Remote Infrastructure Management: Best for Cutting OP EX Costs

March 6, 2011

On occasion we invite guests to write our blogs.  Vishal, head of Byte Technosys has taken his firm to a new level simply by providing the best of breed RIM service.  The blog below is from Vishal Vasu, Director at Byte Technosys, India.

Remote Infrastructure Management (RIM) services will be the next growth engine for the offshore service industry as reported by leading consulting agencies and media. In fact, the global RIM industry has grown at more than 80 per cent CAGR from US$2 billion in 2006 to US$6 billion to US$7 billion in 2008 where India has been a significant beneficiary. A common question that would come to our mind is – with the industry hit by recession in 2009 and with the dark clouds of recession still looming on the horizon of 2010, what potential does the RIM service market hold in the future?

RIM makes more sense not just in terms cutting costs during recessions but more as a business strategy. Today enterprises leverage the power of IT to streamline their key business processes and gain a competitive advantage. Even with the investments already made, the key issues relating to application performance, scalability, security, management and effective utilization are mostly unresolved. Apart from helping to reduce the overall IT Infrastructure Management costs, a well structured and managed RIM relationship can bring significant benefits.

Flexibility of Service
Customers hiring service providers have an advantage here as they can align the business needs with the services provided by the Service Provider. Services can be flexed to meet peak times and loads, mission-critical and non-mission critical or a combination of both. This type of flexible pricing model and service delivery helps in apportioning the infrastructure management costs.

Domain Expertise
In this highly volatile IT industry it is hard to keep up with the latest technology trends and it is almost impossible to have on pay roll a staff that can match the ever demanding and changing face of IT technology across all segments. A RIM service provider can add value here as they have diverse IT staffs which are at a client’s disposal, working 24×7. Moreover, these specialists are constantly updated with the latest technology trends via internal training programs, technical training programs from vendors, etc.

This basically helps companies to gain a competitive advantage as it helps to reduce the time to market. Companies can take the bold steps of adopting and switching to new technologies to gain a competitive advantage. Serious service providers in the RIM industry would normally have alliances in place with leading technology suppliers and as a result clients can also enjoy a single window of service from them with an assurance that the team working on their projects would be capable of handling the technology and related needs.

Visibility and Control
Companies retain full control of its strategic components such as physical IT assets, technology refresh, policy and architecture which provides visibility into the availability, performance and utilization of each component. Many of the established RIM suppliers have embraced the ITIL framework which lends itself to RIM very effectively. Putting the collected data in to this type of best practices framework provides lot of insight and visibility. This visibility further enables companies to take control of the situation, make informed decisions on future investments in IT and improve current service levels.

Reduced Costs
Remote Infrastructure Management not only assists in reducing the manpower cost of managing the infrastructure, but also brings down the costs related to future infrastructure investments. It has been reported and endorsed by agencies like McKinsey and NASSCOM that outsourcing the infrastructure management services can save dramatically reduce the labour related costs by 30% to 40%. On the other hand, companies can also reduce costs associated with future infrastructure investments using expertise of the service provider by way of infrastructure optimization, standardization using industry best practises and consolidation using virtualization technologies.

Proactive Services
Most of the time RIM services engagements are driven and governed by SLA’s (Service Level Agreements). Service providers, in order to maintain the SLA, invest in to software and technology that enable them to gain an insight on failing components in the IT infrastructure, usage patterns, thresholds, etc. These tools enable a service provider to provide 24×7 proactive monitoring and management via a Remote NOC (Network Operations Centre). This helps to resolve issues in a faster and structured manner.

So, in today’s fast paced and ever changing IT world, RIMs makes more business sense and CIOs have to step back and ask themselves what they’re trying to accomplish with infrastructure outsourcing. Cost savings, optimization, transformation or efficiency? CIO’s decisions on outsourcing infrastructure management are going to be driven by more than just cost savings and as a result it is also going to create a challenge for the service providers to tweak their service models to show more benefits and not only cost savings.


The True Cost of Hosted E-Mail Solutions

September 19, 2010

Most businesses take e-mail as a given. However, the true costs of managing e-mail accounts are seldom assessed. As an illustration of the costs, assume a Small to Mid-Sized Business (SMB) with 1000 e-mail boxes for non-IT users, four servers to service the accounts and Microsoft Exchange Platform. Further assume that the IT group gets about 3000 requests on the average annually.  Requests include account set up, password reset, backup, & restore, synchronizing the e-mails with PDAs such as iPhone and Blackberry, and other support.   To properly support the users, two skill sets are required:  helpdesk support and exchange administration.  If the SMB maintains the expertise in-house, hosting costs, staff, virus and spam filtering and Exchange license costs are in the neighborhood of $300,000 to $400,000. It effectively amounts to $350 per user per year.  There are essentially two options:

Option 1:  Outsourcing to a hosted e-mail solution and maintain the helpdesk in-house.

Option 2:  Outsource to a hosted solution and outsource the helpdesk.

Option 1 Analysis:  Typical costs of hosted e-mail solutions range from $10 to $20 per mail-box per month.  If you add a minimum of two support personnel, the costs are not significantly different from in-house costs.  However, the service levels are significantly better.

Option 2 Analysis:  The challenge here is that outsourcing helpdesk for low volume of requests actually results in higher costs.  The primary reason is that most firms providing outsourced helpdesk charge between $25 to $60 per ticket or $30 per user per month.

For this reason, most SMBs have just managed e-mail in-house.  There is an alternative solution.  It takes advantage of the Global blended model more typical of applications outsourcing.  The solution is not to use hosted e-mail, but use hosted servers and use RIM (Remote Infrastructure Management) to manage the servers and off-shore helpdesk.   Although one individual typically is required on-site, the overall costs are significantly lower.  Many off-shore companies now offer a per ticket charge.   These costs are usually in the neighborhood of $4 to $10 per ticket.  Remote infrastructure management is typically $100 per server per month.   This implies that SMBs can reduce their costs by over 40% annually.   The best part is that the service levels are significantly higher than traditional e-mail hosting solutions.  Most Fortune-1000 companies have taken advantage of these benefits.  The growth of focused niche Service Providers will pave the way for SMBs to take advantage of the blended global sourcing models.   The challenge is to find the right Service Provider.  Brokers who connect SMBs to Pre-credentialed Service Providers accelerate the search and contracting process.

Notes:

Industry analysts have identified Self-Service as an area of high return on investment derived from reduced cost per incident, enhanced agent utilization rates and customer satisfaction improvements.

Case in point the average fully-burdened cost per incident:

  • Walk Up            $29.30
  • Phone               $27.60
  • Email                $21.67
  • Fax                   $18.90
  • Chat/IM             $17.90
  • Self-Service       $13.50

* Help Desk Institute, Practices and Salary Survey

Research indicates that agent efficiency in a typical call center is 75% – not an acceptable level in tight economic times.


Labor Arbitrage Models Will Fail

July 18, 2010

I wrote a blog in the BPO network with the same title – but as I pondered it applies to the off-shore development market as well.  In the BPO blog I staretd with “BPO initially started with the need to focus on core services, but economic benefits were quickly realized as BPO providers gained economies of scale and scope. The prevalence of BPO quickly became one of labor arbitrage. Although many BPO providers are focusing on value and moving away from just cost advantages, a majority of them still rely on the labor differential. In my view, this approach will fail. Not just for the rising labor costs, but the way people are getting help is also changing.”

Upon reflection this is equally true for off-shore development.  Global providers have not only moved away from the one or two country source models to multi-country (IBM and Tata are great examples), but they have also moved up the food chain.  One project I helped in determining the best sourcing strategy was decided not on cost alone, but deep expertise in the CPG (Consumer Products Group) industry.

The key here is that service providers should be looking at the business model, their target markets and build systems and processes that can be readily adapted to different verticals. To achieve this, they must develop innovation groups and fund them internally. R & D is not just for product companies, services companies must have R & D groups completely distinct from operations and projects to help the firms stay competitive.


Social Networking: The Role of Meta-Networks

May 28, 2010

Facebook, Twitter, LinkedIn, you name it – we have it.  Each of these are gigantic social entities, we can create networks within these entities.  For lack of a better phrase I call these meta-networks. I am sure the pundits have a better term for these.

Meta-networks have led to creation of sub-networks.  For example, in LinkedIn any one can create groups and sub-groups within groups.  Groups are either temporal or permanent in nature.  I call temporary groups social linkages.  A classic example of a social linkage was evidenced by the events in Iran which could easily have been suppressed without these meta-networks.  The viral effect of sub-networks and social linkages is phenomenal.  From the simple photo libraries on Picasa to the video libraries on YouTube to the custom enterprise networks on Twitter and Facebook, these meta-networks have created the opportunity to create content at will.  Will these meta-networks survive and become the mega enterprises of tomorrow or will they be gobbled by the existing enterprises? Just imagine if IBM purchased LinkedIn!


The other side of outsourcing

May 5, 2010

In the book “Outsourcing America: The True Cost of Shipping Jobs Overseas and What Can Be Done About It”  (Published in 2008 by AMACOM, a division of American Management Association).  The authors  Hira brothers  argue that outsourcing jobs overseas is deleterious to the health of the American Economy.  To add salt to injury, a University of California study concludes that 14 million white-collar jobs are vulnerable to being outsourced offshore.  Given the high rate of unemployment, outsourcing jobs is getting bad press.  Lou Dobbs of CNN made a career just on this topic.

Enough gloom, let me narrate a real story about a real company based in California that manufactures a Green Technology product, one that converts radioactive waste to harmless reusable materials.  This company has a patented product and builds its machine in California.  Guess where the big markets are for this product?  No prizes awarded for guessing China and India.  The more China and India buy these products, the more jobs in California.  Admittedly this is one example, and you cannot extrapolate on a single datum.  However, the message is loud and clear.  The way for America to forge ahead is innovation.


Rethinking “Does IT Matter?”

March 30, 2010

When Nicholas Carr wrote that infamous article (“Does IT Matter?” by Nicholas G. Carr. Harvard Business School Press, May 2004), most refuted Mr. Carr vehemently.  In 2004, it was hard to imagine a world where the Data Center is in the cloud and applications are delivered as a service.  Nearly six years later, most firms are shifting to the cloud, collaboration and social computing, and SaaS technologies have become common place.  But the question is does IT matter now?  It still does, but we must credit Mr. Carr with one thing – we are beginning to think IT as both an utility and an enabler.  The value of IT is best realized when it becomes a business enabler.


Time Sharing a CIO

February 19, 2010

For small firms, to have a full time CIO is a waste of valuable resources. Please note that the CIO who is time-shared should work and be treated as a trusted employee of the firm.  And the time sharing should be ethical  and ensure that there are no conflicts.   The CIO should play the role of an executive working with other C-level executives to develop and manage technology that is “synchronous” (aligned is over-used) with the business. It is critical that the CIO provide an appropriate governance framework that is not onerous.  In most small companies, the CIO may also have to play the role of the CTO for these firms and develop/manage the IT projects (using the portfolio approach) that is efficient, secure and provides true value to the enterprise.