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Business houses are increasingly resorting to outsourcing IT services, thanks to the cost advantages and a host of other benefits.

When G.M. Pens International, a prominent player in the writing instruments and accessories business, reviewed its IT infrastructure three years ago, the needle stopped on two prime concerns – high cost of  running its IT operations and connectivity hassles between its offices located across the subcontinent.

The company, which is an exclusive licensee of Reynolds of France, has its data center sitting at its headquarters in Chennai and runs ERP to track its supply chain. “Since IT is not our mainstay, we were looking for someone who could support us and manage our IT infrastructure” says K. Ganapathy, CTO of the company. At this point G.M. Pens evaluated a number of vendors with offerings on managed IT services only to zero in on Wipro Infotech. The two signed an annual contract that has seen renewal every year. While Sify takes care of its connectivity, Wipro manages the data center and other infrastructure remotely from its Global Service Management Center (GSMC) in Mysore. Ganapathy now vouches for the usefulness of outsourcing IT infrastructure management to a third-party vendor.

What’s on offer

Data center management

Storage

Application services

Security services

Remote infrastructure management

Printing services

Helpdesk

Take the case of Overseas Infrastructure Alliance, a project development and management company with offices in India and Africa. The company undertakes analysis, exploration, development, and delivery of infrastructure projects across all industrial sectors. To curtail the high cost and intricacies in maintaining its data centers, the company roped in Netmagic, a major player in the data center management space, in 2008. Netmagic provides its customer hosted servers and rack space besides Internet bandwidth, power backup, and monitoring and security services, besides round-the-clock technical expertise.

Why outsource?
There are a number of reasons why more and more companies, both big and small, are outsourcing the management of their IT infrastructure. These include cost advantage, access to technical expertise, getting more time to focus on core business activities, and greater efficiency and accountability. “With enterprises facing issues such as manpower retention, and deployment of complex applications, thus causing issues like 24x7 monitoring, security, business continuity, etc. along with the growing need to provide quality services both to customers and employees, outsourcing IT infrastructure is becoming a key driver to survival,” says Sharad Sanghi, MD and CEO of Netmagic Solutions.

If you are giving your entire IT to somebody, basically what you are doing is giving him a key. Obviously you would not like to pass on the key of your organization to someone you cannot trust, and the trust in this case comes from brand reputation. - Aditya Singhal Country Manager, Infrastructure Services IBM India/S Asia

“Outsourcing is good for everybody but it is very effective in small and medium-sized companies. So I would say an organization with 50 to 5,000 users is ideal for switching over to managed IT services. In large organizations what happens is that there is a lot of work and lot of data, so there people do partial outsourcing, not 100 percent outsourcing,” says Sunil Bhatt, CTO, Allied Digital.

Cost advantages: Saving cost on IT is one of the big reasons why companies outsource in a big way. There are costs related to the setting up of IT infrastructure, right from installing PCs to data centers, besides ACs and other power equipment used inside a data center. Add to this the cost of real estate, employees on role, upgrading of infrastructure and monitoring, etc. With the slowdown already making it hard for companies to preserve cash, saving money on the IT front has become crucial. “We have done total cost of ownership (TCO) analysis for many of our customers. So whenever we outsource a service vis-à-vis their internal support, we have seen tangible benefits of 30 to 50 percent,” says Bhatt.

Suppose an entrepreneur sets up a new office with a headcount of 50. He would require around Rs. 15 lakh for 50 computers, besides servers, etc. Instead of spending so much money on IT, which is not the core area for him, he can approach a managed IT vendor who would make the infrastructure available to him at a monthly charge. “We give the infrastructure to the customer and recover the cost in three years or five years depending on the contract. The customer will be charged on a monthly basis. In other words, the customer need not invest on anything on capex,” says Bhatt. This is the opex model to which the industry is now moving rapidly. It is gaining traction given the slowdown where companies are falling short of money to spend on setting up IT infrastructure.

However, the capex model also exists in which case the entrepreneur would have to spend his money on setting up infrastructure while outsourcing the managing part to the vendor.

Similarly, there are substantial cost benefits in the case of printing solutions. “Outsourcing imaging and printing related needs can lead to substantial amount of savings for large enterprises. If enterprises choose the right partner, they will be empowered to better manage their printing costs while reducing the need for frequent maintenance,” says Nitin Hiranandani, Director, Enterprise Sales & Services, Imaging & Printing Group, HP India.

Benefits of outsourcing managed IT services

Cost advantage

Access to technical expertise

More time to focus on core business

Greater efficiency

Higher accountability

No need to recruit/train/manage specialized skill sets

Staff-related Issues: Outsourcing your IT infrastructure not only saves on costs, but also the hassle of managing your IT team. This also includes their training, salary-related hassles, and so on. Once you outsource to a vendor, they deploy their staff in your facility. Alternatively, in the case of total outsourcing model, your employees would migrate on to the rolls of the vendor, saving you the trouble of managing their salaries and benefits. “What we offer to our customers is that those employees who work on our client’s payrolls are transferred on to our payroll. So for a customer it is a contract, and they need not worry about laying off their employee, their PF, their gratuity, etc. The entire burden is taken care of by us,” says Bhatt.

Moreover, as infrastructure is a broad issue, getting experts on all aspects would be a difficult task. The knowledge is limited to a select few that the company hires. Once you outsource to a vendor, it would ensure that specialized talent is made available to troubleshoot.

Focus on core business: IT is one area that many companies find too complex to handle. It makes business sense to focus on your core competencies instead of concentrating on IT, which in many organizations is a support function. “Even if IT is an enterprise’s core business, setting up your own data center is increasingly becoming an unaffordable proposition both in terms of money, time and deployment of human resources,” says Sanghi. “Aside from the high capital costs, there are the high day-to-day management costs too. Routinely adding new services or upgrading to the latest technology is also not feasible. In this scenario, it makes absolute sense to outsource this service to a managed IT service provider.”

What are the types of services available?
Data center management: In this case, companies outsource the operations and management of data centers. These services include disaster management, storage management, hardware and network operations, etc. The latest in this is co-location services. In this case, the customer’s data center is placed at the vendor’s premises. This eases the burden on the customer to look for space and other aspects related to the security of data center.

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