surveyed companies, we would like to present our view as a managed services provider. That is why we are supplementing the survey with a series of interviews – in the first part with Christian Fischer, Director Customer Engagement I Managed Services, and Ulrich Kreitz, Head of Managed Services Germany, from NTT DATA Business Solutions AG.

Graph showing survey results on the question: Do you use or plan to use consulting services in the cloud context?

"For cloud customers using SaaS and IaaS, IT operations automatically become a service, where previously their own expertise and capacities went in. The positive experience gained there is changing the mindset: It is easier for companies to transfer even more responsibility. Whether it's ensuring operations or regulatory requirements. For questions that their own IT department used to have to answer, they now rely on their MSP."

"The pressure to transform is particularly strong for large companies, but at the same time IT is heavily involved in routine operational tasks. That's what makes managed services so important: on the one hand, for outsourcing operational tasks, and on the other, for accessing expertise and consulting."

Christian Fischer Director Customer Engagement Managed Services DACH Region

The number of cloud services used in companies is increasing: 33 percent of respondents plan to use "very many" services from the cloud within the next two years - currently the figure is 24 percent. In your experience, what is motivating companies to do this?

Ulrich Kreitz: Where cloud solutions are concerned, in the sense of Software-as-a-Service, Infrastructure-as-a-Service and SAP cloud applications, the first aspect is financial. Companies can implement their digitalization strategy without an immense initial investment. They rent software, pay per user and month. In this way, cloud technology shifts costs from capex (capital expenditure) to opex (operational expenditure). Companies that rent infrastructure from a hyperscaler, for example, instead of building and maintaining their own computing and server capacities, have the same advantage.

Added to this are the typical added values of a cloud application: Operation is stable, short update cycles allow regular innovations. Standardization makes cloud solutions quick to introduce and easy to operate with little effort. Local and legal requirements are also usually regulated by the provider, so companies can transfer complex governance tasks.

Christian Fischer: I would like to add two points: Outsourcing (routine) tasks also makes sense for companies because it saves them resources and gives them capacity for their strategic transformation programs. This is where internal IT expertise is more in demand than ever. The core business then benefits from these talented employees. And: External cloud solutions are easily scalable, resources can be ramped down and up as required, which saves costs and at the same time supports or enables rapid business changes.

However, 35 percent of respondents also say that they will still be able to get by with very few or no cloud services in two years' time. Are there any industries or scenarios where this will work?

Christian Fischer: There are companies that work and want to work without cloud solutions – from today’s perspective. Because they serve local markets or work in highly regulated industries: This is where the public cloud in particular is currently reaching its limits in the perception of the companies using it. Pharmaceutical manufacturers are one example. Their critical processes must be examined in detail in order to implement convincing cloud advantages. Hybrid infrastructures consisting of public and private clouds are possible, for example, in which company-specific in-house developments are encapsulated, while less critical processes benefit from all cloud advantages.

The requirements associated with the cloud are also driving the use of managed services - that is what we are reading at the moment. What makes managed services more important in this context?

Ulrich Kreitz: For cloud customers using SaaS and IaaS, IT operations automatically become a service, where previously their own know-how and capacities were incorporated. The positive experience gained there is changing the mindset: It is easier for companies to transfer even more responsibility. Whether it’s ensuring operations or regulatory requirements. For questions that previously had to be answered by their own IT department, they now rely on their MSP: How do I stabilize my processes? Which releases make sense for us? How much automated testing is necessary?

Companies then also approach the MSP at the strategic level, and the MSP then ideally translates management’s need for innovation into an IT strategy and implementation. In this way, the company’s own IT and the MSP become enablers for digitalization, cloud and innovation. The MSP should also proactively look for improvement potential in processes and technologies and uncover where automation and AI can push the company forward.

Medium-sized and large companies in particular rely on managed services - currently 86 percent and 81 percent respectively. By contrast, only 70 percent of smaller companies use external services and 72 percent use consulting services. Where do the differences come from?

Christian Fischer: The pressure to transform is particularly strong for large companies, but at the same time IT is heavily involved in routine operational tasks. That’s what makes managed services so important: on the one hand, for outsourcing operational tasks, and on the other, for access to expertise and consulting.

In my experience, smaller companies often have reservations. They are concerned that they won’t find an equal partner and want to make sure they don’t buy a service that doesn’t really suit them. They also sometimes do not have the expertise to define their needs and evaluate the various providers. This is where an honest assessment by an MSP as a true partner is needed.

Ulrich Kreitz: A second reason for reluctance may be that companies are not happy to hand over their competitive process know-how, preferring to keep it in-house. However, even small innovative companies cannot avoid the issues of scalability and localization as soon as they grow. And that’s when managed services are a proven solution approach.