Guest Column | May 12, 2020

Here's How Manufacturers Benefit From Managed Services

By Megan R. Nichols

Storage Automation Benefits Include IT-As-A-Service Delivery

Companies today need every competitive advantage they can find. This truism is especially the case in manufacturing, where tons of moving parts must come together fluidly to match supply with demand.

One way manufacturers can position themselves for competitiveness and success is through a managed service provider (MSP) for information technology (IT) systems. Manufacturers must remain focused on their core competencies if they want to make it in a crowded marketplace — and MSPs can help them do precisely that.

Manufacturers with a managed services partner can generally expect higher productivity, greater efficiency, and more predictable expenses, thanks to their renewed focus on their business niche rather than IT projects.

This business model presents lots of advantages for the manufacturing industry. Here are a few of them:

1. Reduced And More Predictable Costs

The costs to build and maintain business applications and IT infrastructure vary depending on the company and the vertical, but they can be substantial. For smaller companies and startups, technology always has been an especially prohibitive barrier to entry.

However, it's possible to trace a great deal of this cost back to the labor, training, and downtime required to adopt new technologies or expand infrastructure without outside help.

On the other hand, managed service providers already know the product, how to install it and how to maintain it well after launch day. For lots of providers, this helps whittle the cost of IT projects and business functions down to the essentials: technology and talent.

2. Access To The Latest Technology

MSPs don’t only help lower costs. They also introduce an element of future-proofing into the client organization, insofar as anything can be “future-proof” these days.

When manufacturers use their in-house talent and resources to bring IT projects to fruition, they might get feature updates and support for several iterations of that hardware. And their staff can probably keep pace with the changes well enough for a while.

But eventually, the technology will evolve, and the company will need to change with it. On that day, things essentially start from square one as the manufacturer goes about updating their hardware and software to remain competitive.

MSPs can ease the transition between technology leaps and help manufacturers maintain access to the latest features when they become available. Instead of making a new set of IT investments every few years, and watching their software become less useful and relevant, manufacturers maintain their contract to receive updates and new features more regularly.

3. Robust Cybersecurity And Risk Management

Most businesses under the sun rely on digital platforms to one extent or another. These present tons of opportunities, but they also create vulnerabilities.

Cloud computing services, communication technologies, smart factories, and IIoT devices and many other innovations expose manufacturers to data loss and potential IP theft if they fail to implement and maintain them. Manufacturers today store some extremely high-value data, making them one of the most frequently targeted industries among cybercriminals.

For managed service providers, dealing with technology’s vulnerabilities comes with the territory. It’s not an afterthought — it’s central to their mission and purpose if they take themselves seriously.

4. Higher Productivity And Lower Downtime

Nobody needs reminding that downtime can cause substantial problems in manufacturing. In glass manufacturing, downtime might cost $15,000 per hour. On an oil rig, the cost of going dark for one hour could be around half a million dollars. Copper mining? Up to $1.5 million per day in the worst cases.

Attentive, 24/7 support is another feature of any worthwhile managed service provider. Manufacturing technology today poses a bit of a “harder they fall” proposition. Smart manufacturing technologies and IT and IIoT systems provide significant value, but as they grow more complex and add more value to the enterprise, the cost of losing productive time rises.

Manufacturers with MSPs maintain higher productivity because they have a knowledge resource on hand that can save them countless hours of fruitless troubleshooting. MSPs should even provide some uptime guarantee in their service-level agreement, which is something you can’t get from a system built and maintained by in-house personnel.

5. Compliance With Emerging Regulations And Quality Standards

Every technologically advanced industry and company finds itself held to higher regulatory standards every year. Manufacturing is no different.

It will only become more vital as digital manufacturing evolves, as manufacturers do more business directly with the public instead of with middlemen and as the industry achieves mass customization capabilities. Medical device manufacturers, food and beverage companies and aerospace and automotive companies are just a few of the verticals held to stringent quality and cybersecurity standards.

MSPs can introduce automation into compliance, thanks to new ways to measure and maintain product quality, capture and audit enterprise data and store and transmit customer data securely.

How MSPs Position Themselves As Value-Adding Partners

Handing over business functions to an MSP involves trading a la carte IT expenses for a more convenient monthly or yearly “subscription” model. Over the service period, the provider remains bound by quality, communication, uptime and performance metrics as laid out in the service-level agreement.

New and established manufacturing companies alike have a lot to gain from the MSP business model. For seasoned manufacturers, one of the benefits involves reconciling legacy equipment with newer, more advanced additions to the factory floor — a common pain point today for manufacturers.

For newer manufacturers, the appeal lies in substantially streamlining the work and lowering the costs associated with getting a technologically advanced factory or distribution center off the ground. And it frees up capital from what would have been a full IT department that they can spend elsewhere, like on hiring talent associated with the company’s niche rather than with supporting functions.

Another chief benefit of the MSP business model involves avoiding problems rather than reacting to them after the fact. Managed services contrast on-demand outsourcing and the break-fix model, where the service provider initiates work or performs an update only when needed and bills the client one job at a time.

From the client's perspective, this acts as a sort of insurance policy. Service providers must know how to communicate about this distinction and demonstrate how choosing a modest, ongoing service cost is wiser in the long run than getting hit with large, intermittent expenses when something breaks or needs an upgrade.

For MSPs, this presents a challenge regarding answering questions posed by potential clients. It might feel counterintuitive for some company owners, but managed services are not a commodity and should not be thought of as one. 

IT has become the backbone of modern business, whether it includes enterprise resource planning, cloud storage and computing, network architecture, communication platforms, Big Data analytics, the Industrial Internet of Things (IIoT) or something else. If you own a managed services company, you probably field inquiries all the time from interested parties who've compared your prices to your competitors'. How can you answer them?

You can start by answering a set of questions for yourself, none of which are explicitly about the cost involved. These inquiries are about value and ROI, some of which aren't as tangible as the budgetary line item your MSP represents for the client company. If you need clarity on how to communicate the value you provide as an MSP, here's how to frame it:

  • Does the service product help the client become nimbler and more competitive in their market?
  • Does the service provider have a technology roadmap in place? Could the client adopt new technologies as quickly as competitors without an MSP?
  • How — and how quickly — does the service's cost provide a return on investment in the form of bottom-line-boosting efficiency improvements? How does it improve the speed of innovation within the company?
  • Is the managed services provider helping the client prepare for and keep pace with new technologies, or are they only playing catch-up?
  • How quickly can the MSP react to market trends? How much faster is this reaction time compared to a company "going it alone" within IT development?
  • In what ways is the MSP a business partner, rather than a party in a business transaction?
  • How quickly will the managed services translate into a faster time-to-market thanks to improved organization and communication within the company?

MSPs Bring Simplicity To A Complex World

In taking on many of the IT responsibilities that have become central to manufacturers’ success, MSPs leave the client free to remain focused on their core competencies. This ability allows them to improve existing product lines and bring brand-new innovations to market.

Managed service providers can position themselves as essential, value-adding partners to today’s manufacturers. They bring simplicity to a world that is growing aggressively more complicated by the day. That’s something you can pay for, but you can’t put a price tag on it.

About The Author

Megan R. Nichols is an industrial writer for sites like Thomas and IoT Evolution World. Megan also publishes easy to understand manufacturing articles on her blog, Schooled By Science. Keep up with Megan by subscribing to her blog.