Published on the 10/02/2022 | Written by Heather Wright
The great engagement begins…
Covid, and the Great Resignation, are changing the way companies engage when it comes to IT – from demanding continuous improvement programs from their MSPs to crowdsourcing.
Jaideep Thyagarajan, Gartner principal analyst in IT Leaders Sourcing, Procurement and Vendor Management, says the MSP model is a very popular engagement model for many businesses across Australia and New Zealand, with very high demand for some models such as cloud managed services, applications managed services and testing managed services.
The managed services market across Asia Pacific has exploded in the last two years thanks to Covid, abrupt enforced work from home, restrictions and, now, the Great Resignation.
Figures from technology research and advisory company Information Services Group (ISG) have managed services soaring to a year-on-year increase in annual contract value of 87 percent, to a record US$929 million, in the three months to June 30, 2021, before dropping back in Q3 to a 53 percent year on year increase. And, it should be noted, ISG only covers contracts with an annual contract value of US$5 million or more, leaving a large swath of the market un-covered.
According to ISG, the Q3 results saw cloud services accounting for more than 84 percent of Asia Pacific’s IT and business services spending in Q3, by far the greatest percentage of any region, ISG says.
Traditional managed services also grew, up 53 percent year on year, but down on the previous quarter.
Gartner itself has forecast the cloud managed service market to reach a whopping US$102 billion by 2025, with growth driven by organisations demanding agility and support of increasingly complex digital environments.
But Thyagarajan told iStart there’s also an element of disillusionment locally with the MSP model.
“The fear among Australian and New Zealand businesses and organisations is that a lot of such engagements are slipping into very tactical and transactional relationships,” he says.
While MSP engagements might come with the safety of SLAs, KPIs, clearly defined outcomes and an MSP taking responsibility and accountability for those outcomes, their longer-term nature can mean they miss out on trends unfolding in the market, such as analytics and AI.
“Because of that concern, dissatisfaction or frustration, a lot are crafting what’s popularly called a continuous improvement program with their MSP service providers.”
It’s a program that takes the MSP from being an organisation helping you keep the lights on, to being a part of your business’ transformation program, with regular reviews designed to proactively identify opportunities to ‘improvise’ and create continuous improvement opportunities through the likes of automation or modernisation.
The innovation is then introduced in a phased manner throughout the course of the MSP engagement.
Thyagarajan says many Gartner clients are proactively incentivising such behaviour, including innovation behaviour drivers in contracts, defining strategic objectives, including an innovation plan; identifying opportunities to collaborate and taking quarterly sessions with the MSP to invest in ideation identification and joint execution of innovation initiatives.
“And it’s part of the selection criteria now, even before they engage with MSPs.”
For providers, many of whom have kept their digital business or consulting/professional services units where much of the cutting-edge skills reside, separate from the traditional MSP business, the move will require change, adding the specialist and emerging skills into their MSP programs more proactively.
“I’m very fond of recommending clients define an innovation fund. Make sure there is an incentive for the service provider also to chip in, to co-create, co-develop,” Thyagarajan says.
But, he stresses, it’s not a one way one effort with the MSP doing all the heavy lifting: The customer too, must be fully engaged.
“It has to be a joint effort.
“We have seen most of such models work because it is a relationship beyond a contract, it is a relationship beyond a pure tactical, transactional kind of arrangement. It is more about ‘here is a genuine problem, how do we sit down together and solve it?’
“That level of co-creation, that spirit of co-development, co-innovation is what will eventually solve all these frustrations with MSPs not being very proactive about innovation.”
He suggests the ‘three i’s’:
Incentivise the service providers to drive innovation and behaviour behaviours.
Proactively identify improvement and innovation opportunities through regular collaborative interactions.
Implement – Can you have a funding model that facilitates innovation costs? Can you have a specific contract exhibit to cover innovation? Can you define a process for handling the IP of the innovation?
Crowdsourcing gains momentum
The Great Resignation has also seen businesses putting greater emphasis on knowing MSPs talent retention and management strategy, as they seek to avoid being caught out by the skills shortages sweeping all businesses.
A recent LogicMonitor report shows 44 percent of Australian and New Zealand MSP respondents have experienced significant employee turnover in the last 12 months – at a time when MSPs have never been more important due to the disruptions businesses are continuing to be faced with.
“It is very heartening to see the selection criteria evolve,” Thyagarajan says. “It’s no longer just your track record, financial viability, staff numbers, references. They’re still all there, but the new selection criteria is about whether they can include an improvement plan, how they plan on introducing innovation in a phased manner through the course of the engagement, and whether they can translate those improvements to cost savings at the client end. And what kind of people they have and their contingency plans for extraordinary situations like the GR era, Covid lockdowns, restrictions.”
But if the MSP market has soared on the back of the pandemic and talent crunch, the past two years has also brought home to local businesses the value of spreading risk.
Clients have realised they don’t want to have all their eggs in one basket. They really want to spread out the risk so there is as much immunity as possible against any such macro developments like the talent shortage, the Great Resignation era, the restrictions and sudden transitions to work from home and so forth.
“So in the spirit of spreading the risk and in the spirit of avoiding vendor lock downs, we are also seeing the most prudent among clients in Australia and New Zealand venturing towards alternative engagement models.”
Thyagarajan says many local organisations aren’t shying away from those alternative engagement models, including crowd sourcing, gig economy platforms and freelance platforms to fulfil their temporary talent issues.
Crowdsourcing in particular is booming, especially in the development and testing side of things – driven partly, Thyagarajan says, by a proliferation of ‘wonderful’ crowdsourcing platforms.
“Flexibility in the crowd has gone up quite a bit. As a client I can define the audience to whom I want to give this product to be tested. You can set up a private crowd, and you can front end some of these crowd sourcing arrangements with your incumbent service providers,” he says, citing the example of Accenture’s alliance with Applause.
“Many incumbent service providers are realising that crowdsourcing is here to stay, so they are partnering with those platforms. So they can provide an intimate engagement doing one-on-one, or throw the problem statement out to the crowd, depending on what the client wants.”
For organisations concerned about the potential challenges of crowdsourcing, using an incumbent service provider can alleviate concerns and also help them build the case to convince their business why they need to go to the crowd while also helping translate the outcomes from the crowd so they are absorbable by the business.
He says when it comes to customer experience testing, crowd testing ‘has become the go-to option for many organisations who are very serious about CX.
“Sure you can have an IT vendor, a service provider, but the testing would still be limited to that particular team of testers who would at best be several dozens of testers. We’re not talking about hundreds of thousands of testers in the crowd,” he says.
By using crowdsourcing to open up the ambit of the population who can test an application or device, organisations are seeing the ability to uncover bugs increase multifold.
And while it might be testing and development that are proving the big winners in crowdsourcing currently, Thyagarajan says that’s just the start. He sees a future where business analysts or even project managers can be crowdsourced.
“Support is a very ripe use case,” he notes. “But we have no reason why it shouldn’t go into other areas, it’s just a matter of when and also a matter of more such challenges coming in the market. I think the talent crunch situation really showed the clients locally that you cannot really have all your eggs in one basket. You cannot depend on just one vendor, one set of people for your work.
“And what we are seeing is a slow evolution in thinking that ok, it doesn’t matter where the services are coming from, what I should really be caring about is framing the problem statement really well, framing my audience – what kind of people I want to be working on my product – and finally do I have a mechanism to translate the outcome I get from this person on this platform into something that is absorbable by my organisation?”