Reducing Costs with Remote Infrastructure Management

Gartner’s (News - Alert) market overview of remote Infrastructure services worldwide predicts that by 2012, 50 percent of labor hours for global IT infrastructure service delivery for commercial clients will shift from on-site support to remote delivery.

The IT infrastructure outsourcing market continues to evolve. As firms struggle to focus on their core competencies and maintain their competitive edge, more emphasis is being placed on shedding costs and proving ROI on IT spend. Traditionally, large service providers offered on-premise IT infrastructure management services for customers. But for several years now, Remote Infrastructure Management (RIM) Services have been monitoring and managing all infrastructures pertaining – such as networks, data centers, servers, storage security, applications, end user computing and so on – outside the company’s offices. RIM today involves a combination of near-shore and offshore delivery models, with the promise of reducing operational costs and enabling investments in new technology.  

A McKinsey study estimated that the total market for RIM services has a potential of reaching $104 billion, of which $26-$28 billion is expected to be realized by 2013. Gartner has also forecasted that 70 percent of all North American companies will have RIM service contracts by 2012. Large IT services providers in India, especially, see infrastructure management as the next big source of revenue as demand for offshore application development and maintenance stabilizes.

When RIM Comes Into Play

RIM can include behind the scenes activities such as hardware support and management, or it can include managing user-facing services such as network management or desktop support. The range of IT functions for RIM includes:

• Data Networks (WAN/LAN)
• Desktops/laptops and related peripherals
• E-mail systems
• Mainframe platforms
• Servers
• Storage platforms
• User support
• Voice Networks

RIM can be undertaken as a partial service, only permitting the provider to manage or monitor a portion of the IT functions. Full service RIM involves the customer retaining its IT assets but handing over the management of their IT infrastructure to a provider or providers. The configuration of the RIM scenario depends on the client’s specific business drivers, internal capabilities, and strategic IT direction. Thankfully for buyers, RIM services today are designed to let the customer retain control of its IT assets, while eliminating the challenges associated with day-to-day IT operations.

Offshored RIM: Not Without Challenges

There’s no doubt that the prospect of reaping cost savings, productivity gains, follow-the-sun working models, and business model flexibility derived through taking advantage of offshore IT outsourcing certainly has been driving RIM adoption, even offshoring. However, choosing an offshore RIM service provider has several advantages, but it may not be the best choice for every company or line of business. The risks and additional management overheads involved with offshoring strategic projects get compounded when sending critical, real-time operational support around the world. Training, governance, compliance requirement, and political limitations are some considerations.

In general, the major concerns identified by senior business and IT executives with respect to offshoring include security and data privacy, language and accents neutralization, high-level business and industry-specific knowledge, and the lack of performance metrics. These concerns can be mitigated through a strong provider management and governance process that assures these issues are addressed well before any service is transitioned to a provider. CIOs should carefully evaluate their objectives and the involved trade-offs for infrastructure outsourcing. Is it cost savings, optimization, transformation, efficiency?

Data security concerns and strict regulations have inhibited growth of RIM outsourcing with verticals such as aerospace, state and local governments, defense and healthcare. Industries such as banking, insurance, and financial services have been leading RIM outsourcing and offshoring growth due to immense pressure on them to reduce costs and increase efficiency and productivity of the IT investment.

India: Leading the RIM Wave

As a dominant leader in all IT domains, India is the natural leader for providing RIM services on a global level. India has captured the majority of the global offshore market due to its mature processes, vast labor pool with desired skills, and the infrastructure necessary to manage the growth of RIM.

China is emerging as a potentially major player in RIM outsourcing, and several service providers are investing in China as part of their global delivery base. Network operation centers are being established and beginning to support RIM clients. Several European, East European and Middle East countries are also being positioned as centers for RIM delivery. With particularly strong experience in multilingual help desk support, Poland and Hungary are making serious advances into the RIM marketplace. Mexico and Latin America offer a nearshore alternative for RIM services for the North American market.

So what drives an enterprise to choose RIM for its infrastructure?

The key business drivers for outsourcing RIM services are cost reduction through labor arbitrage and utilization. Access to state-of-the-art tools and technologies, proven process and continuous improvement capabilities, highly skilled technical resources available on demand are the other factors spurring growth. Although sometimes exaggerated, the potential savings through the outsourcing of IT infrastructure may range as high as 20 percent to 30 percent. In fact, some organizations claim to have saved as much as 40-60 percent reductions in costs by reducing manpower, increasing performance efficiency and improving capacity planning.

Selecting a vendor with multiple locations, a large and diverse skilled workforce and robust systems help a customer organization better respond to the changing needs of its internal customers. The reasons why so many companies today prefer to outsource their infrastructure management go beyond saving costs to include:

• Process-based approach for efficient handling of issues
• Quality certifications to ensure adherence to standards and security controls
• Best practices and domain experts in place for standardization
• Risk Mitigation for assured business continuity
• Flexibility and Scalability to absorb spikes and dips in manpower or technology requirements
• Pre-emptive problem resolution through proactive monitoring and event correlation

Remote Infrastructure Management: Best for Cutting Operational Costs

Not surprisingly, the increasing interest in RIM services is essentially due to the prospect of reducing operational costs and increasing productivity in one IT function. However, buyers must realize that cost savings are not instantaneous, and the saving curve is quite gradual.

Constant pressure to reduce operational costs, prove ROI and a challenging business environments has been pushing CIOs to do more with less. Maturity of RIM delivery models and increased automation has made it possible to reduce infrastructure and management costs. However, RIM today is being actively adopted as a long term business strategy. Customers leverage the power of RIM outsourcing to streamline their key business processes and gain a competitive advantage, while addressing challenges associated with application performance, scalability, security, management and effective utilization of IT resources.  RIM outsourcing promises to deliver cost saving benefits because of:

• Flexibility of Service - Customers align their business needs with the vendor’s services, enabling the vendor and the customer to flex the delivery model to meet peak times and loads, thus apportioning the infrastructure management costs.
• Domain Expertise - Keeping up with the latest technology trends is difficult and it’s expensive to keep a staff on payroll that can match the ever demanding and changing face of IT technology. Outsourcing RIM eliminates this need and controls manpower costs since the vendors can provide desired skills on demand. Moreover, almost all RIM vendors constantly train their staff and upscale their skills. Analysts such as McKinsey and NASSCOM have reported that outsourcing infrastructure management services can save dramatically reduce labor related costs by 30 to 40 percent. 
• Infrastructure Costs – Outsourcing RIM brings down the costs related to future infrastructure investments as well. Customers don’t need to purchase new equipment or invest in scaling up to the latest technologies/software available, as they have access to the vendor’s resources and virtualization technologies.

Summary

RIM services have come of age in the era of the flattening globe. With the virtual elimination of global connectivity and bandwidth issues, business centers in the developed world can connect with service providers in low-cost, emerging markets. Global service providers are harnessing labor pools across the world to deliver low-cost yet effective IT infrastructure. Customers benefit from lower costs and potentially greater efficiency and flexibility in the support of their IT functions. RIM outsourcing makes more business sense in an environment riddles with competition, need for innovation and speed, and the quest for reducing operational expenditure. At the same time, RIM outsourcing decisions will be driven by more than just cost savings and service providers will need to innovate service and delivery models to show more benefits.