by July 2, 2007 0 comments

Gone are the days when you could manage your entire IT infrastructure using a
handful of people. Today, the number of IT functions across all enterprises has
grown by leaps and bounds. IT infrastructures are becoming increasingly complex,
and crossing geographical boundaries. In such a case, you need a bigger team to
manage your setup. The question that arises from this is, whether to build an
inhouse team to manage it all, or outsource parts of it to a third party.

Increasingly, more companies are using the latter option and outsourcing
parts of their IT infrastructure to managed IT services providers. This leads
one to several questions. How do you decide which parts of your IT
infrastructure to outsource and which ones to keep with your internal team? How
many service providers should you approach and what should be the duration of
the contract with them? What should be the terms in such a contract? For which
services can you easily find a managed IT service provider, and how should you
choose the right managed service provider?

Today, there’s a huge market for managed IT services, and in this story,
we’ll analyze the key trends that are shaping this market.

By and large, the easiest functions to outsource are the non-business
critical ones. The difficult part is in defining what’s non-business critical,
since IT is increasingly being subjected to business norms. Something that’s
extremely business critical for one organization, could be ‘not-so-critical’ for
another. That’s why, there isn’t a ‘one size fits all’ answer to this.

Pre-requisites before outsourcing
1. Split your IT operations into service-enabled models
2. Gain the ability to demand levels of services and performance from your
IT, bound by penalties for non-performance
3. Reduce your operating expenses, salaries of IT staff, training costs,
technology up-gradation costs
4. Get a single point of contact for all your IT infrastructure and solution
5. Leverage the experience of your MSP and skilled manpower to solve your IT

What to look for in an MSP?
1. Sufficient and qualified manpower for your needs
2. Prefer it to be near to your location
3. Ability to provide you a consistent and qualified single point of contact
4. Ability to work in an ecosystem of your IT vendors
5. Have sufficient experience and track record with other enterprises in
your line of business
6. Financial standing to commit to the deal
7. Reputation and standing in the industry

The logical way to decide between outsourcing a function or keeping it
inhouse is to weigh both options in terms of cost and downtime. How long would a
service provider take to resolve a problem? If you needed it to be done faster,
how much would be the additional cost for it? Would it be more cost effective to
have inhouse staff handling it instead?

For instance, increasingly, most companies are implementing remote
infrastructure management, and many others are outsourcing the management of
their branch offices. In both cases, if you were to do it inhouse, then you
would need to find the right manpower and train them. As the first one can be
quite a tedious and monotonous job, you would also need to keep them motivated,
as retaining the manpower would be a challenge otherwise. In the latter,
ensuring that they’re trained and equipped enough to manage the branch office is
a task in itself. It makes sense therefore, to outsource such functions to a
service provider. Moreover, now managed IT service providers are getting the
attention of CIOs on more focused areas such as security, storage, WAN, etc.

Today, CIOs’ role is to formulate the IT plans, assess requirements and
manage all IT functions. In order to outsource any IT function, you should
divide your IT functions into smaller groups, and then identify the areas that
can be outsourced, be it hardware or software. After deciding what to outsource,
then the next challenge is to choose the right vendor as per the IT budget and
quality of service desired.

The advantage of using managed IT services is a CIO can concentrate on new
projects without worrying about infrastructure-related issues. Even if something
were to go down, it would be the managed service provider or MSP’s job to
rectify the same.

Why outsource?
If you manage the entire IT yourself, then you need an IT staff in-house
that is well trained to handle the technologies, platforms, hardware and
software that you use. Secondly you have to pay for their salaries, training,
etc. Further, due to the high attrition rate in the IT industry, your
organization’s HR department will need to spend time finding new professionals
with sufficient skillsets and in training them. While this is happening, the
technology outside is also changing. If you change your deployed technologies,
you again need to train your IT staff. After that you have issues like managing
multiple vendors and their associated AMCs and costs. The more the number of
vendors for an organization, the more complicated things become when a problem
occurs. So, try to minimize the number of vendors, as much as possible. On the
other hand, the MSP can act as a single-point of contact for all your needs.
While some vendors specialize in one or two areas (like networking, hosting,
etc.) many others provide end-to-end solutions. The end-to-end providers further
outsource parts of their worok to other down-level MSPs.

With the kind of services being offered today, you can outsource your entire
set of IT functions, including implementation, products, sourcing, and
maintenance. You can even ask the vendor to set up the whole thing for you, run
it for some time and eventually hand it over to you to run after you have the
required skillsets. Such contracts are fairly long term, to the tune of 10 years
and longer, and the deals are worth huge amounts of money. The feasibility of
such long-term deals needs to be evaluated. Does it make sense to be locked in
with a single MSP for such a long period? What if it doesn’t work out after the
initial few years? The best approach in such cases would be to get into an
annual contract and renew it based on what the MSP has delivered. Alternately,
organizations can also choose to outsource only parts of their infrastructure to
an MSP, and sign short-term contracts. We’ll now look at the services that can
be outsourced.

Web hosting services
This is the oldest service that can be outsourced, and just about every
organization avails of it. Organizations can either take up space for their
website/portal or for their email. What’s new is that increasingly, service
providers are bundling more features in their hosting services. Managed mail
services, for instance, are a key trend nowadays. So in addition to providing
basic mail services, a service provider would also offer security services like
anti-virus, anti-spam, etc. For web-hosting, the service provider would offer
things like content filtering, secure access, etc.

Business applications
This is another area which is picking up slowly. The main concern for a CIO
is to provide seamless performance on mission critical applications. In order to
do this, a team of IT experts is needed to keep continuous vigil on the
applications performance, delivering quality of service and maintaining 24×7
uptime. As finding and retaining experts for such a job is not easy, outsourcing
this job can be quite feasible. Another trend that’s taking shape nowadays is
SaaS (Software as a Service) where the application is hosted with an ASP
(Application Service Provider). It’s a hot new trend, but out interactions with
several users has revealed that they’re reluctant to opt for this model. Several
reasons have emerged for this. One of them is customization. Users are
apprehensive of the level of customization that a SaaS vendor would be able to

Infrastructure mgmt
There are several things that come under Infrastructure management. These
include the hardware, network, and WAN links. These can be further broken down
as well, depending upon the size of your network. The hardware, for instance,
can be broken up into desktops, servers, and even power and cooling equipment in
the datacenter. The network can include switches, routers, and even WAN links.
Increasingly, organizations are consolidating their IT infrastructures and
providing remote connectivity to the branch offices. In such a case, ensuring
that the WAN links are up is absolutely critical. For an organization, such as a
bank, with hundreds or thousands of branches across the country, hiring manpower
to manage all these WAN links can be a nightmare. This is where an MSP can
proove to be very beneficial. The MSP would do all the running around for you,
which could involve things like several trips to the telecom provider or the ISP
for lodging complaints.

In an enterprise, there are so many other security issues including identity
management, intrusion detection, information security, etc. Even rolling out
security-in-a-box solutions has its own challenges. Identity management today
comes in several forms, starting from user authentication till signing him off.
In the interim, the process also needs to ensure smooth and transparent handoffs
to external applications and devices. Enterprises have a lot of choices today in
what they can implement. Monitoring and proactive control of the security
deployments vis-a-vis their health and performance are now done on an online
basis. Here, the MSPs are tasked with managing the security of the servers and
clients, along with the network and the
applications that run on it. Security devices are now built around the
Integrated Services Architecture, a model that allows networks and equipments to
converge. The problem with security is that if there is an outage, the
enterprise can have big losses and that too not just confined to business part.
Therefore, enterprises going in for managed security should first quantify the
losses. You need to evaluate the types and value of these losses and then
evaluate the prospective MSP on the basis of this. They should also make such
terms a part of the SLA which makes the MSP responsible and more interactive.

Storage and replication
With the rapid growth of IT, storage requirements are increasing in an
enterprise like anything and managing it is becoming a big headache for the CIO.
They get requisition for additional storage requirements on a regular basis
despite storage capacity planning. Managed service providers are also offering
storage management and replication services. By outsourcing the storage and
replication process, CIOs don’t have to worry about storage outage for their
application or new projects. They can get any amount of storage, whenever they
want, plus get the benefits of data security and quality of service. Reliance
has recently started giving managed storage services, where they provide data
security and replication services.

Disaster recovery
Every enterprise application and data plays a critical role in business.
Therefore the CIOs can’t afford to have any negligence or downtime in that part
at any cost—the reason for the concept of disaster recovery gaining importance
these days. In today’s scenario every big or small enterprise has some kind of
offsite disaster recovery site, so that if business applications go down from
the core, the disaster recovery mechanism will shift IT operations
(mission-critical applications) to another DR site without losing the business
continuity. To maintain a DR, enterprises would require skillsets, connectivity
and infrastructure on another location, which means huge IT budgets. A major
challenge for a CIO is to manage both the sites in sync with their IT team. Or
if for any reason DR doesn’t work at time of crisis then blame comes to CIO. To
ease such pressures and to save IT budgets too, CIOs are now thinking on moving
toward managed DR services.

Remote monitoring & management
In order to have smooth functioning of applications running inside your IT
infrastructure, a continuous monitoring team is required full time plus experts
who can analyze the performance of your IT infrastructure and take appropriate
actions in case of performance degradation. Same also applies to network
monitoring. Today, many MSPs offer remote monitoring and management services
This evades the performance management and network-related issues from CIO’s
head. Most of the banks outsource their network monitoring part, which gives
them maximum up time with performance.

Building a datacenter requires a significant IT budget and time to set up.
Plus there are other issues like choosing the right hardware vendor, power
requirements, cooling needs, etc. Therefore, today, organizations have the
option to have outsourced datacenter services rather than build their own. A few
months back we did a survey on datacenter and found that by and large 51% of
enterprises were running their own datacenters, while another 47% had either
completely outsourced it or were using a mix of both. So data center outsourcing
is a hot trend these days.

VPN networks
Managed VPN services follow the same trend as datacenters. Rather than
setting up your own infrastructure for VPN connectivity, an MSP can provide you
connection end-points while also managing it transparently. Before taking such
services the CIO should work on common SLA parameters including round-trip
times, the supported protocols (IP-MPLS, PPP, HDLC and ATM), security (IPSec),
redundancy, reporting and so on. Now with MPLS VPN, cost of incurring VPN
network has become affordable for enterprises. This solves the connectivity
issues that CIOs earlier used to have, while connecting remote and branch
offices with lease lines. Most telecom service providers today are providing
managed VPN services.

What to outsource and what not to?
It’s a difficult call for a CIO while deciding what to outsource. Today,
almost all IT functions can be outsourced to an MSP. But before outsourcing, CIO
has to first evaluate organization IT infrastructure and segregate the IT
functions that he can outsource easily without affecting the business. Plus at
the same time CIOs also would like to keep control over all IT functions that
they are outsourcing.

In some cases critical business application and data can’t be outsourced at
any cost. For example, in financial sector financial data is very critical, so
they can’t afford to host applications and data server to an MSP premises, nor
would they want any vendor to manage it.

However, functions like networks and connectivity can be outsourced, because
they don’t have other options. They have to tie-up with some MSP to connect
their branch offices. Security of data and application is another area that can
be outsourced because of limited skillsets available. Whatever’s outsourced, a
considerable amount of time must be spent in finalizing the deal and defining
the SLAs.

Types of services models
There are various services models offered in this sector depending on the
client’s requirements. Given below are the key services models used by MSPs

SLA-based model
The SLA-based model used by MSPs is one, where both client and vendor decide
and agree on certain deliverables. And based on the SLAs MSP provides services
to the client. If the MSP breaches any of these SLAs, the client penalizes the
MSP, according to the agreed norms. These are normally short-term contracts for
1 to 3 years, after that both parties can review the SLA contract for further

Insourcing and co-sourcing of people
In the in-sourcing model, the MSP provides time and skilled IT manpower to
manage the IT infrastructure or other IT functions of an enterprise. The benefit
is that the enterprise would never have short-fall of skilled manpower, whereas
in the past, retaining manpower was a key challenge for an enterprise. However,
in co-sourcing both internal team and vendor work together to support IT.

Shared services model
This is a popular trend in managed services. You go for outside management
of your IT to decrease your operation expenditure. When an MSP creates a common
pool of resources for its customers and provides its services out of that pool,
the cost of operations for the enterprise goes down.
For instance, an MSP providing managed network or security services can create
an external NOC from where all the input data from the MSP’s clientele can be
monitored at the same time. Several MSPs have created such NOCs for this
purpose. Similarly, applications and datacenter services also work well with the
shared model where several clients of an MSP have their servers and applications
hosted in a common datacenter (co-location) allowing for better manageability.

Dedicated service model
In the dedicated service model, the MSP can offer you services in two ways.
One, by hosting the applications into their datacenter and dedicate a complete
rack for you. Two, by providing you with dedicated skillsets and manpower to
manage your entire infrastructure which is inclusive of hardware and software.

Top reasons for outsourcing
The increasing need to provide consistency and quality of service to
internal and external users of the system.
Manpower retention for managing IT infrastructure is a problem
Multitude of technologies, platforms and applications being deployed in
the enterprise-the complexity of managing them.

Earlier, the costs used to be at the top of CIO’s mind when deciding on
outsourcing IT management, but today it is the requirement of service quality
levels that bothers him most.

Future prospects
According to MSPs whom we have interacted with, only 30% of the organization
would like to go for managed services outsourcing, be it in any
form—networking, security or voice. And, data convergence outsourcing is the
next big wave for the coming years.

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