The managed service provider (MSP) or outsource model is not new. Commercial and public sector organizations leverage MSPs and outsource partners to gain management, people, and skills they lack internally, typically at a lower cost. This arrangement provides vital assistance to organizations that need additional resources to complete IT tasks they don’t know how to do, don’t want to do, or don’t have the staff to support. MSPs use their specialized skills to help companies reach their business goals, often bringing industry and business-specific insights as part of their services.
What’s new is rapid digital transformation, speed to market, and a talent shortage that is driving an increased need for IT resources. These exaggerated changes are causing CIOs to turn more to MSPs and outsource partnerships to meet the demand.
IT talent is highly sought after
According to one analyst report, businesses think that talent shortage is the biggest barrier to the adoption of over half of new technologies. This means that in many cases, IT leaders who want to deploy new products to boost business outcomes anticipate that the lack of suitable workers to implement the technology will be problematic at some point.
Gartner states that “Despite talent challenges, infrastructure and operations (I&O) and other IT leaders have increased the adoption of emerging technologies to drive innovation as organizations begin to recover from the pandemic… IT executives see the talent shortage as the most significant adoption barrier to 64% of emerging technologies…”1
The number of employees voluntarily leaving their jobs in the last two months of 2021 and in the first month of 2022 continued to climb as people reassess their work and personal lives, according to the U.S. Bureau of Labor Statistics.2 CIOs are performing a balancing act between the volume of IT work their business demands to innovate, finding technical resources, and keeping their current talent happy.
IT spending is projected to reach $4.43 trillion, an increase of 4% from 2021. Along with overall IT spending growth, IT services are expected to grow 6.8% in 2022 and 8.5% in 2023—reaching $1.372 trillion.3
By 2025, organizations will increase their reliance on external consultants, as the greater urgency and accelerated pace of change widens the gap between organizations’ digital business ambitions and their internal resources and capabilities, according to Gartner®.4
Contingent staffing vs. MSP
Contingent staffing as a model for technical resources requires your people to interview, hire, and manage contingent resources—even though you may already be short-staffed, stretching your team even further. You own all the risk, and the effects of turnover are direct to your teams.
With the right MSP, you enter a shared risk model where retention and turnover become the responsibility of your MSP. Knowledge management, cross-training, focusing on retention, and a pre-defined strategy for managing turnover are best practices that will help shelter you from the impacts.
In a contingent staffing model, hourly rates are paid based on each person’s individual skill and experience level. A typical MSP solution is built on a blended rate model with teams leveraging different skill levels, and a management or KPI structure to drive outcomes. Leveraging offshore options can help to further lower costs, as well.
Typically, requirements dictate that staff augmentation contractors work in similar situations as your employees, which may be a hybrid of remote and in the office, or in the office only. In an MSP model, the location of the workers is less relevant as long as KPIs are being met. MSPs can offer more flexibility in work location, improving their ability to engage top talent from around the world on your behalf. Flexibility in work location has been a top priority for employees during the great resignation.5
Considering the landscape, it’s not a matter of if you will outsource, but where, when, and how to ensure success.
Six tips for implementing Managed service providers at your organization
- Emphasize outcome-driven outsourcing
Create your model and performance evaluation criteria around desired outcomes. For instance, if the outcome is reduced support time, your partner should be focused on automation, elimination of work, and modernization. Ensure your contracts are written with the outcomes in mind, your partners' incentives are aligned to your outcomes, and give yourself flexibility for change—all organizations change over time.
- Choose deliberate areas to outsource
A ‘one size fits all’ solution may look like an attractive option financially, but it can become restrictive and ineffective over time as business drivers change. Be strategic when selecting areas for outsourcing IT to a managed service provider. Choose an MSP that is the best fit for the scope of services and one that has a culture and values that match yours.
- Define the scope and boundaries around responsibilities
Many MSP partners provide models for scope definition and evaluation criteria that will help with this part of the process. To facilitate collaboration and a smooth working relationship between your organization and the partner, make sure you clearly define your tasks and expectations, and the tasks that your partner’s team will own. Positive collaboration, positive intent, and trust among your teams and the MSP is a critical success factor.
- Focus on strategic work
Let your outsource partner do more of the heavy lifting for standard operations, running the day-to-day and enhancements for the IT ecosystem you already have. Use your team’s business knowledge to drive innovation for the company. Where you can really make a difference as an IT partner is helping the business evolve to new levels with new sources of revenue, improved customer experience, and reductions in operating expenses.
- Up-skill your people
Leveraging an outsourcing model for certain areas of the operation will free up time for you to focus on internal teams and help them grow. Invest in the exceptional employees you have—present them with opportunities to develop new technical and personal competencies, like learning agility and collaboration skills. Hire for factors like industry knowledge and the desire to learn, then teach the technology or leverage your MSP for more of the technical work.
- Open your doors to diversity
Choosing partners with a diverse talent pool can bring new resources to your organization. Diversity is a competitive advantage that brings measurable benefits as well as improved workplace culture, making it a focus for major global corporations. As an example, the neurodiverse community is an untapped area for recruitment, and their skill sets are a good fit for a wide range of positions, including technology, finance, and operations.
At a time when enterprises are struggling to find and keep digital talent, third parties are becoming that much more essential in providing the skills that today’s enterprise IT teams need. Strategic outsourcing can enable organizations to foster innovation, grow their business, and improve operational agility without taking on more risk.
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- “Gartner Survey Reveals Talent Shortages as Biggest Barrier to Emerging Technologies Adoption.” Gartner, September 13, 2021. https://www.gartner.com/en/newsroom/press-releases/2021-09-13-gartner-survey-reveals-talent-shortages-as-biggest-barrier-to-emerging-technologies-adoption. ↩
- “Employment Situation Summary - 2022 M08 Results.” U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics, September 2, 2022. https://www.bls.gov/news.release/empsit.nr0.htm. ↩
- “Gartner Forecasts Worldwide It Spending to Reach $4.4 Trillion in 2022.” Gartner, April 6, 2022. https://www.gartner.com/en/newsroom/press-releases/2022-04-06-gartner-forecasts-worldwide-it-spending-to-reach-4-point-four-trillion-in-2022. ↩
- Mearian, Lucas. “Talent War to Push Cios toward Consultancies, Managed Services in '22.” Computerworld. Computerworld, January 20, 2022. https://www.computerworld.com/article/3647749/talent-war-to-push-cios-toward-consultancies-managed-services-in-22.html. ↩
- Hanson, Teuila. “Commentary: The Right Culture Can Stop the Great Resignation.” Fortune. Fortune, January 18, 2022. https://fortune.com/2022/01/18/great-resignation-workplace-culture-flexibility-well-being-linkedin/. ↩