Managed services: The new strategy partner?
Beyond technology support and enablement, companies seek providers who can deliver strategic value, expertise, and innovation.
Estimated read time: 3-4 minutes
Long viewed as a trusty cost-reduction lever, the managed services industry is moving into its next act — driving strategic, sustainable transformations that deliver competitive advantages.
This evolution from “outsourced” transaction manager to value-driving business transformation partner marks a critical fork in the road for both managed services providers and the companies who retain them. And while technology coverage continues to be an essential requirement for providers, it’s now table stakes as companies seek out managed services partners who can be both tech-enabled and strategy-led.
To maximize value from their managed services portfolios, leading companies are evaluating providers on the domain expertise they can bring — and not simply their ability to “cover the other stuff.” This drive for excellence across the board — whether in-house or external — allows organizations to become more agile and move more rapidly on growth opportunities, as we outline in a detailed new KPMG report that tracks the latest developments in the managed services industry.
Great(er) expectations
Our new report on the evolution of managed services (in coordination with HFS Research) includes a survey of more than 1,000 business leaders at large global companies who are involved in managed services decisions for their organizations.
This research builds on our similar study published in 2022, and so it offers unique insights into the rapid pace of change in managed services—and the rising expectations on what companies want from their providers. Among the key findings overall:
73%
Percentage of companies that have implemented managed services in at least one area of their business.
66%
Nearly two-thirds of the companies in the survey have launched managed services for an entire business function or at scale across the enterprise
72%
The top managed services were customer service (72 percent), HR (69 percent), and cybersecurity and sales and marketing (both at 68 percent).
26%
Process expertise (26 percent) and industry expertise (24 percent) were rated as the top reasons for choosing a provider—a significant shift from the previous survey’s tech- and task-heavy focus.
In general, the survey also revealed an increasing emphasis on expanded support for judgment-heavy processes—an upgrade that requires both expert technology and people. This trend further differentiates managed services from its legacy “outsourcer” profile as a third-party vendor that only covers a company’s transactional processes.
In fact, while a quarter of the companies in our survey reported using managed services solely for transactional processes today, that is forecast to steadily decrease over the next few years as buyers place a premium on expanding knowledge-based support.
Asking more, doing more
To be sure, managing mundane technology processes and driving cost savings still matter. But in many ways, those are now basic requirements that reflect how much the managed services model has matured in just the last few years. Simply put, buyers are looking for more.
Take technology, for example. It matters more than ever, but in different ways. Companies don’t just want their service partners to absorb all the binary banalities and report back every quarter. They also want help identifying and deploying transformative new technologies that can support sustainable innovations that address fast-moving challenges. This advise-and-do-it approach is reflected across many of the top goals identified by buyers, which include (in order of priority):
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5
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Channeling the examples above, the business leaders in our survey identified three rapidly changing arenas where they believe managed services providers are ideally positioned to deliver expertise, innovation, and value in the next two years:
where leading providers are combining sophisticated automation and powerful analytics backed by hard-to-hire expertise
with dynamic support for business-critical software-as-a-service systems that focus on continual optimization
where a surge of new regulatory activity and technology-related risks demand expert support and agile new technology solutions
The bigger picture
Managed services has an expanding charter. Leading providers are responding by bundling advanced technologies, human expertise, data-driven insights, and best practices into multiyear packages that provide their partner companies with innovative, highly responsive services at predictable costs.
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To harness this expanded potential support, companies need to be forward -thinking and be ready to work through barriers to adoption, such as lack of organizational alignment or concerns about losing direct control of key business functions.
But for many companies, moving quickly and delivering value in today’s business climate means understanding what your company teams do best—and then finding the right managed services partners to expand their contributions and cover the rest.
Explore more insights and opportunities:
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