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Managed services models: An introduction for VARs

When VARs offer clients managed cloud services, they often enable them to save money on infrastructure and staff spending, but choosing the right managed cloud services model can be a challenge.

Managed cloud services combine the power of the data center with the power of the network to deliver advanced IT...

services while saving your clients on infrastructure and human resources spending.

To compete effectively in a global market, companies find they need 24-hour operations, fast access to sales and production information, and flexibility to adapt dynamically to business changes. To compete in this environment requires a fast, reliable and secure IP network, but maintaining that network depends upon regular, ongoing investments in infrastructure and IT staff. Instead, many companies are turning to managed cloud services, which present the opportunity for solution providers to implement a host of managed services models.

What are managed cloud services?

In a managed services model, a company hands over all or part of the management of its network infrastructure, applications and security to networking experts. These experts include service providers and systems integrators or VARs. Businesses have the option of purchasing a specific managed service, a set of services or an all-inclusive package that includes most IT functions.

Increasingly companies are realizing that purchasing IT functions as a service does not mean losing control over critical business functions and that they determine the degree of in-house management and monitoring, which even applies to network services where the physical components are located at service providers’ facilities.

In conjunction with the growth, the type of services available has also evolved. The first type of managed services tended to be limited to remotely-managed premises-based reports, gear and software. Managed Service Providers (MSPs) are now shifting toward delivering a wide range of computing and applications as services for a fixed rate. Certain components of managed service (typically in the application development side) are variable in nature and priced using an hourly rate card. The vendor or MSP manages the service proactively with minimal management from the customer.

Purchasing critical business functions as a service enables companies to concentrate on their core competencies and leave the technical growth and management for the technicians. Not having to maintain an IT infrastructure saves money while increasing productivity because the network is constantly monitored by a dedicated service provider.

VARs offering various managed services models can often enable their customers the ability to reduce staff because there is no longer a need to have one or two in-house individuals responsible for IT, human resources, etc. Budgeting support can also be scaled back or improved in response to economic conditions as IT costs become predictable based on a clearly defined service-level agreement.

Types of managed service models and managed cloud offerings

Scenario 1:  On-premise services (the bulk of the market today)

In this scenario, the business owns the network and shares some management responsibility with the service provider.

Companies that already have an internal IP network may want to continue to manage it while out-tasking management of the onsite equipment [usually known as customer-premises equipment (CPE)] that is used for the managed service only. Businesses just beginning to use a provider for some business functions sometimes feel more secure keeping control of their network equipment.

The service provider sets up, maintains and administers the equipment needed for the managed service, including company-owned equipment such as servers, while the business maintains and administers its internal network.

Scenario 2: Traditional hosted or hybrid managed services

As a company’s memory requirements and storage requirements grow it may become amenable to having redundancy in cloud storage, a hosted website or having the SP host some applications. Many large enterprises like this arrangement because they can maintain physical control of the equipment while relying on the service provider for 24 hour network operational support.

The traditional hosted or hybrid managed service could include traditional transport such as managed MPLS or IP VPN, connectivity and messaging services, datacenter services and security managed or hosted services.

The service provider sets up, maintains, and administers the equipment for the managed services as well as the corporate network. The business monitors its corporate network through a web interface provided by the service provider, receives regular reports on the network status and managed services, and is notified in case of a defined emergency.

Scenario 3: Cloud managed services

Once a company has some experience and is able to compares its costs, such as air conditioning and power, to the security and cost of the cloud, it may decide to purchase its applications,  application platform, computing needs, and storage as a service in a pay-per-use model. This is a true “cloud managed service,” which opens the full benefits of the cloud to the business.

 As defined by the National Institute of Standards and Technologies, a cloud managed service is a pay-per-use model for enabling available, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.

Three major cloud services exist:


Cisco WebEx, Google Apps, Microsoft Exchange Online,; end-user facing applications, both consumer and business


Google AppEngine, Microsoft Azure Services,,; application platform, middleware and application infrastructure


Amazon EC2 & S3, Flexiscale, Google Base & BigTable, Rackspace Cloud, and Terremark

Read more about managed service cloud opportunities in this free ACG Research report. Also read about customer IT drivers for managed services and leveraging managed cloud services architecture and infrastructure.

About the author: Lauren Robinette, principal analyst for ACG Research’s managed service business, offers a comprehensive managed services program consisting of training modules, including takeout and strategies to support vendors’ and MSPs go-to-market processes based on the industry’s best practices.


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