Managed services customers are moving towards integrated propositions, instead of focusing on IT and telecommunications as separate entities. While organic growth is one way for providers to benefit here, it does not always offer the speed to market required.
Organisations are increasingly treating computing and telecoms as integrated platforms to improve efficiency and save costs while sharing offerings across departments or locations.
Perhaps too many cooks have been adding too many ingredients to the broth and spoiling it.
Businesses are becoming acutely aware that dealing with a range of service providers can preclude economies of scale, and it is not just about having diverse contracts and invoices flying around.
It is entirely at odds with doing more with less - a long-running trend that any smart enterprise cannot afford to ignore. A lean approach to in-house services helps a business become more competitive. Meanwhile, scaleable, pay-as-you-grow cloud computing, alongside BYOD where employee mobile devices are integrated into core systems, helps cut down on third-party costs.
IT departments are doing the work of telecoms departments, while CIOs and CTOs are juggling a series of complex, interrelated technology issues. Service providers that can simplify the technology needs of their customers and contain costs as well are often the winners here.
Voice and data services clearly remain fundamentally different. IT services providers cannot simply bolt on a telecoms capability just because a customer has asked for it. They can, however, adapt their business models through a buyout.
The urge to merge
This strategy requires an increase in capex initially, but the mid- to long-term gains are evident in the ability to secure recurring contracts from more customers, combined with a greater involvement with existing customers.
Services providers should therefore look to partner with financial institutions that understand their sector and its trends and can see beyond the figures to future growth potential. Recurring revenue streams and rolling contracts will make sound business sense to a bank that fully appreciates the sector’s needs and completely understands the evolving role of the IT services provider.
Through this move it immediately enriches its cloud offering, growing and enhancing the service capabilities it offers to its customers. In a proven shared-services model you can add another dimension to your capabilities, enabling the company to offer a wider and more integrated service portfolio.
Any services provider setting out to deliver economies of scale to its customers by expanding and enriching its own capabilities to address converged managed services requirements, has its own economics to contend with - but the acquisition route can reduce overheads and operational costs.
It can also strengthen the provider’s negotiating position on wholesale rates, due to the larger client base - a process which, in itself, boosts margins. This can be viewed as a big step, but it is one in the right direction given the ongoing convergence of the IT and telecoms sectors.
Lorraine Ruckstuhl is corporate director for the media, telecoms and tech team at Barclays
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