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© 2017 FORRESTER. REPRODUCTION PROHIBITED.

© 2017 FORRESTER. REPRODUCTION PROHIBITED.

New Dimensions in Managed Services Delivery

Bill Martorelli – Principal Analyst

December 10, 2018

We work with business and

technology leaders to develop

customer-obsessed strategies

that drive growth.

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We have entered the “age of the customer”

Improved EX and reduced costs now vie for top client priority

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Key client trends in Next-Generation MSP services

› Shift to cloud is at the heart of digital transformation.

› Clients want partners who can push thinking and innovate quickly.

› Services vendor value propositions too often sound the same –

convergence of creative, consulting, and technology; convergence

of front- and back-office

› Slow erosion of traditional services results in new players that

threaten the former giants

› Growing focus on employee experience as opposed to supplier

performance

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Demand for managed services holds up

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With at least modest growth for 2019 ahead

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12%

14%

17%

11%

16%

1…

12%

20%

20%23%

23%

24%

17%

23%

23%

20%

24%30%

11%

15%

15%

15%

17%

17%

17%

18%

19%

19%20%

20%

21%

22%

25%

25%

26%

28%

Region-specific delivery capabilities

Thought leadership

Certification

The provider already be pre-approved for procurement

We have worked or are currently working with them

Capabilities with the core software packages required (i.e., Adobe,…

Consistency of staffing

Project and change management methodology

Ability to support or deploy solutions globally

Regulatory knowledge

Brand/reputation

Customer experience expertise

Credibility as proven by successful completion of past projects with…

The ability to handle the end-to-end project from strategy to…

Expertise in new technologies (e.g., AI, blockchain, containers)

Industry, business process, technology, software platform expertise

Knowledge/experience with my firm's industry

Price

Enterprises Small Businesses

Which of the following criteria are most important to your [business unit] [IT department] when selecting a third-party service provider?

Base: 496 to 1,990 Services decision-makers whose firms have hired business/management consultant, agency, technology services

firm or Other third-party services firm in the past 12 months. Source: Forrester’s Global Business Technographics Services Survey,

2018

What do customers want from their MSPs?

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14%

13%

12%

17%

14%

1…

13%

18%

16%

16%

16%

14%

17%

21%

22%

14%

14%

15%

16%

16%

16%

17%

18%

18%

18%

18%

19%

20%

20%

26%

Can't support or deploy solutions for our global operations

Can't link outcomes/value of the project to key business metrics

Insufficient cooperation with other vendors/suppliers

Lack of innovation

We are not a top client, so we do not have access to the top staff

Limited presence in our geographical location

Can't translate technical vision into a coherent business value…

Inflexible regarding changing volume, scope, business needs, or pricing…

Insufficient industry, technical or business expertise

Lack of expertise in customer experience (e.g., design thinking and…

Poor communication/project management

Lack of expertise in modern development (e.g., Agile, DevOps, and…

Inability to deliver the project as specified (time, budget, capabilities or…

Frequency of staff turnover

Cost savings are lower than expected

Enterprises Small Businesses

Which of the following are your [business unit’s] [IT department’s] biggest challenges with your existing third-party business/management consultants, agencies, or technology services providers?

Base: 496 to 1,990 Services decision-makers whose firms have hired business/management consultant, agency, technology services

firm or Other third-party servicesfirm in the past 12 months. Source: Forrester’s Global Business Technographics Services Survey,

2018

What are the top customer challenges?

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Why Next-Generation Information Technology (NGITO) outsourcing?

› Conventional Infrastructure technology outsourcing has experienced

customer satisfaction concerns (watermelon effect)

› ITO has not emphasized customer experience and satisfaction

› Cloud transition undermines conventional approach

› Automation is on the verge of redefining the industry

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What did we learn?

› Cloud migration and DevOps are morphing the nature of

infrastructure outsourcing

› Workplace services rise in importance as data center exodus

continues

› Customer experience, particularly initial experience, is a sore

spot for customer

› Automation looms large in outsourcing's future, but customers

have doubts

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The Forrester Wave: NGITO 4Q2017: Findings

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Three Major Factors Influencing the Infrastructure Services Market

› Impact of the cloud

› Impact of automation

› Focus on employee experience

Impact of the Cloud

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Cloud has become a principal engine of software development

Source: October 20, 2014, “The Software-Powered Business” , Forrester report

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Why cloud? Cloud lies at the heart of digital transformation

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Infrastructure services market is continuing to evolve in response to the hybrid cloud opportunity

› Support for hybrid cloud computing tops the infrastructure outsourcing

agenda as focus of ITO delivery shifts to the cloud

› Interoperation of multi-cloud environments looms as major management

challenge-for which existing tooling solutions are inadequate

› Applications and infrastructure towers are slowly converging under

influence of DevOps and consumption-based models

› Era of mass cloud migration begins

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Data Center Data Center Data Center

Customer DC Supplier DC Cloud DC

Cloud shifts the focus of managed IT services delivery

Time

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Something for everyone across cloud delivery spectrum

Plan and Design

Build and MIgrate

Operate and

Optimize

Resell and manage

relationship

VAR

And IP

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Implications on service providers and MSPs

› Contracts grow shorter with erosion of minimum commitments • Risk transfers more to the supplier of services

› Traditional services grow narrower and smaller, but potential for lucrative niches remain throughout life cycle

› Competition from “born in the cloud” MSPs intensifies

› Partnership with large “hyper-scale” cloud providers becomes key go-to-market enabler

Impact of Automation

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Suddenly, automation is everywhere

IT-Infrastructure

Automation

Dev/Ops Modern Service Delivery

Cloud-based automation

The yin and yang of automation

• Source: Digital Transformation Demands A New Automation Framework

Presumed sequence of the automation journey

Infrastructure

• Initial focus of Autonomic, Cognitive automation movements

Applications

• Applications focus has emerged but secondarily to infrastructure and BP

Business Process

• Principal focus or RPA technologies, anticipated job reductions

Runbook and Other IT Process Automation

Robotic Process Automation

Cognitive Automation

Advanced automation scenarios advances by “layer”

Autonomous

Automated

Assisted

API-based

UI-based

Scripted

However, we have a challenge

How do I rationalize my

automation portfolio?

I think my product is config management. Is

it actually release deployment?

What provides a better business

case: chatbots or ML?

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Different automation technologies combine to provide a comprehensive view

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Implications on service providers and MSPs

› Workloads shrink from contract to contract as core ticket administration activities get automated away

› Integration of disparate automation solutions becomes a key competitive requirement

› Nature of service delivery personnel pyramid changes with lower-cost labor automated out

Focus on Employee Experience

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Today’s outsourcing reality: Even if service levels are green, customers may be red with rage

Example XLA metrics: employee experience and user sentimentMetric Type Measurement Methodology

Customer Effort Score Customer effort score, usually rated on a scale of time buckets, gathered from the answer to a single question: "How much effort did you personally have to put forth to get your issue resolved?" The responses are marked on a scale of 1 to 5, and are graded as: 1 - Far less than I expected 2 - Slightly less than I expected 3 - About as much as I expected 4 - Slightly more than I expected 5 - lot more than i expected

Same customer/Same Issue (SC/SI)

(Number of repeat tickets for same customer / Total number of tickets raised by that Customer)*100

Context-aware CSAT The User Delight Score (UDS) is a culmination various quantifiable metrics. Often a weighted average rating of Operational parameters and User Experience factors to create a synthetic “Index.”

Meeting experience Lead time to find, book and move to meeting room.

User first day experience Lead time to find parking location, allocated seat, IT and Line manager, etc.)

Example XLA metrics: employee experience and user sentiment

Metric Type Measurement Methodology

% Incident / Service Request deflected/resolved using Automation

% Incident / Service Request deflected/resolved using Automation (IVR Self-help, Mobile Self-help, BOT etc.)

Reduction in Cycle time due to Automation

Reduction in Cycle time due to Automation (F1 = (A-B)/A * 100))

Virtual Assistant Effectiveness Percentage of Chats successfully resolved by VA (F1 = (COUNT(B) / COUNT(A)) * 100)

A = Set of all chats completed in the Measurement Period.B = Subset of A which were fulfilled entirely through “Virtual Assistant

Tickets Reduction Tickets reduced during the measurement period as a result of automation

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Implications on service providers and MSPs

› Reliance on SLA mechanism recedes in favor of “XLA” variant

models focusing on customer and employee satisfaction

› Service delivery borrows consumer metaphors like service cafés,

technology lockers and vending machines

› Emphasis shifts to “co-creation” versus transaction model for higher

order consulting, delivery work

Summing Up

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Recommendations to lead in next-generation MSP services

› Capitalize on your strengths

• Reliability, value, growing capabilities in Digital and transformation

› Embrace digital and technology firmwide

• Technology-light Technology-led

› Retain or shed the image of “value for money”?

› Risk averse and traditional Partner for innovation and disruption

› Become synonymous with customer/employee experience

• Back-office process customer experience excellence

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Winning goes beyond raw capabilities

› Does your brand resonate with front-office needs and customer

experience?

› Are you perceived as an innovator?

› Do you have compelling stories to tell?

› Do buyers think you have what it takes to dream…and then

execute?

FORRESTER.COM

Thank you© 2017 FORRESTER. REPRODUCTION PROHIBITED.

Bill Martorelli

+1 617 613 8505

wmartorelli@forrester.com