Data is the key to unlock a refreshed vision for managed services

The Situation: Managed services is a fast-growing business segment for EY. With increasing competition from all angles, including the Big 4 and major systems integrators, EY is attempting to differentiate its services along the lines of insight and enablement. But to do so, it needs to help revive the tired vision that the “managed services” moniker represents, using data as the cornerstone.

At a recent analyst event dedicated to managed services, EY described its vision for managed services as finding new ways to integrate tech and domain expertise to drive value for clients.  This is a view that managed services build upon traditional business process solutions by adding these technology enablement and domain value levers. The shift to the digital enterprise, the pandemic’s forced reassessment of transformation, and the pace required to transform are driving what EY believes is a $360 billion market opportunity. What enterprise leaders need to understand better is whether these services are merely a tech-enabled way of keeping the lights on (and keeping them out of trouble) or truly enabling new ways of doing business – and how.

EY’s competition is rife across the supplier spectrum. From traditional peers in the Big Four to the major systems integrators (SIs) and IT and business process outsourcing (BPO) shops and now niche service providers and cloud software providers, enterprise buyers hear varied spins on managed services and its cousins BPO and ITO. EY has more than solid mindshare and brand permission to play in its core markets of talent, legal, finance and tax, risk and cyber, and sustainability. The problem? No matter what you label it, everyone is talking about “innovation,” “outcomes focused,” and “value added.” What’s unclear to enterprises is whether these more sophisticated services can lead to true strategic partnerships with co-developed outcomes.

EY’s managed services capability is founded on trust and reliability

EY’s client panel members, which included clients from Fronterra, Mondelez, and Baptist Health, described EY as a solid, reliable partner that takes away many of their headaches by alleviating a lot of cumbersome repeatable processes and doing it more consistently. This trust appears to be the bedrock of EY’s client relationships and is working well by fueling this $7 billion business, targeted to hit $12 billion by 2025. They described automated reporting, greater global consistency with tax filings, and delivering tenfold the promised efficiencies and cost savings. All these activities are legacy EY services; the twist now is that delivery is platform-enabled to some extent and that results are more outcomes and value focused for the client.

Data is the key to ensuring greater value with “managed services” The client relationships EY showcased are undoubtedly growing in sophistication, but what was missing was that holy grail of innovation that so many buyers crave and service providers attempt to provide. The missing link was an emphasis on data-driven services. Innovation is not about scaling through technology but taking client data and using it to rethink processes. The trouble with this from a managed services perspective is that data is enterprises’ Achilles heel, with governance issues and siloes preventing them from effectively gathering data and insights. Data issues are the top challenge preventing enterprises from reaching their strategic goals and hence innovation (see Exhibit 1). Adding to this organizational alignment and C-suite buy-in challenges, and it’s no wonder companies struggle to innovate and transform.

Exhibit 1: Data, alignment and leadership are holding back transformation

The Bottom Line: Fixing fundamental data issues is key to driving innovation and refreshing a faded managed services vision.

The term “managed services” is due for a refresh; it is a dinosaur of a term that in services traditionally meant platform plus people delivering processes. While EY uses it to signify more technology-enabled, value-added services, it still does not imply innovation or create a vision for this market opportunity. Whatever we call managed services in the future must convey the data-driven, innovative services that the industry is pivoting towards. EY’s advantage as an advisory-led firm is that the consulting side of the house can help drive some of these conversations with clients, but enterprises must solve their data issues to drive innovation in transformation initiatives. EY has demonstrated a lot of value for clients, but it falls just short of illustrating the vision for the future of these services around data-centricity.