Outsourcing is the first step towards IT services

August 17, 2011 • Opinion

Cloud computing is the IT buzz phrase of the moment and if one cuts through the profusion of definitions of what Cloud computing actually is, it boils down to IT as a utility – a pay per use approach akin to other utilities such as electricity and telephones.

Peter Dixon, Dimension Data GM for innovation and IT outsourcing presales

Best guesses by IT gurus, however, are that the end game of IT as a utility is some five to ten years away and that moving organisations from where they are now – mostly owning their own IT assets with varying degrees of outsourcing – to full dependence on external providers for every aspect of their IT operations and data, will be a process of graduation over time to progressively greater levels of outsourcing, hosting, and managed services.

During that journey, the Cloud will provide solutions for optimising services through means such as virtualised IT infrastructure on both dedicated (private Cloud) and shared (public Cloud) platforms as well as virtualised software or applications as a service.

The motivator for that progression will, of course, be how attractive the return on investment (ROI) is for each move away from owning and managing one’s own technology. And the business case, certainly in the case of outsourcing and managed services, is already clear.

For instance, we’re seeing, through the 49 Dimension Data offices worldwide, a distinct trend among organisations towards consolidating IT assets and business processes so as to reduce complexity and lower operations costs. Consolidation also improves security and compliance, and increases productivity.

The problem is, of course, that even very large corporations seldom have all the skills and all the technology in-house to keep themselves at the cutting edge of technology. It’s also an established fact that specialist areas such as contact centres and data centres are more cost effective and more efficient when they are outsourced.

Hardly surprising, then, that the BMI-T SA IT Services Market Sizing and Forecast 2009 – 2014 report has shown that the South African IT services market is growing at a CAGR of 8.3% over the five-year forecast period, reaching a total of R45.87 billion by 2014 with outsourcing dominating at a 41% share of the overall services market. The reasons cited in the report for organisations choosing to outsource include the IT skills shortage and labour.

regulations and the benefit that IT outsourcing services vendors mostly use up to date versions of systems, thereby sparing clients the trouble and costs of having to update out-dated systems. There is also an increased focus on managed services where clients choose to outsource selected services such as end user equipment and security instead of outsourcing the whole IT operations. This has resulted in companies signing up smaller contracts with several vendors over a shorter period as opposed to signing one big contract with a single vendor over a long period.

In addition, as more South African organisations grow beyond the country’s borders into the rest of Africa, it is simpler to source the technology solutions and services from a specialist provider who understands the issues of delivering services in the relevant territory.

For most organisations, therefore, outsourcing and managed services are in themselves a good idea, because they solve so many maintenance, management, opex, and capex challenges.

They also represent an unspoken ideal, which is that no organisation would typically choose to operate its own power station. Far easier operationally – and financially less risky – to simply plug into the grid, pay for what you use, and let someone else worry about how the power gets to your plug safely, without interruption, and at full capacity.

That is the real return on investment in outsourcing: the ultimate arrival at a point at which you plug your business into an IT system, the components of which you have selected because they align with your business strategy and, therefore, enable your business to seamlessly and affordably do what it needs to do to stay competitive and profitable, and you pay only for the time and functionality you actually use.

Someone else employs the IT specialists. Someone else has the administrative burden of keeping licences up to date and refreshing hardware. Someone else has to work out how newly developed technologies will be integrated with existing infrastructure so as to optimise your business operations and give you all possible options for exploiting the latest innovations.

So, outsourcing now, either fully or selectively, positions you early and optimally for the end game of computing as a service. As a consequence, your ROI on outsourcing is significantly improved along the journey.

Peter Dixon: Dimension Data GM for innovation and IT outsourcing presales

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