Managed Services – The Hidden Value within X as a Service

Most IT decision-makers are very familiar with the core proposition of managed services; it shifts the responsibility of reducing operational costs and improving service levels to the provider. When managed services is coupled with consumption-based pricing of IT systems, its new role is contributing to a new breed of dedicated IT resources provided as a service. We take for granted that the public cloud providers have always been managing the shared resources of public cloud. But it’s the consumption-based pricing model that usually captures everyone’s attention. However, replicating the consumption model for datacenter resources only gets you part way there if your goal is a cloud-like experience for on-prem resources.

In this new role, managed services coupled with consumption-based pricing of resources allows you to avoid the many downsides that come with purchasing and maintaining on-premises storage. Instead of monitoring and worrying about whether you have enough storage capacity available, you can easily flex usage up or down as business requirements change. Instead of paying for major capital expenditures upfront, you can improve cash flow by paying an annual subscription based on consumption. This means that, instead of spending weeks or longer preparing the business case and navigating the CAPEX approval process, you can meet your needs for increased storage easily on-demand.

What really makes this all possible is the managed services within things like Storage as a Service (STaaS). The managed services are the hidden value within STaaS.

Hitachi Vantara commissioned Forrester Consulting to conduct a Total Economic Impact (TEI)study to examine the value of pay-per-use consumption and managed services within its STaaS offering. Forrester spoke with IT decision-makers at four organizations with extensive experience using the service. These organizations included financial services, logistics, and IT services companies, ranging from $7 billion in revenue to $174 billion. We found that a composite organization, representative of all the participating companies, experiences a benefit of $25.88 million over five years versus costs of $8.24 million, resulting in a net present value (NPV) of $17.64 million and an ROI of 214%.

One very interesting finding from the research and financial modeling Forrester did is that the cost savings benefits of consumption-based pricing were dwarfed by the combined benefit of streamlined operations and improved availability.

• Shifting from upfront purchase to pay-per-use consumption, accounted for an on-premises storage cost reduction totaling $5.8 million. While this is a very compelling benefit, it accounts for less than a quarter of the total benefit value of $25.9 million. A storage architect in the insurance industry described how this affected his team: “We used to have capital investments—now we have rent. It has saved a tremendous amount of time in the procurement process and improved financial flows.”
• However, managed services within the STaaS contributed to productivity gains within the IT team that accounted for a $5.3 million benefit. This empowered team members to make more strategic contributions to the business. The director of storage and backup services added, “It’s a lot easier to manage than it was in the past. So, rather than us focusing on keeping the lights on, now we’re able to shift our focus to add more value.”
• The largest contribution to the overall value, however, was the $14.8 million benefit that resulted from improved service levels, availability, and operational efficiency of the organization. The global head of IT infrastructure at a financial services company told Forrester, “Before Hitachi, our estate was melting. We had arrays that were underspecified for the use case. We had outage after outage after outage during the business days when we were busiest. When we brought Hitachi in, the world became a much better place.”

All the executives Forrester interviewed for the study echoed these observations. While IT organizations and their management teams had shifted to STaaS primarily for the pay per use cost savings, they discovered that the unexpected value of managed services within their STaaS was an even greater benefit to their organizations.

For more information read the full TEI study, The Total Economic Impact™ Of Managed Services From Hitachi Vantara For XaaS, and  visit EverFlex X as a Service (XaaS).

Jeb Horton is Senior Vice President, Global Services, Hitachi Vantara.