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The Promise of IaaS

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Together, IaaS and analytics outsourcing, present new opportunities to organizations in terms of both global sourcing and business value.

Together, IaaS and analytics outsourcing, present new opportunities to organizations in terms of both global sourcing and business value.

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  • 1. The Offshore Analytics Making Sense of Data to Make Cloud IaaS: How secure is Landscape Pg 10 Money Pg 19 the user? Pg 24www.globalservicesmedia.com May 2011 The gateway to the global sourcing of IT and BPO services The Promise of IaaS
  • 2. Software Paradise, �Hangzhou Sourcing Demonstration City of Chinasourcing Hangzhou Hangzhou was defined as the “China Service Outsourcing Demonstration City” in February 2009. Hangzhou is also the one of eleven software industry base cities in mainland China. It has currently formed the several industries including telecommunication, software, integrated circuit, digital TV, animation games and E-commerce.The revenue of software business in Hangzhou was achieved at 47 billion RMB in 2009, the software export revenue reached at 460million USD. There were total 112 enterprises passed CMMCMI, ISO27001 certification. There were 20 IT software enterpriseshave list on public market, two companies ranked at Top 10 of self-brand software products, total 15 enterprises have list at the key software enterprises name list of the national strategic planning. In order to accelerate the development of outsourcing industry, Hangzhou Municipal Government set up the leading team to draw up the development plan, issue the supporting policy to make the rapid development of outsourcing industry in Hangzhou. The total delivered amount of offshore outsourcing business reached at 919mllion US Dollars, risen to 352% compared to the same period of last year (2008).Hangzhou government has put more focus on the financial service outsourcing that is considered as the medium and high end outsourcing industry, Hangzhou now is creating to become the financial delivery center. International Financial Outsourcing Center Promotion & Undertaker: Great-Idea International Outsourcing Consulting Center
  • 3. Hangzhou, China A City of Financial Delivery Center To Combine the Global Resources and Facilitate theIntegration & Upgrade of the Global Service Capability Please Attention October Trip in Hangzhou China Sourcing Summit & Delegation to China Sponsors: Ministry of Commerce of the People’s Republic of China Ministry of Industry and Information Technology of the People’s Republic of China Ministry of Education of the People’s Republic of China Host City : Hangzhou People’s Government Official Promotion: Hangzhou Municipal Foreign Trade & Economic Cooperation Bureau International Financial Outsourcing Center Contact: Tel-8610 85863613 Fax-8610 59081093 Email-salida-liu@great-idea.com.cn
  • 4. Recognizing & celebRating SeRvice PRovideR excellence! releasing : June 2011 compendium coverage 2010 sponsors be there where it mattersFor more information write to niketac@cybermedia.co.in
  • 5. Global ServiceS A CYBERMEDIA PuBlICAtIonAn integrated media platform which connects thevarious constituents of the global technology and Pradeep Gupta business processing services industry ecosystem. Chairman & Managing Director Cyber Media (India) Ltd. E. Abraham MathewDirectory of ServiceS PresidentNewSletter Ed nair EditorA regular digest of key industry happenings. ed@cybermedia.co.in Satish GuptaDiGital MaGaziNe Associate Vice PresidentThe fortnightly digital magazine features research satishg@cybermedia.co.inreports, articles and experts’ views. Available on Smriti Sharmawww.globalservicesmedia.com smritis@cybermedia.co.inwebiNarS Smita Vasudevan smitav@cybermedia.co.inGlobal Services’ web-based seminars aim to impart Sourabh Chandra Pushpuseful information related to outsourcing indus- sourabhc@cybermedia.co.intry in the form of presentations and discussionsby industry specialists. niketa Chauhan niketac@cybermedia.co.inreSearch Gary BindraWe deliver indepth analysis and research reports gurdeepb@cybermedia.co.inon sourcing subjects. Virendra Kumar x-virendrap@cybermedia.co.inMicroSiteS Global ServicesOnline resource center designed to provide Cyber Media (India) Ltd.focused content on special subjects to the out- CyberHouse, B- 35, Sector 32sourcing community. Gurgaon-122001, India Tel: +911 24 4822222eveNtS Fax: +911 24 2380694 Contact:From multi-day, high-level, resort conferences to globalservices@cybermedia.co.inintimate breakfast discussions we offer a numberof opportunities that connects the outsourcing Disclaimercommunity. All rights reserved. No part of this publication may be reproduced by any means without prior written permission from the publisher.cUStoM ProGraMCustomized services rendered through different letterS to the eDitormedia platforms. Send letters to ed@cybermedia.co.in, or to any of our writers. We reserve the right to editoSoUrce booK all letters. Postings submitted to our blogs andA directory of global outsourcing service providers. letters to the editor may be published in ourwww.osourcebook.com digital magazine or Website.
  • 6. April 2011 features 12 THE PrOMISE OF IaaS 12 by Smita Vasudevan and Sourabh C. Pushp Enterprises find building new data centers expensive, emerging SMBs need to scale up infrastructure fast. AnAlytiCS OutSOurCinG: MAkinG SenSe Of DAtA tO MAke MOney 19 by Smriti Sharma Analytics outsourcing has crossed the chasm from being a nice-to- have proposition to a need-to-have practice.10 xperts“THE OFFSHOrE ANALyTICS ClOuD iaaS: HOw SeCure iS tHe uSer? 24LANDSCAPE IS STrENGTHENED By by kumar Parakala, kPMGAN ENTIrE ECOSySTEM”by Smriti Sharma PlAtfOrM BPO: tHe GrOwtH trAjeCtOryExcerpts of an interview with reetika Joshi, Senior research fOr tHe BPO inDuStry 26Analyst at ValueNotes Sourcing Practice and co-author of the by jui narendran, Head - Valuenotes Sourcing PracticeHFS analytics report titled ‘Where offshore analytics is headingin 2011.’ uSAGe-BASeD PriCinG: tHe PrOMiSe AnD tHe reAlity 28 By nigel Hughes, Global Services Director, Compass Management Consulting GLObAL ServICeS DIGITAL MAGAzINe Next Issue: 2011 GS100 2011 GS100 research by Global Services & Neo Group recognizes and celebrates service provider excellence.
  • 7. COMING SOON
  • 8. Editor’s NotE New Opportunities in Global Sourcing: IaaS and Analytics o ne of the biggest changes in the services industry is dictated by how enterprise applications ISVs predict and present the roadmaps for their products. I was hosted by SAP at its annual Sapphire Now event at Orlando this month. Attended by a record 6600 people and over 200 partner companies, the opportunity for services this year seemed robust. Companies such as SAP, Oracle, and Microsoft are hugely reliant on a partner ecosystem largely comprising services companies. My conversations with companies such as Accenture, Capgemini, HCL Axon, HP, TCS, CTS, CSC, Infosys, Neoris all point towards increased Ed Nair services work in areas such as analytics, enterprise management, mobility, Editor and cloud-based applications. ed@cybermedia.co.in Cloud-based computing is no doubt the flavor of conversations at all technology gatherings. In the enterprise applications area, the prospect of on-demand applications delivered on SaaS platforms is now mainstream. Together, IaaS But using cloud to deliver infrastructure services has been at the door for and analytics quite a while. It is now being explored with great interest by organizations outsourcing, present both large and mid-sized. new opportunities Our cover story this issue is on exploring the potential and possibili- to organizations in ties of infrastructure-as-a-service (IaaS). It is very clear that enterprise IT infrastructure sourcing would be majorly disrupted by IaaS in the next few terms of both global years, but there are many caveats too. The story gives a bird’s eye view onsourcing and business the area and some decision pointers for organizations pondering over new value. infrastructure decisions. Analytics is to business as diagnostics is to healthcare. And analytics is eminently suited to being delivered offshore. The special report on analytics outsourcing scopes out the potential in this area and offers perspectives on the drivers of the growing trend. Together, IaaS and analytics outsourcing, present new opportunities to organizations in terms of both global sourcing and business value. As a companion resource to our coverage on infrastructure services, our May webinar titled ‘Understanding Emerging Models on Infrastructure Management’, with Amit Singh, Partner, Avasant, covers the area in detail and provides thorough insight into sourcing paradigms thereof. Do register on our site for the webinar or download the webinar recording. GS
  • 9. Harbinger Systems Expert offshore product development partner Your partner Mobile & Web 2.0 apps, Enterprise & E-Learning in technology Software innovation From innovation to market leadershipCopyright © 2011 Harbinger Systems Pvt. Ltd.All Rights Reserved.
  • 10. Analytics Outsourcing“the offshore AnalyticsLandscape is strengthenedby an Entire Ecosystem”Excerpts of an interview with reetika Joshi, senior research Analystat ValueNotes sourcing Practice and co-author of the HFs analyticsreport titled ‘Where offshore analytics is heading in 2011.’by Smriti SharmaGS: What are the key catalysts for Ao? l Availability of cross-functional, multi-skilled tal- rJ: The case for global ent As the scale and scope of analytics expanded to delivery of analytics is gain- accommodate several core functions, the delivery of ing momentum. There are analytics called for maintaining highly specialized two primary reasons for manpower across more diverse domain areas. This this: enhanced efficiency manpower often remained under-utilized. Given their and relatively lower costs. high cost, companies increasingly started looking However, business value at third-party service providers to help. Increasing plays a far greater role in demand for analytics also led to the emergence of pure analytics delivery than pure play analytics service providers. These providers have cost arbitrage and efficien- teams with deep domain knowledge, technology and cy. Thus, a third emerging statistical expertise. reetika Joshi aspect is the strengthening l Cost arbitrage for low-end analytics. According to of an entire ecosystem of HfS research, for a typical analytics project, talent costsoffshored business intelligence, market research, IT and constitute approximately 60% to 70% of the total costs.BPO services in tandem with analytics. With other costs (infrastructure, etc.) significantly lower For many less complex offshoring activities, the cost of than in onshore locations, cost arbitrage can range up tolabor is the most compelling driver for offshore outsourc- 50% for offshore locations.ing. In more specialized areas such as analytics offshoring, l reduced time to market With increasing competitioncost is a driver, though it is not the most important one. and the urgency to obtain first mover advantages, it hasThe availability of highly qualified professionals, contextual become imperative for firms globally to access talent todomain expertise, operational risk, the reliability of critical provide pertinent data supported by thorough analysis at ainfrastructure and market integrity are instead pivotal. faster and more efficient pace. Offshore delivery centers are l Leveraging IT and BPO offshoring experience and attractive as they come with faster time to market and alsoecosystem Companies with existing outsourcing relation- provide accompanying support services on a 24x7 basis.ships are looking to leverage their IT-BPO offshoringexperience to source analytics solutions, preferably from GS What exactly does the offshore analytics area coverthe same service provider. In most cases, the third-party in terms of scope?service providers developed analytics solutions in a bid to rJ: With greater usage of analytics and increasing com-move up the value chain. plexity, there is a tendency to break analytics projects10 Globalservices www.globalservicesmedia.com May 2011
  • 11. Analytics Outsourcinginto distinctly executable parts and outsource to dif- GS: Who are the key service providers and how are theyferent specialized teams. Accordingly, there are four evolving?levels in the analytics services mix, in ascending order rJ: The offshore analytics landscape has changed over theof complexity: last decade from one dominated by captives of large com- 1. Data entry/de-duplication: This includes every- panies, primarily in India. Today, the industry features athing from cleaning to maintenance and actual. It is a low- large number of vendors offering end-to-end specializedend service and offers low revenues to service providers. A analytics solutions to specific verticals. High-value third-large chunk of KPO-centric analytics work (almost half ) is party analytics solution providers are focused on providingdedicated to data preparation. value beyond cost arbitrage by leveraging a combination 2. Intuitive analytics: This entails running the of onshore-offshore delivery models and the use of tech-models and generating new insights on a continuous nology.basis. The outputs for these services may be in the form Third-party offshore analytics service providers can beof dashboards, reports (of different frequencies), alerts, broadly classified into four categories. The grouping isetc. primarily based on company origin, affecting the strategic 3. Model building: This is an advanced level of intent and objectives behind offering analytics services.analytics, where models are designed to predict various The strategic intent of service providers in variousbusiness outcomes. Statisticians and econometricians groups differs, depending on their overall business focusbuild models focusing on business problems/opportuni- and aspiration. A strong desire to move up the value chainties at hand. In terms of offshoring, modeling is done by in order to improve profitability and boost the top line iscaptives as well as third-party vendors depending on the common across all service providers.maturity of the clients’ in-house teams. 4. Solutions: Solutions generally entail “bundled” GS: Expand on the issue of data security in Ao.analytics components, delivered to clients to address rJ: There are workarounds for companies that are hesitanttheir needs. Providers take a consultative approach about outsourcing analytics due to data security issues.and leverage technology to deliver value. The aim is Several vendors offer onsite delivery teams (at clientto render the client self-sustaining and create a unified premises, client country, etc.) when data cannot reachanalytics delivery mechanism. This may be done by offshore. Companies also may want to look at creatingdeploying an analytics platform or other tools. captive centers offshore that specialize in analytics, to These constitute the main standalone analytics offer- maintain better control of company or customer data.ings prevalent today. Beyond this, there are a variety ofembedded or value-enhancing analytics components GS: What are the new areas and adjacencies for Ao?that are offered by IT/BPO providers. These include rJ: The opportunities for service providers may beanalytics to improve the efficiency of processes, identify looked at in terms of horizontals and verticals. Vertical-problem areas or sub-processes with cost-saving poten- wise, retail and CPG, banking and financial services,tial, and provide reporting and MIS for existing proc- healthcare insurance and telecom look to be the strongest.esses. These services often are embedded as part of the Horizontal opportunities include sales and marketing ana-solution to the client (as value-adds) without additional lytics, followed by supply chain management, logistics,cost. operations and web analytics. GS11 Globalservices www.globalservicesmedia.com May 2011
  • 12. Tools & Technologies The Promise of IaaS12 Globalservices www.globalservicesmedia.com February 2011
  • 13. Tools & Technologies “Enterprises have been moving high-value application workloads to the cloud, as vendors prove their availability, security and monitoring solutions.” tim Beerman, Vice President, Managed Hosting Product Management and engineering for Savvis“While cloud computing has its share ofissues, when properly setup and utilizedprovides tremendous value. It lets aproduct company like July Systems focuson the product building and less on theinfrastructure.” Vikas Murthy, CtO, july Systems. “There are three broad future trends to expect in IaaS-buyers to become more educated, industry specific segmentation to take place and a fair amount of hybrid cloud models to come up.” Chirajeet Sengupta, research Director, everest Group13 Globalservices www.globalservicesmedia.com February 2011
  • 14. Special Reportthe Promise ofinfrastructure as a serviceEnterprises find building new data centers expensive, emerging sMBsneed to scale up infrastructure fast. the answer seemingly lies ininfrastructure as a service (iaas), a model of cloud-based delivery.Where do we go with iaas?by Smita Vasudevan and Sourabh C. PushpM ounting demand for computing Bright prospects resources by enterprises around the Positive demand and supply side factors indicate that world, rapidly changing technology adoption levels for IaaS will be on the rise in the near future. needs and complex business environ- Increasing data center expenditure by enterprises and emerg-ments have all acted as catalysts for the growth of ing SMEs (small and medium enterprises) eying significantInfrastructure as a Service (IaaS). In the face of investments in IT infrastructure are fueling demand in thisnew challenges, businesses are moving away from space. At the other end, a competitive IT market is driving thethe traditional model of procuring and owning IT supply of IaaS. Gartner’s Cloud Computing Special report oninfrastructure to a model in which infrastructure IaaS suggests that the segment is set to grow nearly threefoldsis sourced as a service. This external services-based from $ 3.7 B in 2011 to a whopping $ 10.5 B in 2014. Thereapproach to delivering IT services is termed as is currently a lot of hype going around IaaS and an increasingInfrastructure as a Service or IaaS. The shift is a number of enterprises are showing interest in this area. Gartnermanifestation of cloud-based delivery in a utility estimates that over the course of the next five years, enterprisescomputing model. will be spending $112 B cumulatively on SaaS (Software as a “The shift is because these new environments offer Service), PaaS (Platform as a Service) and IaaS. United States,an almost immediate fix to some of the most signifi- Western Europe and Japan will be holding a major share of thecant hurdles that drive escalating IT costs,” according global cloud market.to Steve Garrou, Vice President, Global SolutionsManagement at Savvis. Enterprises are seeing benefitsin outsourcing their infrastructure needs over mak-ing huge capital investments on buying the resourcesphysically. IaaS enables them to procure the necessaryIT resources from a service provider on an on-demand,pay-as-you-use basis. This difference in the functioningand pricing model of IaaS promises to significantly cutdown costs, support scaling up, and bring efficienciesthat may not have been possible otherwise. The evolution of IaaS is the result of advance-ments in the world of technology. rooted in theerstwhile web hosting model, the pervasiveness ofvirtualization and maturity of utility computingcoupled with cloud-based access has made IaaS aclear possibility. Source: IDC June, 201014 Globalservices www.globalservicesmedia.com May 2011
  • 15. The Promise of Infrastructure as a Service Comparison of some Leading iaas providers Providers Rackspace GoGrid Amazon Savvis What does it offer ? The rackspace cloud GoGrid is a small, One of the pioneers Savvis is one of the consists of three independent service of cloud computing, broadest and deepest major services: Cloud provider. Its primary Amazon offers cloud in the industry. It has sites, Cloud Files focus is its Xen-based services such as an above-average and Cloud Servers. cloud IaaS. Its service Amazon S3 or eC2. customer portal rackspace Servers is managed by a multi- Amazons Auto Scaling and strong history provide unlimited server control panel feature of eC2 allows it of delivering utility online storage and operated by ServePath to automatically adapt offerings. Savvis has CDN. In addition to the and features an API. computing capacity to vMware based IaaS online control panel site traffic. (Symphony). the service can be accessed through API. Free Support Yes Yes No Yes Security Features bootable Mode Failover Features backup Storage Critical Data Privacy Critical Data Privacy Persistency Persistency Data Protection Data Protection backup Storage Snapshot backup Failover Features Persistency Critical Data Privacy backup Storage Data Protection Snapshot backup Snapshot backup Load balancing Yes, Free of cost Yes, Free of cost Yes, with a charge Yes, Free of cost virtual Private Servers Yes, Free Yes, with a charge Yes, with a charge Yes, with a charge Subscription Type Use based Use based and Use based and Use based and Subscription Plans Subscription Plans Subscription Plans Inbound bandwidth 8.00¢/Gb 0.00¢/Gb Price 10.00¢/Gb Outound bandwidth 22.00¢/Gb 29.00¢/Gb 11.00¢/Gb Price base Plan Cost 1.50¢/h 8.00¢/h 8.50¢/h base Plan Details 256 Mb rAM,10Gb 0.5 Gb rAM,10 Gb 1.7Gb rAM,160Gb Flexible month-to- local storage,10 Mbps local storage,Free local storage,1 eC2 month plan Network Throughput inbound traffic. Compute Unit Additional IP Cost 2.00$/monthSource: http://cloud-computing.findthebest.com15 Globalservices www.globalservicesmedia.com May 2011
  • 16. Special ReportEvolving, not yet mainstream and the objective varies in all these cases. Self-managed IaaS is The market for IaaS shows huge potential but is still imma- normally used by customers with basic IT needs such as testture and in an evolving phase. There are numerous providers and development and in this case all the operational controlin this space and many more are coming up foreseeing the is retained in-house . In Lightly-managed IaaS, a part of theopportunities. But there is lack of appropriate benchmark or operational control is retained by customers while there isstandards to compare the services offered by different provid- some intervention by the providers. Complex-managed IaaSers. These services generally follow a consumption model that are used by customers who have very complex and fast chang-is based on pay-as-you-use, on-demand and self-service strate- ing IT systems that need to be fully operated and controlledgies. yet there are lots of underlying differences. by service providers. IaaS has still not found a place as a mainstream offering, Along with cloud services, providers may also offer a set ofthough industry players believe that this is soon going to optional managed and professional services. Management ofchange. “Adoption of IaaS solutions primarily includes test the server, infrastructure software, storage, security and otherand development workloads. While this has been the major network devices is what providers usually offer as part of theiradoption model for IaaS, we are seeing production workloads managed services. Professional services would include servicesmoving to the cloud. Enterprises have been moving high-value related to hosting like capacity planning, security auditing,application workloads as vendors prove their availability, secu- performance testing and so on.rity and monitoring solutions,” according to Tim Beerman, IaaS customers are more often served on a pay-as-you-useVice President, Managed Hosting Product Management and basis, though providers may at times also give the option ofEngineering for Savvis. multi year agreements on which enterprises can avail dis- More often, business specific areas are maintained and counts. As the the market is in an evolving phase, providerscontrolled in house, while common IT requirements like continue to change and upgrade their services frequently.storage, hardware, operating system and so on are outsourced. Amazon, Savvis, rackspace and Gogrid are the leadingA deciding factor in this case is usually what areas does the global providers of IaaS. Here is a quick comparison betweenbusiness find critical and does not want to be controlled by their services and cost and pricing structures.an external organization. Another factor is how efficient is theinternal IT system in handling complex situations. Buyer expectations There are different types of buyers in the IaaS spaceServices offered and accordingly their needs vary. Primarily, there are enter- There are different types of providers in the IaaS space. prises that were using the web hosting model and are movingSome of them are offering this service as an extension to their towards cloud IaaS and then there are others that are new andtraditional line of web hosting services, while there are many are trying to test and experiment to see if it can be beneficialnew players who are purely focused on IaaS. Providers also to them. Another differentiating factor is the size of thesediffer significantly in terms of their size of operation. There enterprises. Large enterprises already have significant invest-are large-sized providers who offer a comprehensive portfolio ments in IT infrastructure, so their objective is mainly to cutof services as well as niche players with few selective offerings. down costs and bring efficiencies through IaaS. Whereas small“Starting at a high level, IaaS services come in both public and medium enterprises look for growth and also aim to avoid(multi-tenant, shared infrastructure) and private (dedicated huge capital investments on purchasing IT infrastructure.infrastructure for single client). Differences between providers Real benefits : July Systems, a mobile media companyinclude the underlying hardware class, the virtualization solu- uses Amazon’s cloud computing services to cost-effectivelytion, network connectivity options, security implementation, scale its business. “At July we have seen flexibility and cost sav-monitoring capabilities and performance, to name a few,” says ings as key benefits to an IaaS cloud based infrastructure. It hasBeerman. Other than public and private, there are community helped July Systems achieve unprecedented scale to meet theand hybrid models as well. The cost, level of privacy and so on demands of the millions of users that access our platform eachusually varies for all these models. For instance, a community day. With the support of our IaaS service provider we are con-cloud has lesser users than a public cloud and so the cost per stantly growing our footprint and crossing major milestonesuser tends to be higher, while the level of privacy is better than like our recent announcement during Cricket World Cup,”in the case of a public cloud. says Vikas Murthy , CTO, July Systems. According to Gartner’s Magic Quadrant for Cloud “While cloud computing has its share of issues, whenInfrastructure as a Service and Web Hosting, 2010 report, properly setup and utilized provides tremendous value. It letsthere are again three different ways in which IaaS is used by a product company like July Systems focus on the productcustomers. This includes Self-managed, Lightly-managed and building and less on the infrastructure,” adds Murthy.complex-managed IaaS. The level of control and management16 Globalservices www.globalservicesmedia.com May 2011
  • 17. The Promise of Infrastructure as a Service Issues involved : Most enterprises, though ready to adopt The third party’s access to company data should be secured asIaaS, are not really aware of the numerous services available all the data hosted on the cloud are not protected under intel-in the market. Also, there are security and privacy related lectual property rights.issues that influence buyers. According to a report by Ernst &young on IaaS Trends and Perceptions in India, 72 per cent The way aheadof the respondents pointed out that data privacy and security Choosing the best service provider is one of the mostissues are the most significant concerns in the adoption of significant decisions companies face when venturing intoIaaS. When asked what elements were essential to moving the IaaS space. Not all service providers have the appropriatemore critical applications to the cloud, in Savvis’ March 2011 industry and technology experience to replace the in-house ITresearch study with Vanson Bourne, 64 percent responded infrastructure for a company. So, the choice is not risk free. Itwith full security implementation, followed by high avail- necessitates any company to assess IaaS providers carefully.ability (54 percent). Enterprise-level performance was also Buyers should understand their needs well and opt forrequired by 47 percent of respondents. a provider that is best suited for their requirements. Some other key questions to consider here are- Is the hosting pro- Data security and privacy 4% 88% vider able to understand your business and the overall needs 8% of your company? Is the provider flexible in its service-delivery 21% 75% approach? Is the provider having adequate expertise, scale and SLA compliance 4% geographical coverage and using technology that is not only 58% Cost competitiveness 13% 29% up to date, but also stable and widely compatible with other 58% technology standards? Portability and interperability 13% 25% Service providers must understand specific needs of 4% 46% each buyer segment and be able to offer services accord- vendor support network ingly. The objective of different enterprises for adopting 42% 13% Pricing models 42% 46% IaaS will be different. Providers should offer support and 13% services that are in line with their customer requirements. Past track record 38% 38% They should also be able to show their customers how 4% 21% by cutting down their IT cost they can save resources forSource: ernst & Young – Cloud adoption in India growth and expansion. According to Chirajeet Sengupta, research Director,Legal issues involved Everest Group, “There are broadly three things to expect in According to Nixon Peabody LLP’s report ( Laurin H. IaaS in the future-buyers to become more educated, under-Mills, May 13, 2009 ) the most prime legal issues are: standing when, where and how to go about implementing • Location: where’s the data ? IaaS. Secondly, industry specific segmentation to take place your data could be stored in any country and you may not in terms of services and lastly, a fair amount of hybrid cloudeven know where the data center is situated. The location fac- models to come up.”tor thus raises the question of legal governance over the data. As enterprises become more aware of the opportunitiesFor instance, if there is a conflict between the cloud vendor and benefits, there will be a great difference in the way theyand the customer, issues may arise regarding which country’s approach and adopt IaaS. “Clients want capacity when theyjurisdiction will be followed. need it and want to only purchase it when they want it. IaaS • Security: who has the access ? approaches offer this flexibility and in the years to come will The strongest security threats to cloud computing include no longer be considered an alternate delivery model, but ainsecure application interfaces, malicious insider threats and strategic choice for some critical solutions as companies seektraffic hijacking. Cloud computing facilitates the storage of greater flexibility and the need to satisfy a diverse end-userdata at a remote site, so it is critical for the data to be protected. base,” says Garrou, about the future trends and opportunities in IaaS.” GS17 Globalservices www.globalservicesmedia.com May 2011
  • 18. COUNTRY-IN-FOCUS Ensuring Global Visibility A special feature for countries to showcase their uniqueness There are numerous outsourcing destinations that exist as great alternatives to India and China. Inviting Countries to showcase capabilities that accentuate their uniqueness.Examples of Country-in-focus feature Egypt Philippines Jordan JORDAN For more information write to satishg@cybermedia.co.in
  • 19. Special ReportAnalytics outsourcing:Making sense of data toMake MoneyAnalytics outsourcing has crossed the chasm from being a nice-to-have proposition to a need-to-have practice.by Smriti SharmaI n a globalized economy, information and data are interactions. By analyzing these, they understand the backbone of a business. However, merely having customer buying patterns that helps identify poten- access to numbers is not of much use. rather, it is tial cross-selling opportunities, improve marketing analytics—the interpretation and application of data efficiency and rOI from campaign strategies (e.g.—that makes businesses thrive. direct mail campaigns). Similar analytics is performed Analytics has been titled as the smartest weapon in the for credit card companies, retail, and many othercorporate quiver. This credential can be attributed to the businesses.fact that sans analytics it is difficult to sustain competitive- 2. Risk Management Analytics: Analytics for high riskness. Data analytics arm an organization with significant businesses. In such businesses, profitability depends on theanalyses - that highlight upcoming business roadblocks, ability to increase profits by retaining low risk customershidden trends and key insights- on which management can and at the same time reducing losses.base strategic plans and operational policies. Example: In the insurance industry predictive With ever growing competition and globalization, models are developed that predict expected claimanalytics has become critical for all businesses to support amount depending on past data. This data analysistactical and strategic decision making. Today, companies also helps in detecting fraud, predicting defaults andcan choose from a host of platforms and services-based bankruptcy.tools that can be deployed to make intelligent use of infor- 3. operations Analytics: It includes IVr analytics,mation enabling business decisions that impact both top demand forecasting and demand management, perform-line and bottom line. ance and productivity, customer satisfaction analysis, col- Analytics is basically the application of computing lections efficiency, etc.resources, operational research, and statistics to solve busi- Example: Analytics is used to analyze IVr data to iden-ness and industry problems. It covers areas like- marketing tify user segments based on usage preference and redesignanalytics, predictive and strategy science, credit risk analy- the IVr strategy accordingly.sis and fraud analytics. 4. Finance & Investment Analytics: It includes equity Viral Thakker, executive director, Performance and research, investment analysis for PE-VC funds, investmentTechnology services, KPMG stated segments that this banks, etc. This is perhaps one of the leading segments ofservice encompasses: analytics usage. 1. Marketing & Customer Analytics: Data mining Example: Organizations make use of financial analyticsand management to understand consumer behavior. in market-size estimation, competitive analysis and intel- Example: Telecom and internet companies gen- ligence, apart from identifying investment opportunities,erate a large amount of customer data during their due diligence or during M&A analysis and strategy.19 Globalservices www.globalservicesmedia.com May 2011
  • 20. Analytics Outsourcing: Making Sense of Data to Make Money This extremely essential ‘game-changer’ does not in Bucharest, romania. Amongst the India locations,naturally plug into the outsourcing model. The reason Gurgaon has the largest employee strength in researchbeing level of data sensitivity is very high. Due to this, & analytics division, with over 800 people, followed bysome clients set up captive units to deliver analytics, Mumbai, Bangalore, Pune, and Chennai.instead of outsourcing. However, the last decade has Activecubes, a global firm providing Analytics Serviceswitnessed third-party providers gain significant expertise with associated Technology Solutions, focuses on US,in analytics. Australia and India from the geographical perspective. From an Industry angle our focus markets are Pharmaceuticals,The offshore analytics market Financial services and retail-CPG industries. As of now, US, UK and to some degree, the rest of Europe are its main offshore location is Bangalore and it plans tomajor markets served by analytics service provider. Since expand to more locations in India as well as internationalthese mature markets embrace experience in offshoring locations.business processes they are now moving up the value According to HfS research titled ‘Where Offshorechain and are willing to outsource knowledge serv- Analytics is Heading in 2011’, Fortune 500 companiesices. Some providers are also focusing on Australia and are the big-league clients for this knowledge service.Japan. Enterprise from verticals such as FMCG, BFSI, and tel- Main contenders in terms of delivery destinations are ecom are significant buyers for offshore analytics serviceIndia, China and Eastern Europe. Others include near- providers. Service providers are also targeting mid-sizedshore countries to the US such as Mexico and Costa rica, clients to move up the value chain. Some providers areand offshore destinations such as Singapore and Sri Lanka. also looking at tapping the rapidly growing domestic andVendors may be from these or other destinations, but they regional markets. Large IT-BPOs and KPOs are trying toneed to have delivery capabilities in at least one of these cross sell analytics services to their existing clients. KPOsdestinations. and BPOs need to create specialized capabilities to service Genpact’s Analytics and research department has a parts of analytics projects and eventually take a verticallarge concentration in America and a large portion of their approach to growth in their chosen area to move up thecurrent revenue comes from this region. It has footprints value chain.in Europe, China, India and Australia. In the comingyears, it is expecting to grow significantly in Europe and Key driversAsia-Pacific region. Leveraging specialized skill sets, access to affordable Most of WNS clients are based in the United States and resources and better utilization of resources, achieve scaleEuropean Union region. It is also expanding its client base across geographies and business units, overcome corporatein the Asia-Pacific region. As their practice is a horizontal silos, establish and industrialize best practices, stand-offering within WNS, most of their clients are spread ardization of the disparate analytical processes, establish aacross several industry verticals, including financial serv- well-defined delivery model...are some of the key drivers.ices and insurance, retail, CPG, healthcare, professional Thakker pointed out drivers on the demand as well asservices, travel and leisure. supply side. WNS provides analytics services from five offshore The demand drivers of analytics outsourcing include:delivery locations in India, and one nearshore location • nalytics significantly enhances the client service A organization’s ability to generate top-line revenue. However, a significant shortage of highly-skilled knowledge professionals in the developed nations is making recruiting of such professionals very difficult. • o remain competitive, organizations have realized T the need to use analytics to reduce time to market for their services and products in areas such as mar- keting, product development, product launches, strategic decision making, etc. • us, offshoring high-end services not only ensure Th access to professionals at a significantly lower cost, but also ensure a gain in competitive advantage forSource: HfS research, 2011 the customers.20 Globalservices www.globalservicesmedia.com May 2011
  • 21. Special Report Some of the drivers of analytics outsourcing from the • endors would need to have stringent internal meas- Vsupply side are: ures to prevent any IP data infringement. Formal • lobal as well as Indian vendors have demonstrated G qualification assessments, certifications (such as ISO their capabilities to execute high end knowledge 27001 certification in data security) and periodic work efficiently. Vendors are moving up the value competency reviews would become essential. chain and are using high-end analytics as a differen- tiating factor for their service offering. Future aspects • ue to the high availability of skilled labor espe- D In this space there are many captives, people who still cially in countries such as India, vendors are able to want it to be an in-house activity as they consider it to be provide the clients with contextual domain expertise their core capability or core differentiator. But then, there which is an important driver for analytics outsourc- are significant sizable integrated players that are now devel- ing. Moreover, due to the relatively standardized oping in the market. Kulshreshtha spoke about where this nature of analytics and a growing awareness of the whole discipline is going, “I think there will be a little bit increasing quality of education systems in favored of convergence of the whole software and business intel- offshore locations, this segment has seen a spurt in ligence side; whereby you do things like setting up data terms of supply. warehouses and then setting up analytical process on top • e technology and telecommunication develop- Th of them. IT companies always did data warehousing type ments have also helped the Analytics Outsourcing/ of work they did not do so much of analytics type of work offshoring industry to grow, by making real-time data on top of that, Where else, we worked the other way, we available and rapid data processing and analysis. used to do more of analytics services kind of work and we have not done much of data warehousing side. All theseAre concerns over security justified? areas will emerge.” Management of intellectual property (IP) and conflict- Second thing, he pointed, that is already happeningof interest issues are more demanding in analytics out- is people are going to drive their solutions to the marketsourcing and KPO than in BPO, where data protection with tag such as the one IBM uses. Genpact also use thatand privacy concerns dominate. tag, which was launched as smart enterprise processes. Pankaj Kulshreshtha, senior vice president - Analytics Genpact is addressing this business along with some other& research articulated, “I’ve been doing this for 13 years parts of their business as smart decision services. Othernow and I have seen companies evolve to a level where they folks are going to use words such as analytics, intelligence.do not worry much about security. We work with 12 out Increasingly lot of third party players will go to the marketof 15 pharma companies so obviously we have a very legiti- with solutions that are woven around smart intelligentmate way of addressing their concerns around data security type of theme.and intellectual property protection. This is the case across Third thing, from Kulshreshtha’s viewpoint, is thatfinancial services and majorly other areas too.” social media explosion that is going on will transform the From infrastructure prospects, Kulshreshtha added, base of how analytics is done. right now a lot of analytics“We make sure that we create a completely secure environ- is done that analyzes the data companies produce aroundment that is as secure as our customers would like. We buying behavior. However, there is very little that is donehave situations where a part of dedicated team is placed in this space in terms of understanding what peoplein an enclosure, that even I as a business leader require are saying about certain brands, what people are sayingwritten permission to enter. People inside that enclosure about experience with certain products and services. Asdo not have access to any other mail apart from customers text mining and knowledge discovery type of technolo-mail. They work directly on customers systems and have gies evolve to next level what will happen is we will findthe same data security systems applied as would be applied completely different ways of solving the problems thatto any analyst sitting in the customers own facility.” we currently solve using the hard data that is currently Some significant issues that could emerge are: used. • s ownership rights between service providers and A Some of the emerging areas highlighted by Thakker receivers become blurred, debate over intellectual v Customer analytics for the energy and utilities sector property ownership and management of statistical (smart metering) analysis models are likely to increase. v Fraud analytics in retail banking • hen the same regulatory restrictions vary by coun- W v Cyber-analytics to detect cyber crime and acts of ter- try, conflict-of-interest management issues concern- rorism, cyber risk management, foreign espionage, intel- ing violations of insider trading rules may increase. lectual capital theft, etc.21 Globalservices www.globalservicesmedia.com May 2011
  • 22. Analytics Outsourcing: Making Sense of Data to Make Money v Learning analytics to assess students’ academic and KEY SERVICE PRoVIDERSextra-curricular progress, predict future performance, and BPos- Genpact, Evalueserve, WNS, EXL Servicesidentify potential issues It companies- Wipro, Infosys, TCS, HCL, HP v Cloud based BI tools could see proliferation v Social network data mining for customer analytics Specialized MR firms- Ugam, Marketics, eClerx, v ‘Big data analytics’ – Big data refers to the tools, proc- Annik Systemsesses and procedures allowing an organization to create, High-end analytics- Aranca, Copal Partnersmanipulate, and manage very large data sets and storage traditional MR companies- AC Nielsen, CrISILfacilities Boutique R&A firms- ValueNotes, SG Analytics, Arun Kharbanda, business unit head- research & NetscribesAnalytics, WNS Global Services opined, “The next decadewill be very different from the last one, with structural Financial services- JP Morganshifts in demographics that will reflect more prominentlyin the international trade and economics, where outsourc- packaged solutions that combine consulting services withing will no longer be a choice. The KPO industry in India delivery”, added Kharbanda.has gone through a “concept selling” phase in the last few Analytics Outsourcing started with financial and mar-years for a majority of clients who have so far utilized BPO keting functions. Some of the first companies to takeservices. At the same time, some clients have been able advantage of this were the MNC’s when they set up cap-to create a competitive advantage for themselves through tives in India. Initially the heavy lifting in terms of dataestablishing Analytics Centers of Excellence programs that analysis was being outsourced. Then came the higherhave resulted in improved decision making across multiple end statistical modeling. ramachandran K, Executivebusiness groups, markets and geographies.” Director & Head – Healthcare, Activecubes articulated, “Some of the new opportunities we see are from indus- “Nowadays, high end business consulting (based on thetry verticals that were hitherto not very active in AO, data) is also being outsourced. Next will come a time whensuch as Shipping & Logistics, Manufacturing and Supply companies in India will start services where they will ownChain. From an offering standpoint, web and web related data and provide consulting / analytics based on the ownedservices are very much in demand from the market, as are data as well as customer data.” GS22 Globalservices www.globalservicesmedia.com May 2011
  • 23. xperts by Kumar parakala, Kpmg Cloud iaas: How secure is the user? All eyes towards the ‘Cloud’C loud computing is a prom- KPMG Cloud survey results of temporary failure during the test- ising IT services’ delivery The cloud service models - ing phase of the cloud services pro- model and today’s eco- Infrastructure as a Service (IaaS), vided by their vendors. This leading nomic situation contin- Platform as a Service (PaaS), Software provider later apologized and prom-ues to favor the cloud. This model as a Service (SaaS) - will drive increas- ised to compensate every affectedrequires a limited amount of invest- ing business and IT activity, resulting customer using this service even ifment on the customer’s side. The in hybrid architectures to manage their sites were not down by offer-adoption of cloud will be driven by and a new cloud IT mission. ing a 10 day free credit. One suchbusinesses that are reshaping them- In another KPMG survey on incident will not bring the worldselves, as it enables the creation of Cloud adoption patterns, we found to a stand-still. However, users havemore efficient business models and that planned adoption for IaaS and started asking the question of theecosystems. SaaS service models is the high- Cloud’s reliability and other service While Technology has often been est. Sixty-eight percent of the ini- providers have learnt the lesson with-a savior during the downward eco- tial respondents indicated that they out burning their fingers.nomic cycles, it has also been domi- largely plan to adopt either the SaaS Large enterprises could pos-nated by concepts and trends that are or IaaS service models. sibly recover from such a mishapseveral times like fads which come Even though IaaS benefits* have in the future but the real impactand go. By now it is a well established been enjoyed by its users even before could be for the Small and Mediumfact globally that cloud computing is PaaS and SaaS gained acceptance, Enterprises (SMEs) who might nothere to stay. According to a 2010 with penetration across industries, able to bear the cost of recovery.survey conducted by KPMG, 59 there still is a caveat: Is the cloud SMEs are moving up the value-chainpercent of the participants believed IaaS really that reliable and safe? of their cloud service requirement.that cloud computing is the way According to independent researchforward. Did the ‘Cloud’ burst? firms, the worldwide SME spend on recently, during a routine scaling the Cloud is expected to reach USD activity at a leading 100 billion by 2014 with business Statement : cloud computing is the future model of IT Cloud service provid- applications, application develop- er in the US the traf- ment/deployment, system infrastruc- fic shift was executed ture software, storage and servers, incorrectly causing being some of the key areas of spend- a domino effect of ing. Hence cloud’s outage could be failures that led to catastrophic on them. On a whole website crashes at its every user will get adversely affected clients’ end. This is if the cloud fails to serve the pur- not actually the first pose for which it was built in the time that a cloud first place- reliable, on-demand and service went haywire. cheap computing resources with a The media has earlier pay-as-you-go pricing model.Source: From Hype to Future: KPMG’s 2010 Cloud Computing Survey reported minor cases24 Globalservices www.globalservicesmedia.com May 2011
  • 24. Infrastructure ManagementHow to save yourself in a benefits of using iaaS for data fault tolerance and elastic character-‘hailstorm’? center requirements istics. For example, deploying loosely Cloud’s failure can happen; this • A cost effective model. coupled apps into the cloud insteadwould occur regardless of the pro- • Business are able to focus on migrating tightly coupled ones.vider’s size or brand. The impact will on core activities. SlAs - Reading between thebe felt by all: the user, the provider • Management of peak loads. lines: Typically, the SLA couldand the end customer. Some of the include an ‘availability clause’ of any- • Incorporates important suggestions that could where around 99.95% availability or concepts related to green help prepare the user from facing a an unavailability of around 4 hours computing.cloud mishap or outages are high- 23 minutes in one year. Additionally,lighted below: Source: KPMG’s The Cloud: Changing the business the SLA could define ‘unavailability’ ecosystem, 2011 Developing infrastructure as the unavailability of one particu-redundancy : Cloud is not a magic lar service which is probably loose-wand to deliver the best and like any the cloud. For the more conservative ly dependent on other service thatother service which is critical it is users, it is advisable not to have mis- failed and has no SLA but causes antypically relied upon multi-vendor sion critical systems or processes in overall failure at the users end. Userssupport system. Spreading the risk the cloud and initially test it with mostly remain unaware of the nitty-across several servers on multiple simpler processes or services getting gritty of the SLAs before opting forAvailability Zones across geographic delivered. Alternatively, it will be a cloud services. Again, cloud advisorsregions and possibly multiple ven- good decision to take expert advice come into picture to assist the usersdors could be one such solution. from cloud advisors before internally and guide them. However, it will beCompanies can have multiple sets of deciding on the adoption of cloud. unrealistic to have 100% availabilityinfrastructure hosting their backend Developing the ‘right’ architec- SLAs from most of the vendors exist-including one of their own and others ture : One of the key characteristics ing in the market. Even market lead-from the service providers. Seamless of a website that could be hosted on ers are offering 99.95% availability.integration between the user’s and the cloud and still manage the risk of A better option is to be preparedthe service provider’s infrastructure outage is the underlying architecture with a back-up plan.will become essential in this case. that can make it capable of operatingHowever, all this comes at a cost. So in a risk prone zone. Without elabo- The verdict!there is trade-off between data secu- rating on the technical aspects which Coming back to our story, the USrity and opportunity cost. are many and rather complex involv- based cloud service provider regained Establishing the ‘purpose’ of ing single vs. multi-host dependen- stability within five days time andcloud usage : Organizations that can cies, time-outs and retries, partition- its business as usual again. What theafford infrastructure redundancy by ing read and write data, etc., let me whole episode actually makes clearhaving their own infrastructure could just say that one needs to architect of is the near omnipresence of thehave their mission critical business in one’s app to suit the inherent cloud ‘Cloud’ and the tools and facilities that are actually available to handle any cloud mishap. On a final note, I would say ‘expect the worst and plan for it’. Infrastructure failure at times is inev- itable, be it your own or provided by the vendor. The best way to tackle this issue is to be prepared before it’s too late as the ‘Cloud’ is here to stay. The verdict is “Cloud IaaS is as secure as the user wants it to be”.GS kumar Parakala is Head of it Advisory, kPMG eMA & india and Chief Operating Officer, Advisory in kPMG in india. He isSource: KPMG’s The Cloud: Changing the business ecosystem, 2011 also a global head for Sourcing advisory.25 Globalservices www.globalservicesmedia.com May 2011
  • 25. xperts by Jui narendran, Head - valuenotes sourcing practice Platform BPo: the Growth trajectory for the BPo industry the current phase in outsourcing is about getting the right partners to transform your business.t he outsourcing of business has moved beyond the hourly or FTE of platform based BPO solutions. processes has gone well (full time equivalent) based engage- Analysts believe this is also a natural beyond the labour and cost ments. The BPO industry is now on a progression for the IT service provid- arbitrage and is not dis- growth trajectory rather than merely ers that ventured into BPO servicescussed as key drivers any more. The survival. in the last decade. Platform solutionscurrent phase in outsourcing is about gave them an opportunity to increasegetting the right partners to transform Marrying technology to the their footprint among clients of bothyour business. Service providers are services services.intricately linking their performance The introduction and inclusion The diagram below depicts theto that of their clients. Discussions of technology in service delivery has growth and evolution of BPO serv-are now around transformation and been the biggest game changer. The ices over the years. The trend hasoutcomes, not just about cost sav- outsourcing industry has been all clearly been to include technologyings. Services also evolved accordingly about technology and it was only a into service delivery and now, it- from purely voice and back office matter of time before the delivery of seems like technology plays a majorsupport to multifunctional, multi- business services would be so integral- part.horizontal. Delivery of these services ly linked to it. This was the beginning Today, the platform BPO serv- ices straddle both horizontal services (F&A, Hr etc.) as well as verti- calised industry offerings, such as procurement. Infosys, which is aggressively devel- oping its offerings, is concentrating on the horizon- tal as well as the vertical offerings in Hr and pro- curement. Infosys’ Source to Pay is a procurement plat- form solution and one such example. Source: valueNotes research Caliber Point, the26 Globalservices www.globalservicesmedia.com May 2011
  • 26. Infrastructure Management don’t have to invest in an ErP plat- form and then outsource some of the business processes as well. This works out for the service providers as well, who are looking to expand beyond the Fortune 500 companies. This does not mean that larger clients or existing clients will not benefit. Platform solutions will offer easier and cheaper ways to explore newer avenues of business. It presents service providers the opportunity to help their clients deliver their business efficiently and perhaps even cheaper. Is Platform BPO everyone’s cup of tea? Not all service providers have the capabilities to develop platform solu- tions. Currently, we see that the larger players have created platform offer- ings. This is because developing a platform based offering needs high investments in infrastructure as well. Moreover, since this model relies on transaction pricing, mature relation-BPO arm of Hexaware launched ships with clients would be needed.republic in 2010, a multi-tenant Hr For the mid-sized service providers,services delivery solution based on analysts believe this may well be an opportunity toOracle E-Business Suite release 12.According to the company, republic this is also a develop platform based solutions on a select area of expertise.is hosted and maintained by Caliber natural progressionPoint and interfaces through a user- What is the future offriendly and secure Hr portal. Tata for the it service platform BPO?Consultancy Services (TCS) offersplatform solutions in multiple service providers that The evolution of platform BPO is actually a gradual shift from the ear-lines such as F&A, Hr, analytics andprocurement. EXL, with its recent ventured into bPo lier models of BPO. However, plat- form is in a way BPO on a cloudacquisition of OPI, is likely to benefit services in the last model and since this is the way of thefrom OPI’s platform based solutions future, it is also most likely to suc-in the F&A space. decade. Platform ceed. Another reason why platformAddressing the smaller clients solutions gave them BPO will succeed is the inherent ben- efit to the clients – in terms of low Platform BPO solutions took an opportunity capital expenditure as well as transpar-momentum with the recession a cou- ency in pricing. Therefore, whetherple of years ago. Cost pressures on the to increase their platform BPO is a win-win solutionclients and the need to engage on along term basis with the clients have footprint among for all is yet to be seen but surely a model that will see exponential growthfuelled investments by some of the clients of both in the next few years. GSlarge service providers. Platform basedsolutions will probably be a boon to services. jui narendran is head at Valuenotesmid to small size clients, where they Sourcing Practice27 Globalservices www.globalservicesmedia.com May 2011
  • 27. xperts By nigel Hughes, global services director, Compass management Consulting Usage-Based Pricing: the Promise and the reality the idea of pay-as-you-go consumption of it resources via utility models and cloud platforms promises to transform it service delivery and the nature of sourcing relationships. But the transformation doesn’t happen overnight or by magic, and achieving the benefits requires understanding and addressing significant organizational and technological obstacles.t he holy grail of utility At a basic level, utility comput- and implementation of “tensioned” computing lies in the ing, or standard services delivery, pricing mechanisms that create idea of dynamic, usage- is characterized by clearly defined incentives to drive more efficient based pricing, whereby and standardized service levels and delivery and consumption of IT.IT resources are flexibly delivered units of IT functionality based on For example, in a traditionalon-demand in response to business industry standards. These allow environment, a client pays a serv-requirements. In principle, under service providers – internal or exter- ice provider a specified amount pera utility model customers pay only nal – to drive significant economies server. The service provider seeksfor what they consume, and don’t of scale. Standardization, mean- to install additional servers, ashave to worry about idle or insuf- while, enables the development that generates additional revenue.ficient capacity. Service providers,meanwhile, benefit because theyare able to leverage their expertiseacross multiple customers. It sounds simple and appealing,and indeed, many organizationsare benefitting from utility-basedmodels. But in reality a varietyof factors must be considered andaddressed before true utility com-puting can be achieved. These fac-tors include organizational obsta-cles on both the client and vendorside, as well as complexities aroundhow IT usage is measured, report-ed, and priced. In other words,while the “pay by the drink” anal-ogy is useful in understanding theconcept of utility computing, it’s abit more complicated than that.28 Globalservices www.globalservicesmedia.com May 2011
  • 28. Infrastructure ManagementClients, meanwhile, have little vis- These challenges notwithstand-ibility into how business uses IT. In ing, allocation models have thea standardized utility environment, practical impact of driving stand-tensioned pricing mechanisms are ardization across multiple custom-applied so that the client organiza- er environments and making serv-tion pays a specified amount for ices more utility-like. This allowsa CPU minute. This creates an vendors to leverage economies ofincentive for the service provider scale and deliver significant savingsto drive efficiency in the delivery to customers.of that CPU resource, as greater Organizations that will driveefficiency equals higher margin. challenge, particularly with regard the utility model to further matu-The customer organization, mean- to revenue recognition. However, rity will be those that are will-while, has an incentive to utilize he adds, “Most customers achieve ing to give up predictability forCPU resources more wisely, as substantial savings once they have overall savings, and are willing toevery CPU minute consumed has a fully transformed into the util- work with cloud providers thatcost attached to it. ity model and are then able to are hungry for market share. Such This visibility into IT delivery align and show a direct relation- customers – Amazon, for exampleand consumption, coupled with ship between business demand and – include businesses with revenue-usage-based pricing and incentives IT usage.” generating applications that need toto deliver and consume efficiently, At present, most “utility” solu- scale rapidly. For them, scalabilityunderlies the potential of utility tions are based on some type trumps predictability, and growingcomputing and its longstanding of allocation scheme. Here, the revenues can cover higher costs.appeal. However, traditional busi- resource that a client is to be billed Another example: parallel process-ness organizations are in many for has to be allocated first, thus ing applications that need burstrespects not quite ready for true allowing for predictability and pre- access to large resource pools.utility computing. While paying approval of the expenditure. While T-Systems’ Smith adds that cus-only for resources consumed is perhaps not true “utility” comput- tomer maturity in working withappealing in theory, in practice it ing, this approach does offer the one or multiple service providersmeans less control over expenditure benefit of flexibility and a more to manage ITIL processes – suchand income – a scary prospect for streamlined process for growing IT as request, order, change, incident,both clients and service providers. infrastructure, as the provisioning problem management, and others Under a strictly defined utility of new servers can be done in a –is essential to effectively manag-model, a customer that dramati- matter of hours or days, instead of ing demand.cally reduced consumption would weeks or months. As client and service providerreceive a dramatically smaller bill. For example, T-Systems charges organizations actively pursue trans-That prospect gives pause to serv- a fixed monthly rate for a frac- formation initiatives based on util-ice providers who need to dem- tional compute measure called a ity models, both parties need toonstrate a predictable quarterly “compute slice” based on industry temper their expectations againstrevenue stream to shareholders. standards. the realities of the existing envi-Put differently, a vendor who will The allocation of memory is ronment. This requires a detailedgladly implement a “pay as you go” another important aspect of utility understanding of current opera-strategy will hesitate to support a computing. “Many applications are tions and constraints, in order to“save as you shrink” approach. By memory-driven rather than com- quantify the size of the potentialthe same token, businesses like to pute driven,” says Smith. “Because opportunity, identify the obstaclespredict expenditures, and the pros- the underlying infrastructure for to achieving it, and charting thepect of unanticipated spikes in IT computing resources is ultimately optimal way forward. GScosts can be unsettling. a physical server, the ratio of com- Dr. Gregory Smith, Head pute capacity to memory is fixed. nigel Hughes is Director of Global Serviceof Cloud Services Delivery & This presents challenges from a Development at Compass Management Con-Technical Solutions for T-Systems service provider perspective, par- sulting. Bill Huber is Partner and Director ofNorth America, acknowledges that ticularly if oversubscription of CPO Services at tPi.a predictable revenue stream is a actual resources is not allowed.”29 Globalservices www.globalservicesmedia.com February 2011 May

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