As the concepts of software-as-a-service (SaaS) and managed services gain mainstream acceptance and adoption among enterprises of all sizes, we are also beginning to see some of the adverse side-effects of a rapid growth market taking hold.

For instance, every established independent software vendor (ISV) must now determine how they are going to play in the SaaS market. For some, this means simply offering a relatively unchanged, hosted version of their existing packaged apps to satisfy to ‘on-demand’ preferences of a segment of their customers. Microsoft’s Live Office and SAP’s CRM On-Demand offerings fall into this category. For others, it means fundamentally transforming their applications to make them truly web-enabled and versatile. Differentiating between the two camps is already becoming tough for some unsophisticated companies.

In the managed services realm, various players are just rebranding, rather than truly restructuring their traditional maintenance, systems integration and outsourcing services as managed service offerings to capitalize on the rising hype. These include technology vendors, resellers and carriers who are trying to combat the threat of independent managed service providers (MSPs) by convincing their customers that they can supply a comparable set of services.

I’ve published numerous commentaries about the shortcomings of these marketing efforts from a provider standpoint. But, the confusion which these deceptive marketing tactics create goes beyond extending the salescycle. They can also lead an enterprise to adopt an ill-conceived and even counterproductive sourcing strategy.

For instance, an enterprise recently asked THINKstrategies to help them devise a “managed service” strategy to address their application development requirements. The company had already outsourced its IT operations, and wanted to ensure that the outsourcer could accommodate a new application. The company recognized that part of the burden would fall on the application developer to comply with the outsourcer’s operational requirements. But, rather than assume the responsibility to bring the two parties together itself to make sure they cooperated on the project, the enterprise wanted to issue a separate “managed service” RFP to have a “managed service provider” facilitate the work of the application developer and outsourcer.

It was obvious that this arrangement would only complicate the situation, and THINKstrategies advised the client to leverage the existing contractual obligations of the application developer and outsourcer to ensure the success of the project.

However, the episode illustrates how the concept of managed services continues to be confusing for many organizations and may increasingly be misapplied or taken to an extreme to achieve a corporate objective.