How to instill innovation into managed services

Application managed services are the bread and butter of every services organization. These services are either supported remotely or onsite at the client premises. These services are typically SLA and ticket based services with the financials agreed mutually based on ticket volumes and nature.


Sounds good .But how can this routine work be made innovative. Is it possible to give value innovations to the customer while managing his services? Is it possible to achieve or create business transformational value through this outsourcing activity?
It is not very easy but it can be very done with a little planning and vision.


Let us take a typical application services contract of 60 months. We now plan the execution of this contract into three time boxed phases with each phase seamlessly integrating with the next phase.


1. The “bread and butter phase” – (0-18 months)-The phase signals the start of the contract where the agreed SLAs and ticket volumes need to be negotiated. The service provider has to make sure that this phase builds the confidence of the customer and fulfills his business needs as per the requirements. This phase also plays a very important role in smoothening or pacifying the negative stakeholders who might be against the outsourced contract. Every executed step and communication has to be clear, concise and informed to all hierarchical levels within the client organization. This not only creates accountability but also helps the service provider gain support from the top echelons of the customer. One word of caution; this phase should end with the stability of the system and the applications.Unless the system is stable and under control, there is no point of going into the next phase.


2. The “Differentiator phase” – (18 – 40 months) The phase mostly occurs at the hump of the contract .At this stage the systems and applications are stable and we should typically have a satisfied client at this point who has expressed faith and confidence in the provider’s ability to support their needs. The time is ripe to unleash the power of the differentiators. A differentiator can be any tool, process, person or technique that adds value to the managed services value chain. The value added can be an additive value, for example adding a tool to automate a manual process that reduces the ticket count or improvement value, adding or changing a process that reduces the cycle time of an operation. A differentiator can also be a person who advises the client in the capacity of an expert and helps the client in achieving key business results .So Differentiators can be of the following types:


1. Product differentiators


2. Process differentiators


3. Technology differentiators


4. People differentiators


While adding any differentiator the service provider should ponder on the following questions:


Is the differentiator leveraging the core competency of my organization?


If I were the client, would I want this differentiator to improve my business processes?

What is the future of the differentiator? Will it get obsolete in the future? What are options and way ahead?

3. The “Look beyond the value chain” phase (40 – 60 months) this phase is the most important phase in the life span of the managed services and also the most confusing one. At this stage the expectation of the client from the provider is sky high and the client wants the provider to work as a partner towards improving and adding value to his business. This phase is the “make or break” phase for every service provider. Providers who negotiate this phase successfully become service innovators and move up the value chain; others remain as service providers fighting for crumbs in the market. 

The following questions need to be addressed smartly by the service provider to graduate to the next level.

Are there any business gaps in the client’s business chain that is affecting my service directly or indirectly? Can I address that problem and propose a solution?


Are there any organizational changes anticipated within the client business that will give me additional opportunities beyond my service? Do I have the competency to take up that opportunity?


Has the client planned any merger, acquisition or strategic alliance? What will be my role in that scenario? Will I become part of the large picture? What needs to be done for that?


We are in the last leg of the contract and if I were the client, will I extend the contract for one more term? What are the value additions that I can offer the client in the next term? Who will be my new competitors in the next term?


Have I added to the core competency of my organization through this contract? Has it been a win-win situation? What learnings can I leverage to other clients from this contract?

So I believe a well-planned managed services contract offers a lot of opportunities for innovations and can create a strong customer value preposition that can extend beyond the contract terms.