IT Departments Not Losing Ground to Managed Service Providers (Yet)

The idea that the formal IT department would melt away either piece-by-piece or wholesale, replaced by managed services providers (MSPs), has been hanging over the heads of CIOs for nearly a decade.

While the option — or threat, depending on how you look at it — is a legitimate and viable one, it hasn’t come to pass yet for many companies, according to a new study from CompTIA.

“The biggest surprise from the study is how slow-moving the adoption of managed services has been,” says Carolyn April, director of industry analysis at CompTIA, adding, “Disappointing growth, however, comes with an upside of opportunity.”

For its Third Annual Trends in Managed Services study, CompTIA surveyed 400 IT and business professionals last November and worked with research firm Cascade Insights to conduct 17 in-depth interviews with management-level executives such as CIOs, directors of IT and vice presidents, and found that only three out of 10 companies currently contract with an MSP.

Lack of Change Not a Vote of Confidence for IT

The slow adoption rate underscores the great difficulty with fundamental change, April says. Even though many business users say they’re fed up with the sluggish, autocratic IT department, many cringe at the thought of outsourcing to a managed services provider.

[Related: 10 IT Outsourcing Trends to Watch in 2014]

On the upside, mega trends in the computing world are aligning to spur the managed services market. BYOD and consumer tech in the enterprise are putting more technology purchasing power into the hands of lines-of-business executives.

Cloud computing and the easy availability of apps online mean that departments can quickly provision IT functions without having to work through the IT department.

[Related: 2014 Forecast for Cloud Computing]

While the decision to sign a managed IT services contract has historically lied with CIOs and internal IT managers, CompTIA says, a power shift is taking place. According to the study, 27 percent of firms have non-IT executives, such as CFOs and procurement officers, deciding on the managed services move, while 21 percent rely on a committee of IT and non-IT executives to make the decision.

“That does not mean CIOs or senior IT is irrelevant or isn’t very involved strategically,” April says.

MSPs Must Appeal to Both CIOs and Business Executives

Managed services providers now must market and sell to both CIOs and business executives. With the latter, managed services providers really need to pitch a business benefit or address a business problem beyond the technical speeds and feeds — a skill that often lies outside their comfort zone.

“Right now, we’re seeing a clamoring in the channel for training around business skills, sales and marketing,” April says. “Marketing is probably the weakest link in the various pieces of the channel business.”

Overall, MSPs have done a poor job of evangelizing their model. Part of the problem is that many channel service providers offer managed services on top of their traditional reseller and integration services business aimed at internal IT departments, so it’s difficult to champion managed services whole heartedly.

Bottom line: “There’s good news ahead” for managed services providers, April says, if they can solve their marketing challenges.

Tom Kaneshige covers Apple, BYOD and Consumerization of IT for CIO.com. Follow Tom on Twitter @kaneshige. Follow everything from CIO.com on Twitter @CIOonline, Facebook, Google + and LinkedIn. Email Tom at tkaneshige@cio.com