24 July 2017 10:29AM
By Paul Dunlop

Next Generation Managed Services - Part 3
This is the third part in a 4-part blog series where I delve into Next Generation Managed Services. In my Part 3 [link], I covered the following aspects of managed services and how they apply to next generation managed services partners (NGMSP):

  • Industry expertise and insights 
  • IT and Business Goals and Alignment
  • Long-Term IT Strategic Plan

In this blog post I will cover how Next Generation Managed Services can:

  • Lower the cost of IT
  • Significantly reduce infrastructure investment
  • Enable manageable billing schedules

Lower IT Costs
By effectively utilising public cloud products, companies typically see a reduction in IT expenditure. For example from a public release from AWS states:

Companies see a reduction in IT spend by utilising public cloud services. A public release from AWS states:

“AWS continues to lower the cost of cloud computing for its customers. In 2014, AWS has reduced the cost of compute by an average of 30%, storage by an average of 51% and relational databases by an average of 28%. AWS continues to drive down the cost of IT infrastructure”
[link to source]

At API Talent, we help our customers see a reduction in IT spend when shifting into the public cloud. The maximum cost benefit is when refactoring application stacks as part of the shift.

Saving costs in the cloud relates directly to your application’s ability to expand and contract based on usage demand. It also relates to the decoupling of old monolithic architectures and taking advantage of cloud native offerings. Messaging as a service (AWS SQS) and function as a service (AWS Lambda) are two examples of services that can be leveraged to decouple tightly integrated applications.

In the past, a Managed Service Provider would provide a performance metric that showed the maximum capacity for compute, memory, and storage. Next Generation Managed Service providers leverage stateless web tiers and auto scaling capabilities. The main difference between these approaches is that your investment in IT hardware is not gathering dust during off peak times of use just sitting there idly waiting for a customer spike to occur.

With the implementation of your application using cloud native services, your application could cost you only as much as your customers use them.

No Up-front Infrastructure Investment
This has to be one of the most compelling - yet frustrating - factors of public cloud.

Compelling because many large companies running their own hardware don’t like to front up half a million, or more, every three or so years for IT equipment. Frustrating because by not having investment up front, companies are in fact using OPEX not CAPEX as their cost model. This may not be desirable.

Who can argue that low-to-no infrastructure investment isn’t a good thing though?

Traditional Managed Services partners operated data centers and managed the customer's physical hardware in them. Next Generation Managed Services partners utilise a cloud vendor for the compute and storage facilities and focus on the proactive maintenance of their customers application stacks.

Leveraging no up-front costs in the cloud forms the “on-demand” model. This can be more expensive (depending on always on) and focuses on a company's OPEX fund.

Where companies require CAPEX models, AWS operates a reservation mechanism on their instances (VMs). These reserved instances can be purchased with varying up front cost options such as no upfront, partial or full. Using reservations can allow a company to depreciate the value over time, though technically they are not owning an asset, rather the lease of said asset.

Manageable Billing Schedules
There is no major difference of billing schedules between traditional Managed Services and Next Generation Managed Services (NGMS).

The billing schedule is monthly unless you are reserving instances and paying an upfront portion. The invoicing for this type of instance is normally done automatically and digitally, saving time and money on paper and snail mail.

The NGMS provider will consolidate your billing for all your AWS accounts and provide you with one aggregated bill. This bill also includes a baseline Managed Services fee.

Additionally, the NGMS provider will provide their customers with a console that allows their customers to:

  • Pay bills,
  • View invoices,
  • Create custom reports, 
  • Raise incidents and requests

The NGMSP is the next evolution for companies to lower their costs, continue to achieve no upfront fee where applicable, and enable manageable billing schedules.

In my next post we will deep dive into the following areas:

  • Onsite support and certified staff
  • Operational efficiency
  • Reduced support and downtime
  • Scalable technology