Annual maintenance and more

IT outsourcing has percolated down to small businesses that are focussing on their core activities and outsourcing IT-related work to specialist firms, says Vinutha V

Two years ago, IT adoption by small businesses was minuscule at best. It was only in the last year that this segment realised the importance of outsourcing certain key IT activities such as annual maintenance, printing and application development to service providers.

Annual maintenance

All too often, small businesses do not have the manpower, domain expertise or infrastructure to manage their IT systems in-house. Due to time constraints and restricted resources, doing things in-house may be next to impossible. Outsourcing key IT infrastructure allows small businesses gain access to talented and cutting-edge IT expertise without having to spend time and money hiring new employees or training existing ones.

These are some of the reasons why companies look at outsourcing business processes such as IT, and it is clear that outsourcing can indeed have a significant impact on a company’s financial performance and operational activities. Increasingly, companies are discovering that outsourcing the annual maintenance of their IT infrastructure is a useful way to gain access to specialised skills in a cost-effective manner while enabling them to focus on their core business initiatives. Companies are looking to outsource their IT needs as this is a viable alternative to establishing costly in-house operations.

68 percent of the IMRB survey respondents outsource the annual maintenance of their IT infrastructure. Web hosting is the next most popular IT outsourcing activity with 21 percent; application development follows closely with 18 percent. 7 percent of the respondents outsource their printing requirements. The balance is spread across security, application hosting, communication and help-desk services. The percentage of companies outsourcing the annual maintenance of their IT infrastructure is high across verticals such as chemical, pharmaceutical, healthcare, manufacturing, auto components and logistics.

So what does this entail? IT infrastructure includes data management, mail servers and ERP systems. Take the example of Century Extrusions, a company manufacturing rubber lining. Its entire IT infrastructure is outsourced to the likes of Wipro. According to N S Suresh, System Manager, Century Extrusions, “System integrators have a better knowledge of products putting them in a position to give us better service while we concentrate on our core businesses. Above all, we can get a cost advantage of 25 percent by not hiring IT professionals and save precious time.”

Small businesses are increasingly finding that outsourcing IT infrastructure is key in their endeavour to meet customer demand. For example, Mandhana Bornemann Industries specialises in brand recognition products for garments, plastics and leather manufacturers who get 300 orders a day. “With 170 computers in the organisation, we have been able to save about 16 percent by outsourcing IT infrastructure such as data management, ERP, software and hardware,” says Pradeep Totla, Assistant General Manager, Corporate Finance, Mandhana Bornemann Industries.

A majority of small businesses are looking at implementing products that are in their reach. Further, they either encourage servicing through partners of the vendors or train their own people. As small businesses are hard-pressed for quick turnaround time to serve their customers, and the cost factor is always on their mind, outsourcing IT activities turns out to be the easier option. They want to spend less time troubleshooting and more time delivering strategic value. 3i Infotech, which was offering ERP products, is now looking at offering services as well. Explains Manoj Kunkalienkar, Executive Director of 3i Infotech, “Outsourcing in the small business segment is bound to happen. We plan to offer services in managing their entire IT requirements concerning ERP maintenance and database management. In the first half of 2005, we aim to sign at least 100 SMBs in the IT services space.”

Print or outsource?

Outsourcing in the small business segment is bound to happen. In the first half of 2005, we aim to sign at least 100 SMBs in the IT services space Manoj Kunkalienkar Executive Director 3i Infotech	Rapid technological obsolescence in printing technology results in the cost of consumables going up. This hits small businesses hard Thomas Suresh Anand Business Head and CTO WeP Peripherals

With technology obsolescence and expensive consumables being pain points when it comes to printing, print outsourcing has taken on a new dimension altogether among small businesses. The growth of a small business can be unpredictable. In such cases, they cannot afford expensive printers but they may need that print quality on some occasions. Ken Consulting, which is into finance and business solution services, requires over 7,000 printouts a month. The company outsources its printing activities to WeP Peripherals. Small businesses have realised that the advantages are on two fronts—cost savings and flexibility. Opines Totla, “Of the total cost advantage of 16 percent, printing outsourcing accounts for about 7 percent.”

Consumables are the heart of printing. Every year their prices go up and with them the running cost of printers keeps going northwards. Worse yet, companies cannot always be sure about the genuineness of consumables, and cartridge shortages are commonplace leading to price fluctuations. By outsourcing printing, a customer’s outflow on maintenance is reduced and the total running cost of printers comes down. This is the major reason why small businesses outsource their printing activities, the fact that it brings down the total cost of ownership (TCO). Comments Thomas Suresh Anand, Business Head and Chief Technology Officer, WeP Peripherals, “TCO includes product purchase, capital, consumables, time and maintenance. Rapid technological obsolescence in printing technology results in the cost of consumables going up. This hits small businesses hard.” Predominantly, laser-printing activities are in demand rather than impact (dot matrix) printing. Companies use impact printers for statement and invoice generation. For communicating with customers, companies prefer laser printouts. “In outsourcing printing requirements, the ‘pay for use model’ works well than an AMC,” adds Thomas. At this time, of its 900 print outsourcing customers, WeP Peripherals has 800 SMBs.

Security outsourcing in slow mode

Although awareness about networked security among small businesses is low at present, once they move up the value chain in terms of revenues and quality, they will go for security outsourcing Pravir Arora Director, Marketing Computer Associates

Currently, large organisations appear to have the best options—either to outsource the security solutions to a specialised security firm that shares their risk or employing sophisticated security skills in-house. Small businesses are especially vulnerable to malicious attacks because they cannot usually afford, or attract, personnel with security experience. Therefore, part-time employees or personnel with less than top-notch qualifications often manage servers and the LAN.

Awareness of security solutions is still quite low in the case of small businesses. These companies are still at the threat management level that entails anti-virus, anti-spyware and anti-spam solutions. Small businesses prefer purchasing point solutions (security software) from vendors. Rajalakshmi Singhal, Director, KEN Consulting affirms, “Presently, to manage our networking security, we have firewall, anti-virus and tools developed in-house. If the need arises to outsource these activities, we will look for service providers who offer security services with confidentiality and longevity.”

According to Pravir Arora, Director Marketing & Head-Channels, Computer Associates, “Although awareness about networked security among small businesses is low at present, once they move up the value chain in terms of revenues and quality, they will go for security outsourcing.” However, security outsourcing cannot be ruled out as companies that fall in the small business category, such as BPO, healthcare and pharmaceutical, may well opt for it. Maintenance of customers’ and patent-related information records are gaining importance, which is leading companies to opt for security outsourcing.

Critical drivers for IT outsourcing

For many companies, trimming the IT budget is the main reason behind outsourcing IT. Many small businesses find that selecting the right system can be a time-consuming and costly process. Hence they turn to consultants to help with research, decision-making and deployment of IT equipment and services. Other companies believe that outsourcing provides a practical alternative to expensive hardware and software acquisition and maintenance; they are able to benefit from the latest technologies while avoiding the high costs associated with purchasing, installing, maintaining and upgrading hardware and software. Outsourcing also enables small businesses to save on cost by avoiding potentially high upfront and ongoing investments in training and support staff.

Focus on core business

The time and resources required to deploy IT services can take away from a company’s primary business activities and impact the overall productivity. By outsourcing IT responsibilities, small businesses can concentrate their resources and attention on core business initiatives. Outsourcing can help resources within businesses do what they do best, without worrying about hardware problems, administering Websites or other IT-related issues.

Outsourcing can significantly affect a company’s financial performance and operations. Increasingly, companies are discovering that outsourcing is a useful way to gain access to specialised skills in a cost-effective manner, while enabling them to focus on their core business initiatives. As companies look externally to source their IT needs, it becomes evident that outsourcing can be a valuable alternative to establishing costly in-house operations.

vinutha@expresscomputeronline.com