Remote Controlled

Bill Piatt, CIO of the International Finance Corporation (IFC),sits in his Washington, DC, office just three floors above the company's primary data centre. But for all he cares, that server room could be halfway around the globe. After all, many of the people who manage that infrastructure are. Satyam Computer Services provides global network monitoring, database administration and mail server maintenance from a network operations centre in Chennai, India.

"Why would anyone think this is unusual?" wonders Piatt, who, in the past, worked for IT services providers Unisys and CGI and was CIO for the General Services Administration. "All infrastructure is managed remotely. No one's ever sitting inside your data centre anyway, even if it is in your basement. Admins are working from a different building or a different city or, if it's a weekend, logging on from home. Remote infrastructure management is something that virtually every organization does every single day. But people somehow think there's a material difference if that work is done offshore."

In fact, the offshore delivery of infrastructure management services - from network services and help desk support to server maintenance and desktop management - is becoming more mainstream. And while Piatt sees that as no big deal, it's a huge deal for providers of these services. Depending on whom you ask, the total market for remote infrastructure management services is anywhere from $US80 billion to $US120 billion. Today, for traditional, large global outsourcers, less than 5 percent of revenue from infrastructure outsourcing is derived from services delivered from an offshore location back into North America or Western Europe, says Kurt Potter, research director for Gartner. But experts say that offshore take is growing at 20 percent to 30 percent annually, as global IT services providers ramp up their offshore delivery capabilities and CIOs look to cut infrastructure costs. Approximately 70 percent to 80 percent of vendor IT outsourcing proposals hitting the market today contain some form of offshore in frastructure delivery of services, says Adam Strichman, senior partner of Nautilus Advisors.

Offshore vendors - particularly the bigger, Indian multinationals such as Wipro and Tata Consultancy Services (TCS) - see infrastructure management as the next big source of revenue as demand for offshore application development and maintenance stabilizes. Between 2003 and 2005, the number of offshore vendors capable of handling infrastructure tasks tripled to 15,000, according to McKinsey. In February, India's National Association of Software and Services Companies (Nasscom) published a report (compiled by McKinsey) proclaiming that up to three-quarters of all infrastructure management roles could be offshored, creating a $US26 billion to $US28 billion revenue opportunity by 2013, of which Indian companies could capture about half. Meanwhile, more established US and European infrastructure outsourcing providers view offshore delivery as a way to compete on price with their offshore rivals and improve their own slim margins.

Both these legacy and emerging infrastructure services providers are counting on plenty more CIOs like Piatt willing to sign on the dotted line. "You have to get better and better at driving operational costs down so you can do more project work," says Steve Bandrowczak, CIO for Nortel. CIOs have "consolidated their data centres, rationalized their servers, implemented ITIL", says Potter. "This holds promise."

Promise, certainly, but no guarantees. While the offshoring of many infrastructure management services is possible, it is not the best choice for every company, situation or type of work (see "How Much Can You Send Offshore", end of story). The risks and additional management overhead incurred when offshoring discrete projects or application development work are only compounded when sending critical, real-time operational support around the world. Issues like training and governance can be tricky.

While there are some labour cost savings to be reaped by offshoring infrastructure management tasks, the limited savings may not be worth it for some IT leaders. Others may be constrained by compliance requirements or political considerations. "CIOs have to step back and ask themselves what they're trying to accomplish with infrastructure outsourcing. Cost savings? Optimization? Transformation? Efficiency?" advises Peter Iannone, head of the IT practice for outsourcing consultancy EquaTerra. "You have to take a look at the range of options, the business value and trade-offs of each."

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

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