South Africa’s managed services sector is poised for sweeping changes in the coming years – as client demands intensify, competition hots up, and new cloud platforms change the game.
Many of the major players are redefining their managed services offerings, each with their own flair and focus areas. For most, there’s a concerted shift away from traditional on-premise infrastructure management and desktop support, towards the end-to-end management and orchestration of a client’s cloud computing platforms.
The Margin spoke to a couple of local analysts tracking the development of the local managed services space, to understand more about the major players, and just how the industry is transforming.
Clinton Jacobs, senior analyst at BMI-Techknowledge, says the predominant managed services players include the likes of Dimension Data, BCX, Gijima, Datacentrix, T-Systems, Altron TMT, IBM, and (from a government perspective) the State IT Agency – SITA.
Jon Tullett, research manager for IT services in Sub-Saharan Africa at IDC, says the industry is headlined by heavyweights like Accenture, Dimension Data, EOH, BCX and Altron. But he says that managed services can be defined in a number of ways, and specialised players fill different roles in the ecosystem.
But just how can these industry behemoths – and the hundreds of smaller, more niche managed service providers in South Africa – differentiate themselves in a crowded marketplace?
Let’s look at a few of the major areas of focus for managed services over the coming years.
Increasing business relevance
“Across the industry, there’s a significant digital transformation happening, especially large enterprises,” says Tullett. “This is reshaping outsourcing and consulting practices to be more business-focused.”
MSPs are certainly feeling the pressure to deliver business results – such as commitments on cost-savings, or clear strategies and business cases to increase revenues, reach more customers, or bring more products to market.
BMI-T’s Jacobs agrees, noting that MSPs are being challenged to cut costs for their clients, improve efficiencies and enhance customer experiences for their end-users. “They must find ways to help clients get the maximum value from their technology investments – so they need to operate as something of a change agent, increasing adoption and usage levels of new technology.
Governance, risk and compliance
“With new legislation coming in – such as the Protection of Personal Information Act – handling a client’s regulatory requirements is becoming a very important part of the (managed services) value proposition,” says Jacobs.
He stresses the importance for MSPs to have clear governance frameworks and established service management procedures in place, including certifications in areas like ITIL, for instance.
Clients’ IT estates are changing dramatically in the cloud-era, and spurring them to consider a number of new technologies made possible by the cloud. Such technologies include the likes of AI, IoT, distributed ledgers, advanced cyber security and automation.
As these new technology fields gain momentum, MSPs will be tasked with designing new governance frameworks that suit an ever-evolving technology landscape.
Depth of skills in emerging technology fields
In fact, it’s these next-generation ICT skills which Jacobs believes could be the difference between tomorrow’s winners and losers in the managed services sector. He says that the larger ICT players typically grow into new, high-growth areas through acquisition of specialist companies. So we can expect some strategic acquisitions in key ‘emerging new tech’ fields in the near future.
“Given the skills shortages in key areas, and the fact that technology is evolving so quickly, it becomes very important for service providers to leverage and develop their skills across the entire organisation,” he says. Jacobs cites the likes of BCX and Performanta, which have made bold moves by creating their own academies, to tap into a pipeline of new talent in key areas.
Tullett also highlights the importance of skills, saying that local businesses are essentially looking for four key attributes in their service provider: “access to high-calibre talent, quality outputs, alignment with the client’s business, and financial stability.”
Cloud expertise
Barbara Kessler, MSP business development manager at Amazon Web Services, highlights a key trend in a recent blog. She notes: “the shift from traditional on-premise datacentres to hyperscale cloud solutions has created a significant new paradigm for managed service providers.”
She says today’s clients are demanding more from their service providers – looking to them to unlock new levels of agility, innovation and automation in their businesses. “These customers are looking for MSPs with deep expertise to consult, then design and implement highly automated and intelligent solutions, and continue to ensure that those solutions deliver an outstanding experience on an ongoing basis.”
Jacobs agrees that emergence of hyperscale cloud environments in recent years has forever changed the face of IT services, describing a state of ‘co-opetition’ between SA’s large MSPs (many of whom have invested significantly in building up their own managed cloud offerings) and the international cloud platforms like Microsoft Azure, Amazon Web Services, Oracle Enterprise Cloud and Google Cloud Platform.
Tullett says that despite the excitement around hyperscale clouds, there aren’t really many ICT services being outright disrupted by public cloud. “But, yes, services are changing, and the public cloud is having an impact on software sales, integration, and support,” he adds.
For local tech firms, the goals are to migrate complex enterprise applications into these new cloud environments, and ultimately play a key role in orchestrating services from various platforms, giving clients a single point of contact to manage all their cloud environments.
New engagement models
Tullett points to big changes in sales cycles and deal structure – which are hitting outsourcing and project services. with budgets still under pressure, and CIOs becoming ever more cost-conscious, “lean transformation is the order of the day,” he says.
Some of the major MSPs are starting to guarantee cost-savings, others are committing to stringent SLAs and penalty clauses, while others are abandoning the traditional multi-year agreements in favour of flexible contract models and a greater sharing of risk.
Jacobs traces a number of dynamics forcing a change in the way relationships between clients and service providers are forged. These include the shift from on-premise to off-premise, from capex to pay-per-use, from manual to automated, from physical to virtual (software-defined), and from fixed office requirements to mobile ways of working.
As the managed services space adapts in response to these trends, the MSPs that can offer the greatest flexibility, lowest risks and most value, will likely grab market share from slower-moving competitors.
Ultimately, MSPs must tailor services to suit the individual needs of a client – adeptly blending public, private, and hybrid cloud solutions, and harnessing the expertise of both in-house teams, as well as external partners.
“In five years’ time, we expect to see a service provider industry which reflects and embraces this complexity, working more closely with their traditional competitors, and becoming deeply embedded in multicloud architectures and client environments,” concludes Tullett.