Legal Times has featured Heinan Landa’s article on managed IT services, “Outsourcing Technology.” Click here to see the published article.
Whether we realize it or not, we frequently use managed services in our everyday lives. The roads we drive on, the water we drink, our electricity, and our telephones are all examples of managed services—specific tasks that have been handed over to external agencies specializing in managing and providing these services.
By definition, a managed service is one in which the service provider, rather than the customer, takes full responsibility for the outcome, including the management of resources for delivery of the service. For example, you generally don’t tell the electric company how to deliver electricity—you just expect it to arrive at your house.
Managed services share a few common characteristics:
- There are clear expectations of what the service will include—often backed by penalties if the service provider fails to deliver.
- They are priced on a usage basis. There is a set price for a certain quantity, and the more you use, the more you pay.
- The business risk rests upon the providers. If they do not provide the service or if there is a problem, the service providers must rectify it at their own expense.
Traditionally, small and mid-sized businesses, including law firms, have been comfortable purchasing information technology (IT) support services on an hourly consulting basis.
Increasingly, since about 2003, these same firms have been moving to the managed services model for their information technology. They have been transferring specific elements of their systems—data storage and backups, disaster recovery, systems hosting, network monitoring, and even server management—to professional managed service companies as a strategy for improving operations.
Clearly, most law firms require the assistance of IT professionals. For small and mid-sized law firms in particular, the value of outsourcing IT is well established. “Many firms—especially those based on billable hours—are moving toward outsourcing their technology management needs,” says Joe Luber, chief financial officer at Buckley Kolar, a mid-sized D.C. law firm. “It saves so much time and, in the legal profession, time really is money.”
Much of the time saved is in the managing of internal IT employees. When you compare the cost of hiring someone to handle IT versus outsourcing the function, you find that the direct costs (including management time) are very similar. However, once you include turnover cost, a veritable annual certainty with internal IT staff, it is a hands-down victory for the outsourcing option. Turnover costs are generally estimated at between 75 and 150 percent of the employee’s annual salary.
There are, of course, other arguments for outsourcing IT that transcend cost and depend largely on your firm’s capability to run that function. However, assuming you take the outsourcing route, why managed services? The answer is that managed services are the natural evolution of more sophisticated IT service delivery systems. Indications from industry market research firms, such as Gartner Dataquest, predict a 33 percent annual growth rate in the managed IT services market.
Here are a few examples of services that could be managed:
- 24/7 server and network monitoring. This lets the IT firm know about problems with your critical systems so they can fix them before you call, and hopefully before you even notice.
- Routine server and workstation maintenance. This might include updating antivirus programs, applying Microsoft critical patches, and so on.
- Unlimited helpdesk support so your attorneys and staff can call technical support for their computer issues—and not have to pay extra. Often, the support technicians can take control of the problematic computer and remedy the problems right on the spot.
- Constant, monitored off-site data backups.
“I saw the value in managed services when I came to work one morning and the network engineer was there before me to address a backup that hadn’t worked the night before,” says Luber.
There are several distinct benefits to managed services:
First, because of the usage-based pricing model, firms can reduce potential budgetary surprises.
Second, the proactive approach to systems management reduces overall downtime. And because of the pricing model, the managed services provider has the incentive to avoid downtime. If they can keep your system running smoothly, they will make more money.
Third, these services can grow with the law firm. Not only can you simply ask for more as you add attorneys and staff, but because the services provided are so well defined, this model also allows you to handpick the services you would like managed. For example, if you have an internal IT staff that provides your users with support on their software applications, you might still want to hire a managed service provider to manage and monitor your servers. And if you would like to bring those services in-house later, that option is always available.
Finally, according to statistics compiled by Paul Dippell, CEO of Service Leadership (an IT industry research firm) the best managed service providers include high-level technology guidance with their service. This is often a quarterly consultation with the firm administrator and managing partner to review the IT activities of the previous quarter and plan any technology initiatives for the next quarter or two. This type of expertise and technology guidance is difficult, if not impossible, to acquire internally for firms with fewer than 100 attorneys.
There are several IT service industry trends that have contributed to the rise of managed services in the small and mid-sized sector.
The first is the recent proliferation of lower-cost management tools traditionally used only in large firms. In years past, only the big firms had sufficient resources to purchase the hardware and software to comprehensively monitor and manage their systems. Now, with affordable hardware prices, several vendors have released network monitoring and management tools priced at a few dollars per machine and available on a subscription basis. This has made the upfront and ongoing investment to offer managed services a profitable endeavor for an IT services firm working with small and mid-sized clients. Tech Data, a wholesale supplier of computer equipment and software, estimates the average upfront investment necessary to implement managed services is $250,000.
The second trend is that the tasks necessary to keep a network properly running are now more clearly defined than ever before (although, paradoxically, more complex than ever). As David Maister asserts in his book, Managing the Professional Service Firm, “In every profession, one can point to practice areas that, in only a few short years, moved rapidly from being frontier activities handled only by a handful of innovative firms to high-volume practices offered by increasingly large numbers of competent firms.”
The advent of the lower-cost managed service tools have allowed IT service providers to offer some of the routine maintenance services at predictable, lower costs which, in turn, lets them fix the price. Thus, they can compete better in the market and add more value to their clients.
A third trend is that now more than ever, law firms need a reliable and professionally managed IT infrastructure. With the advent of the “always on” email and internet culture among small business clients and government entities everywhere, being off-line at unexpected times is a real concern.
Finally, there is the increased maturity and sophistication of the IT services industry. Unlike the legal profession, IT service is a relatively new industry and is still learning how to provide the best service. The ability to offer managed services is a step in the right direction, because managed services usually require a substantial investment in technology and business process engineering only available to the more mature providers.
While managed IT services certainly provides benefits to many law firms, it may not be right for every firm. Here are some things to consider:
- Size: If your firm consists of less than 10 people or plans to spend less than 1 percent of its operating budget on IT, now may not be the time to move to managed IT service support.
- Success: If your existing, traditional, IT support firm provides excellent service, but no managed services, you might consider apprising them of offerings you would like to see, rather than switching to another provider.
- Service: Make sure any potential provider is highly focused on your needs, rather than their particular managed service technology.
Overall, managed IT services is a relatively new approach for outsourcing the technology management needs of small and mid-sized law firms. Its use of technology and methodical service processes offers hope that maintaining your network systems can become as easy as outsourcing your mailroom.
Heinan Landa is president and founder of Optimal Networks, an IT outsourcing firm offering consulting and managed services to small and mid-sized law firms in the Washington, D.C. area. He can be contacted at[email protected].