Thursday, September 13, 2007

IT Outsourcing - SMB in the US

They define basic operational tasks as '... making data backups, running e-mail networks and maintaining computer servers ... ' , and then declare that '...operations typically accounted for 70 percent of a company's I.T. budget.'

They state '....''It can free up internal resources for more important activities,'' .... then , as usual they never define those activities .... but it appears that it is what remains after operational or steady-state work is taken out of the IT dept's role .... this would probably be things like

1) development of new applications , or upgrading current application's functionality
2) upgrading hardware --> servers, network, devices , etc .
3) planning and architect work

But if steady-state can be out-sourced, then 2) above can also go to outsourcers ... 3) might be a little more difficult because the outsourcer becomes 'part' of the company, but certainly this can be done also .... even 1) can be outsourced or worked with an outsourcing firm ... the company knows it's own business and where it is going .. they can put together their future requirements ... for this they'll need to retain a core team of application developers and architects who will do high-level design work ....but then they can collaborate with an outsourcer to deliver the new application ...

This is just a staged approach to the old outsourcing model which takes over the whole IT area for a company in one fell swoop ...

And ALL the IT can be done out-of-house ... eventually because of costs, out-of-house will become out-of-country ....

Outsourcing I.T. To Unlikely Places, Like America
1,078 words
12 September 2007
The New York Times
Late Edition - Final
Copyright 2007 The New York Times Company. All Rights Reserved.
BUSINESSES, especially big ones, began outsourcing information-technology operations nearly a decade ago. But compared with the earliest efforts, corporate I.T. outsourcing today is far more precisely calibrated.
Where outsourcing once meant transferring departments to Bangalore, India, or Riga, Latvia, it now usually involves assigning specific, basic operational tasks like making data backups, running e-mail networks and maintaining computer servers. As a result, outsourcing has become more attractive to smaller businesses that in the past might not have had the resources to hire a full tech-support team to do the work.
The vendors supplying this new generation of outsourcing services are called managed service providers, or M.S.P.'s. They come in all shapes and sizes, from I.B.M. down. Some operate their own large data centers. They have emerged in unexpected places -- American cities like Portland, Ore.; Little Rock, Ark.; and Madison, Wis., where there is enough skilled labor for the tasks , and the expenses are less than in bigger cities. (young people, college grads , in college-dominated , i.e. 'cheap' towns)
Using these companies can offer big payoffs for businesses with I.T. departments that are stretched thin.
''It can free up internal resources for more important activities,'' says Lloyd Hession, chief security officer of BT Radianz, which provides services to brokerages and other financial firms.
Mark E. Bakken, chief executive of Bedrock Managed Services and Consulting in Madison, Wis., said that operations typically accounted for 70 percent of a company's I.T. budget. ''If we can cut that by a third, they can pocket the money or use it to grow,'' he said.
The changes reflect a shift in the scale of information-technology outsourcing, said Richard Ruiz, the general manager of the small- and medium-business services unit at I.B.M. Global Technology Services.
''Ten years ago, I.T. was more of an expense,'' Mr. Ruiz said. ''Back then we did big, complex and expensive outsourcing deals. Now I.B.M. has a more diversified outsourcing product portfolio and can approach smaller customers, too.''
M.S.P.'s are thriving because of several trends. First, Internet connectivity is cheap and getting cheaper.
Corporations can expect more flexibility in Internet capacity, paying for what they use, rather than for extra capacity they may need only at peak times.
''The real driver was the ability to provide a flexible bandwidth model to cater to unpredictable demands on our Web servers from the general public looking for information,'' said Aaron Bazler, the network and infrastructure manager for the Manchester Airport Authority in Britain. When the airport outsourced its parking-reservations system, it freed up bandwidth for its own needs.
Falling Internet connectivity prices, in turn, make it easier for the M.S.P.'s to access the Internet bandwidth they need to ensure reliable operations and prevent a failure. ''We have four upstream Internet providers coming into our place,'' said Rich Bader, the chief executive of EasyStreet Online Services in Beaverton, Ore., outside Portland. Among the three very high-speed lines, he said, usually one goes down once a month. ''The trick is that we have enough spare bandwidth on the other lines to handle any outage.''
Second, the Internet is playing a larger, more integral role in many corporations' collections of computing applications. Take e-mail: it is hard to find any major company that doesn't have an Internet connection for its employees' e-mail.
''E-mail is now about external communications, and we sell Microsoft Exchange by the mailbox at $15 per month each,'' Mr. Bader said. ''Exchange is very picky to run properly, and a lot of companies just don't want to devote the necessary resources to get the kind of reliability that the business requires.''
Having more Internet-connected applications requires more skill in running the applications and the broadband connection to these servers.
''The amount of expertise needed to keep Internet applications running and secure continues to increase,'' Mr. Bader said. ''Before we just had stand-alone Web servers. Now they are integrated into various other internal corporate applications, which means that businesses are even more dependent on their availability.''
Moreover, Internet connections mean data and network security considerations are critical, said Mr. Ruiz of I.B.M. ''The Web drives a lot of security issues for our customers, and they need help managing and containing these issues,'' he said.
And as the size of a typical I.T. staff continues to decrease, there is great importance in shifting responsibility for maintaining these critical servers to an outside provider who can monitor and manage them nonstop.
''We have had no major outages in the past year except for routine maintenance,'' Mr. Bazler of Manchester airport said. ''Having an M.S.P. manage our servers has made a huge positive difference in their availability.''
Third, the software tools that are needed to monitor and manage computer servers remotely are cheaper and more reliable than they used to be. Both I.B.M. and Microsoft, among others, have deepened and broadened their management-tools products, making it easier for engineers to keep machines running and updated, and foster certain economies of scale for M.S.P.'s that are handling multiple customers.
''I call Dell or H.P. and wait on hold and tell them what they need to fix so my customers don't have to waste their time,'' said Bob Longo, the director of ClearPointe Technology, an M.S.P. in Little Rock, Ark.
ClearPointe has a minimum of three engineers on duty at all times. The company monitors more than 25,000 devices, and does routine maintenance on 700 servers for customers all over the United States for an average monthly cost of $700 a server.
Fourth, even the smaller corporations are motivated to do a better job with disaster recovery and off-site data protection as a result of the Sarbanes-Oxley law, which set new financial reporting and auditing rules for businesses and other legislation. In the past, only the largest corporate data centers made off-site plans; now it is more common for smaller ones to do so. M.S.P.'s have tailored their offerings and sell less expensive solutions for this market.
''Legal compliance complexity is really driving more business to M.S.P.'s,'' said Charles Weaver, president of MSPAlliance, an association of managed-service providers based in Chico, Calif.

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