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History Of Managed Services

Managed Services

Because of businesses increased reliance on technology for their operations, it’s no surprise that there’s a high demand for a managed IT services in recent years.

But although Managed Service is all the rage today but it wasn’t always that way.  It took an evolution from Mainframes and internal IT departments, through outsourcing, pay-as-you-go break/fix, to VAR and finally to what is today referred to an Managed Services.

Early Years Of Managed IT Services

IT Support Services has gone through a metamorphoses over the past 25 years from purely internal to to outsourcing focused on response time to one focused on metrics that really gauge the positive impact and IT company can have on their customers.

Sure, there are still plenty of old school, everything-to-everybody, IT shops out there who see Managed Service Providers and managed IT services as just a marketing tactic. But for those of us who really get it, the journey from Internal IT Staff to break/fix to managed IT services has been a long one.

Internal IT Staff

Way back in the early days when only very large companies could afford computing technology, these large companies would staff expertise internally.  Back then you couldn’t get software off the shelf so you had to have a small army of business analysts, programmers and data entry personnel to run these behemoths of computing called Mainframes.

The only piece of the puzzle businesses didn’t handle was the maintenance and upgrade of the physical hardware – companies like IBM, Burroughs, UNIVAC, NCR, Control Data, Honeywell, General Electric and RCA would handle the hardware piece.

PCs And Networking

When PCs entered the picture and networking really took off with the likes of Bayan VINES, Lantastic and NetWare, small businesses entered the technology revolution in droves.  And when they did, they turned to other local small businesses for help.

There was a land rush, new PC stores turned up on every street corner and businesses spent like there was no tomorrow.  Most businesses leveraged the ‘most technical’ person on their staff to fill the role of IT Person and everyone pretty much learned as we went along.

Larger / National companies contributed to this push primarily by shifting their services to custom software.  Example: Insurance Agents used to rate from books – seemingly overnight companies were sending rating software (and the never-ended stream of updates) forcing the move to PC and Networking.

During this phase it was still pay-as-you-go, no real budgeting and no real maintenance (because none was really needed).  Sure there were a few things you could do to be certain things were setup right from the beginning but since smaller businesses were just starting to take up this rush to computerize there wasn’t a widespread understanding of how this new tool should be managed or the risks it represented.


As small businesses relied more and more on technology they began to build internal expertise, sending their IT Guru to Novel training and generally ramping up their skill sets and the business began to rely more and more on the technology.

At the same time, the PC companies that made their bread and butter from building white-box PCs were facing pressure from new national competitors like Dell and Gateway. Facing this pressure they shifted to more services, specifically the setup and maintenance of networks, as this technology continued to become more and more complex.

Small businesses found that it was easier to rely on an external company and remote workers with the right resources as the pace of technological change increased and having someone dabble in technology ‘on the side’ made less and less sense.


When the shift to using an outside company, the focus was more on responding quickly and fixing thing quickly – simply because the small businesses that were outsourcing their IT help were used to having someone in the office – instance response.

All of us in the business got really good at being fast – rushing from here to there, responding to the latest emergency, sometimes dealing with one problem while on the phone with another customer.

Billing was by the hour and learning was on the job – there was always tension between what path should be taken to resolve an issue or how long something took.  There was a disconnect between the IT Provider and the business; the classic is – spending 8 hours fixing a 3-year old PC and sending a customer a bill for $800 when they could have just gotten a new one!

Some IT providers, in a brilliant marketing move, labeled themselves “Value Added Re-sellers” which basically meant that they would charge you to install the server you just bought from them.  Not sure where the real value came from other than additional revenue coming out of the customers pockets.

Or charging a customer for a repeat problem (one you had already charged them to ‘fix’).

Sadly, many, many business and many more IT providers still have the majority of their business stuck in this mode.

Transition to Prevention

It is impossible to staff and scale in a break/fix model – when you are facing an emergency for one customers is when, inevitably, another customer calls.  Billing by the hour was always uncomfortable because in order for an IT provider to have a ‘good month’ it took several of their customers having a disaster – not on the same team here.

Year ago we decided to hit the rest button and change how we did things – don’t charge by the hour, which leaves all the risk with your customer, but charge by the result.  If things go haywire or we have to fix things twice or it takes too many hours to resolve issues – it should hurt the IT Provider just as much as the customer.

The nature of the agreement forces the managed IT service provider to focus the bulk of their efforts and resources on preventing issues BEFORE they happen versus waiting for problems to occur and responding quickly.

Focusing resources on preventing issues produces a much better results for customers – but taking on all the risk for a customers environment is not for the faint of heart – it takes the right processes, procedures, discipline and people (along with years of lessons learned and fine tuning) to get it right.

Have more questions about Managed Service Providers in your area? Check out our comprehensive Managed Services Guide for more information.

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