An October 2008 DLA Piper Technology Leaders Forecast survey talks about the impact of the financial and economic crisis within IT circles. Overall, the survey found that while industry leaders have a host of concerns, they are fundamentally optimistic about future opportunities within technology.
As further validation, during a PSVillage event in Chicago that gathered senior practitioners in technology professional services, several software executives were polled on their current sales pipeline. There were two interesting findings. First, vendors selling SaaS (software as a service) software solutions reported growing pipelines and very strong interest in SaaS offerings. Even more compelling, vendors selling on-premise solutions reported good numbers for this quarter but were concerned what will happen to 2009 capital budgets.
Both findings signal a change in IT buying patterns as organizations will be forced to “make do” with their current resources related to their 2009 technology spend. Under that scenario, solutions that stretch limited budgets will win out over more capital-intensive solutions. With that in mind, SaaS and outsourcing will definitely gain traction while on-premise traditional solutions will shrink. This will no doubt bode well for managed services related to application software maintenance.
Scarce Cash Means Increased Virtualization and Cloud Computing
Companies need to be on guard for fluctuations in demand on their IT resources. Sudden increases in load must be handled swiftly and, if possible, on-demand. In-house options range from being underprepared or over-prepared, but if you have a partner with vast resources, virtually any demand need can be met with aplomb.
Especially as more companies are feeling the effects of the recession, a mandatory capital expenditure on IT infrastructure is not what a company wants to hear. In-house implementation naturally lends itself to more equipment, more space to house it, and more employees to install and service it.
Virtualization and cloud computing come into play in most any scenario. By reducing the amount of infrastructure that is in-house and supplementing that by housing information remotely, a company is more nimble to react to demands. Scalability alone is enough reason to strongly consider virtualizing more IT infrastructure, thereby basically eliminating guesswork as to the amount of resources your information requires. The virtual source is able to adapt to increases or decreases in demand.
The greater number of sources lends itself to redundancy, ensuring maximum uptime. That, combined with cost savings in fixed operating costs and the overall efficiency that virtualization provides, makes a strong case for any company to take a closer look.
A new blended concept has emerged within the managed services realm in the form of co-sourcing. Co-sourcing is defined as a service performed by both internal and external resources and accurately describes the relationship between a managed services provider and an organization’s technical staff.
Outsourcing technical functions, while once considered the wave, has evolved into a more complex practice than organizations anticipated. Throwing an array of IT projects “over the wall” to an outsourcer and expecting them to deliver exactly the same results as an internal department typically falls far short of reality. For the outsourcing model to work, one needs to actively manage that relationship. However, after investing the time and effort in managing an off-shore team, in-house IT folks could have handled it more effectively in the first place.
Co-sourcing offers the best of both worlds as an attractive alternative to either the outsourcing or do-it-yourself models. Under a co-sourcing model, the selected provider can manage the infrastructure, servers and administration and leave the development and management of applications to the client.
Bringing both sets of knowledge and expertise together is essential in resolving any issues that could arise or figuring out the best plan for scaling to the next level. A brain-trust forms between the co-sourcing engineers and client developers on how to keep the applications up and running as efficiently as possible. This includes working collaboratively to incorporate monitoring, backups, storage, database replication, and other high-availability strategies based on the application’s goals.
Under this arrangement, the co-sourcer works with the client to design specific response procedures to common scenarios that might cause an application to become unavailable. Co-sourcing helps the client focus on supporting their core competencies — and leaves the rest to the provider to ensure application availability. Co-sourcers act as true extensions of their clients’ operations, accessible 24/7 with a familiarity and comfort unattainable in the traditional, overseas call-center model.
Bringing Peace of Mind in the Changing IT Landscape
Organizations have a choice in vendors for hardware, bandwidth, networking, data center management, and 24×7 IT support. In the backdrop, these companies must contend with the latest technology of today that could be obsolete tomorrow. This prompts a vicious cycle of continual investments in equipment, state-of-the-art facilities and engineering expertise.
With that in mind, much rests on the shoulders of the modern-day CIO/IT decision-maker, CTO and CEO. Between the capital expenditures needed to buy servers and networking equipment, the labor costs for the engineering and on-call staff, and the rising expenditures of co-location/facilities space, there is much on their minds.
Over the past few years, enterprise managed hosting has emerged as a viable alternative. Managed services providers have adopted the co-sourcing model to provide organizations with the most current hardware and operating systems by placing all of the equipment residing on client networking gear into their data center facilities — all backed and supported with a 24/7 expert bench of certified engineers across multiple IT disciplines. More importantly, managed services providers can achieve these levels of support for a flat, predictable monthly fee. This adds more peace of mind for these organizations.
Support Without the Overhead: The HR Implications
One of the greatest boons of the co-sourcing model is the reduction of overhead. Virtually all organizations are finding it increasingly difficult to recruit, retain, and manage exceptional engineers. With new technologies such as cloud computing, virtualization, green IT, blade servers, Linux, etc., there are just so many engineering staffing resources that organizations can apply.
For example, organizations may sporadically require systems DBAs, load-balancing experts, networking pros, or a senior staff of Linux, Windows and virtualization engineers. However, it is highly unlikely that they would simultaneously need full-time employees for each of these specializations. A managed hosting provider is continually staffed up with these experts and can offer them to a client on an “as needed” basis. By leveraging a talented bench for these situations, both parties benefit from an enormous amount of labor efficiencies.
The managed services provider takes on the task of recruiting, training, promoting, managing and retaining talented systems engineers and removes that chore from the client’s plate. Of course, clients still maintain an IT staff around their core competencies (re: co-sourcing), but reducing labor overhead goes beyond payroll — it comes down to the time clients save in the HR process that leads to the real cost savings. CIOs need to focus on their key priorities, not HR issues such as interviews, performance reviews, and other related discussions that detract from time that should be spent on aligning IT initiatives with corporate goals.
Coping With the Current Financial Climate
Every time we click the remote on a cable news channel, we inevitable hear the terms “bailout,” “recession” and “financial fallout,” among others. However, this country was built on the American Dream and the aspirations of the entrepreneur. For the economy to rebuild, we cannot squelch the spirit of the startup nor impede the growth of SMBs and mid-to-large enterprises.
Companies still need to launch products and services but can make a more concerted effort by leveraging a managed services provider backed by the right technology tools. By embracing a managed hosting model, overhead is effortlessly eliminated, internal resources are optimized, and products or services can rapidly move from beta to production.
Taking this approach, startups are placing their applications online easily while protecting their valuable resources (i.e. time and free cash) that can now be allocated for marketing, sales and product development. The managed hosting model is a perfect match for startups and offers emerging and established companies a viable alternative to “doing it in-house.”
Mid-market firms and larger enterprises with CIOs and larger overall IT budgets that traditionally build their own data centers or collocated facilities can learn from start-ups and realize the same efficiencies by re-focusing on core IT operations. This trickle-down effect is prompting larger organizations to adopt the managed hosting approach.
No longer do they have to worry about hardware lifecycle management and capital expenses. More importantly, as this group moves away from wholesale and retail colocation providers, there is a significant reduction in vendor management (IT equipment, carriers, and data center providers) and the associated overhead related to running a 24/7 team. This market segment is now relying upon managed hosting firms to consolidate vendors and round out their need for expertise across IT specializations — all resulting in a more easily managed profit and loss statement and allowing more time to focus on core competencies.
Three Reasons to Engage a Managed Services Provider in Downtimes
A managed services provider helps any organization, large or small, focus on their core IT applications so that they can drive value to their overall business operations. The following are three reasons to guide your decision to venture down the co-sourcing path with a managed services provider by your side:
- Consider managed hosting as a great cost reduction tool to optimize cash resources around technology investments and trim labor costs
- Access the pool of IT experts as needed without having to employ them full time under your roof
- Know that your high availability applications are in good hands — sleep at night knowing your managed services partner is on the job 24/7 and taking full responsibility for keeping them up and running
While turnover and staff reductions cause many changes within an organization, the managed services provider remains a consistent, trusted partner that can be counted on around the clock.
Kenneth Ziegler is president and COO of Logicworks, a provider of high-availability hosting solutions to support business-critical applications and content. He can be reached at [email protected].