Infrastructure management

Focus on the core business and outsource the rest

2008 bore witness to many interesting infrastructure management projects. Sudipta Dev discovers that the dynamism in the market is all set to be replicated in 2009 as well

As organizations worldwide strive to control costs, one of the significant initiatives for them is offshoring the management of their IT infrastructure—that is a straight saving for them. With almost 80% of all Infrastructure Management Services (IMS) activities expected to be done remotely in the not too distant future, Remote Infrastructure Management (RIM) is touted as the ‘Third Wave of Outsourcing’. This, of course, presents a huge opportunity to those in the business of IMS in India, who had witnessed an interesting phase during 2008, marked by a reduction in IT spending and focus on increasing efficiencies.

In a decade that has been a witness to noteworthy development in the field of IMS, the 2008 gained significance on account of dynamic markets trends—moving towards consolidation, green IT, adoption of Software as a Service (SaaS) / open source and alignment efforts towards ITIL v3. This apart, the need for RIM has increased significantly, as IT managers have found value in getting work done from an offshore location.

Though 2008 saw economic turmoil across the world, the infrastructure management industry saw steady growth of around 15%. “There has been consistent demand for Capacity on Demand and the concept of RIM is now well accepted by the European market. This reflects the industry shift towards offshoring as a survival mechanism,” stated Hans Rooijmans, Head, Infrastructure Management, Logica. Indian companies that deliver remotely win a third of all IM deals in the UK. This trend is now observed in other parts of Europe as well. In fact, the company sees immense opportunities from the Nordic nations in Europe.

2008 has been a landmark year on account of an increasing level of awareness amongst large, medium and small enterprises about the business benefits of letting another agency manage the IT infrastructure. According to Girish Krishnamurthy, Managing Director, Kaseya India, “Many Indian companies started understanding the benefits of what organizations in the US, Europe and Australia had realized a few years back only last year.”

The rationale

The key factors that have propelled the growth of IMS are—cost and complexity of managing infrastructure in-house, lack of skilled technical manpower to manage the same and ensuring greater efficiencies.

Elaborating on the factors that have led to the growth in business, Keshava G Setlur, Senior Lead, Marketing (IMS), Infosys Technologies, stated, “With the cost of hardware infrastructure having dropped significantly labor has become a larger component of the overall costs. The current business environment is putting pressure to minimize cost of operations and businesses are exploring better ways to manage their IT infrastructure operations at lower cost levels—driving outsourcing and offshoring of infrastructure management.”

The business value of IT investments is the second-most important aspect. There is a strong need to deliver availability and service levels with an increased focus on process orientation and ITIL. “Business is demanding more from the investments that have been made, and this is where companies are looking towards providers who can manage their infrastructure better and deliver higher business value and service levels,” added Setlur.

Then there is the perennial problem of shortage of available and skilled labor, which is leaving companies with no other option but to offshore their IT management requirements.

Setlur conceded that an ageing workforce in segments such as mainframe particularly affects the availability of talent for businesses in those service lines. This is driving businesses to collaborate with providers with these capabilities who have deliver presence in high quality talent geographies such as India. Given the other factors of delivering higher business value and lowering of costs, areas such as automation and productivity improvement are forcing companies to consider offshore players seriously.

Business value

Managed services, when bought using the right model, are the best way to align IT and business in the most cost-effective manner. Ajay Soni, Vice President, IMS, Patni, said, “Since the success of managed infrastructure services is measured and controlled using tangible results (service levels), the enterprise experiences improved customer satisfaction resulting in improved productivity.”

The company implementing proper infrastructure management is the biggest beneficiary of the investment given the following benefits. According to Soni there are some key important business values—organizations can gain higher operational and financial efficiencies, can provide proactive monitoring and management, increases customer satisfaction and businesses can stay focused in their core business areas.

Increasing opportunities for the Indian providers are compounded by increasing levels of benefits for their global clients. “Clients are reporting high levels of satisfaction with our services, reflecting the business benefit they are deriving by partnering with us. This is especially so given the increased focus on business-IT alignment and pressure on controlling cost of operations while boosting the business utility of IT infrastructure,” stated Setlur.

Compuware had noticeable success in 2008 with Vantage, the company’s ITSM solution. “Vantage brings a unique proposition to our customers by virtue of being the only industry solution with solid integration of end-user experience, applications performance management and business service management solutions,” stated Sachin Khanna, Managing Director, Compuware, South Asia. In India, the company has seen success with some large customers from manufacturing, retail, BFSI, telecom and other verticals, implementing the solution through a direct engagement as a managed service through partners. All this has happened in a short timeframe thereby setting a platform for take-off this year.

Spending by vertical

Worldwide the key sectors driving the growth of the infrastructure management business have been the BFSI, telecom, IT, manufacturing and the government. India too has followed the same trend.

“Enterprise IT Management (EITM) solutions being industry agnostic are applicable across all industry verticals. Companies in retail, pharmaceuticals, communications, media and entertainment are in the process of actively evaluating these solutions,” pointed out Rajendra Dhavale, Director Technical Sales, CA India.

Every business needs to ensure that they are profitable, cost-effective and efficient and therefore every business needs ITSM. “ITSM is gaining traction in verticals such as BFSI, retail, telecom, insurance, legal, government services, education, retail, healthcare, pharmaceuticals among others. What is interesting is that, today, mid-size companies are showing the highest levels of ITSM adoption,” remarked Khanna.

Advantage India

According to Nasscom, India has been a significant beneficiary of RIM. A joint study by Nasscom and McKinsey predicts that India is positioned to capture $13-15 billion of the global opportunity in RIM by 2013. The country’s share in the current RIM market ranges from $3-4 billion. This growth is also expected to result in the creation of around 350,000 additional jobs in the industry.

Traditionally, large service providers offered IT infrastructure management services within the premises of the company. RIM involves monitoring and management of all infrastructure pertaining to networks, data centers, servers, storage security, applications and end-user computing outside the company’s offices. “RIM can be offered through a right mix of near-shore and off-shore delivery models. It can become a vehicle for reducing costs from operations and enables IT heads to think freely when it comes to new technology investments,” stated T Chidambaram, Senior Manager Product Marketing (Sify IMS), Sify Technologies. He added that the current trend is more offshore services (predominantly on account of the cost factor). The evolution will be more towards a mix of offshore and near-shore mix rather than pure offshore delivery (for want of closeness to the service delivery team).

Many vendors are now beginning to believe that RIM is going to be the next big source of revenue and are increasing their delivery capabilities to attract more business from outsourcing companies. “Remote Infrastructure Monitoring and Management (RIMM) capabilities are like SaaS services, complete outsourcing, own infrastructure but outsource management, selective outsourcing to meet their requirements,” stated Sharad Sanghi, CEO and Founder, Netmagic Solutions. While ITIL framework acceptance has been a common trend across the various providers, there no clear trend/consolidation on tools being deployed. Many players have taken an approach to integrate multiple tools into a single homegrown dashboard/portal. One of the major milestones for Netmagic was the launch of its RIMM services for the Indian market—to address enterprise challenges of managing multi-platform and multi-vendor solutions to support mission-critical IT requirements on a 24x7 basis in June 2008. Net magic’s RIMM services are a complete tier of offerings for Indian enterprises providing customers with capabilities to accommodate their varying IT operation requirements.

Remote Infrastructure market is still evolving and service delivery models are evolving as well. Sanghi pointed out that at one end there are service providers leveraging RIM to optimize their existing delivery cost on IT large outsourcing contracts, on the other end there are service providers that provide shared services with per device pricing. “Given the size of the market and varied requirements, we believe that there will be coexistence of multiple models,” added Sanghi. Frost & Sullivan has been predicting the RIM market for India to show annual growth rate of 30%. However, there could be a significant acceleration in this expected rate of growth due to the severity of the recession.

“We almost tripled our revenues from the RIM operations in India over the last year. Apart from that we expanded our operations in Chennai and now we extend our RIM services to almost every country in Europe from India,” stated Rooijmans with evident pride. Asserting that the future of IM is RIM, he added that in fact in the coming five to ten years, IM will be perceived in the same vein as RIM. 80% of all the IM activities will be done remotely and RIM will be the default standard for managing IM in the near future. This apart, RIM will no longer be optional but it will become an inevitable service for most companies. Moreover, customers would like to buy IM as a service. “Additionally owing to lower hardware costs, automation and usage of RIM the costs for managing a server would become less then the cost of managing a desktop,” felt Rooijmans.

Concerns about quality of services and solutions delivered would need to be the immediate focus area. Investments in building IP and delivering services through innovative yet reliable IP would play an important role. “Given the increasing scale and scope of responsibility of RIM providers, those who demonstrate maturity in terms of important business issues such as change management would clearly be sought after. Another key factor in the evolution of RIM services is the maturity in the engagement model, wherein the provider ‘signs up’ to help the customer achieve their intended business outcomes. This will help customers align their IT investments and spends better with their business needs,” stated Setlur. In terms of technology, various trends are emerging, and these are at various stages of commercial and large-scale adoption. As technology evolves, more remote services will be delivered remotely. Verticals such as banking, that have not fully exploited RIM potential, will do so. Local language support will be provided through proximity centers, with non-language dependent work done from offshore.

At a larger level, there will be a shift from infrastructure availability as focus, to application availability driven by greater alignment of infrastructure investments with business value, felt Setlur. Standards and benchmarks will evolve, leading to better ways to measure impact and performance of infrastructure services. This apart, green computing will be a large factor in the overall evolution of infrastructure services.

RIM in 2009

The slowdown has made it necessary for organizations to cut costs and align IT spending with their business goals. This will create opportunities for RIM providers. Business continuity and disaster planning is yet another factor that is set to drive the market for RIM in the near future.

2009 will be marked by great dynamism in the market that is constantly evolving. “The drive will be more towards utility computing, cloud computing, virtualization and the likes—these technologies can maximize utilization,” said Chidambaram. In the backdrop of the economic crisis, companies are looking to maximize returns from their existing investments and Sify’s target will be to streamline its services with respect to that.

“We recommend the output-based model delivered through SaaS as it is much easier to buy compared to some other models. Also, cloud computing would be the next big wave like virtualization in the RIM arena gaining a lot of ground in 2009. On the process front Service Catalogs and Run-book Automation would get the most focus this year,” predicted Soni.

Considering the current focus on virtualization, green IT, governance, risk and compliance; Dhavale felt that organizations would look forward to the following:

• Managing and securing data centers
• Automating and optimizing data center operations including energy management and end-of-day job operations
• The increased emphasis on corporate governance and risk management, due in part to a series of recent corporate scandals, is another factor that will help drive adoption of centralized risk management approaches.
• In short, organizations would be looking forward to unifying and simplifying IT management for greater business results.

“Industry reports reveal that approximately 70-80% of vendor IT outsourcing proposals hitting the market today contain some form of offshore infrastructure delivery of services,” stated Soni. While customers are looking at their own infrastructure consolidation, one option is becoming more and more eminent and that is of using a shared platform. Offshore service delivery combined with shared platforms like software as a service or infrastructure as a service brings in huge reduction in operational expenses.

As far as the RIM market is concerned, India is well equipped to take on a proportionate share of the opportunity. “Our experiences gained from the rise of the Application Development and Maintenance (ADM) and BPO industries, will help in increasing capabilities of India-based providers,” remarked Sanghi. Management of low-cost talent and the country’s reputation as the IT offshoring center of the world is an added advantage. In short, the key drivers towards the growth of RIM in India in 2009 could be—lowered device prices, higher technology quotient, wide usage of technology across industry, compliance requirements, growing shortage of qualified talent, increasing cost of IT infrastructure management and retention issues with IT talent.

2009 will be an interesting year. “IT is an enabler but it is also a cost center. IMS can save cost and bring about efficiency. The heightened awareness witnessed in 2008 will start witnessing implementations in 2009 and beyond. How will companies enable this cost saving of 30-40%? “They will move out of maintenance to management mode, move from reactive to proactive mode—not just a move but a transformation aligned to business goals. Success is their in financial delivery, in change management,” asserted Krishnamurthy. Service providers would also need build efficiencies and move from AMC model to SLA model.

The current recession has opened up many doors of opportunities for the cost-effective RIM. Irrespective of their size of business or area of operation, most organizations understand that tough times do not last but tough businesses do.

sudipta.dev@expressindia.com