Source: Sunday Business Post
The downturn may be playing havoc with many established sectors within the IT industry, but the resulting scrutiny of costs is proving a boon for managed services.
"Managed services conversations are quite different than they were 12 months ago," said John Purdy, chief executive of Ergo. "The average chief information officer is now operat-ing with a smaller IT department or budget than previously. Cost control and cost management are big issues, as are people availability and domain expertise. Organisations are now quite happy to buy services in on an agreed basis when they need them."
Companies are rethinking how to manage IT costs in a difficult business climate, according to John Staunton, senior executive and head of outsourcing with Accenture in Ireland. "Irish businesses are looking more at managed services and outsourcing, as they are realising that it can provide them with pretty rapid improvements to their cashflow," Staunton said. "Companies are looking for their outsourcing partners to help them to further reduce costs, and are particularly looking to technologies or applications that can improve the automation of business tasks or IT tasks."
Some companies forced to cut IT staff were turning to managed service providers for a cost-effective substitute, said Edel Creely, managing director of Datapac. "Organisations are looking to perhaps streamline the operational side of their IT department," Creely said. "They may be under internal pressure for resources, and looking to outsource some tasks that they traditionally carried out within the business, such as managing the support desk."
A broad range of providers, both indigenous and international, offer IT managed services in Ireland. These include specialist technology service providers, business consultants and technology vendors. "In the Irish market, there are a large number of providers - around 40, according to analysts IDC," said Staunton. "These range from broad providers to very specialist niche ones. We find that it is important for clients to carefully consider who they select."
Creely said competition between providers was fierce. "When contracts are coming around for renewal, customers are looking at the situation with a fresh view," she said."It gives us an opportunity to go in and talk to potential new customers about the services and value add we can bring. Perhaps in the past people were not setting aside the time to look at everything as closely." Purdy said the cost of managed ITservices was falling due to increased competition in the market. "There is a group of us that are banging heads a lot," he said. "We are trying to win business from each other, and also trying to compete against some of the manufacturers who arc struggling and have aggressively moved into the services area."
Gary Melvin, sales director with Brandon Consulting, advised companies to look carefully at the bona fides of any managed services provider before signing up. "The problem in the market at the moment is that there are a lot of companies who have badged an offering called managed services," said Melvin. "They will give remote monitoring, but not the strategic elements of a true managed services offering. [Customers] are just getting a reactive support service, rather than a proactive ICT Management service"
Purdy said that any, and all, IT functions could be delivered by an external provider via a managed service agreement. "Any defined component of an IT organisation's world that can be ringfenced and put into a service level agreement (SLA), in theory, can be delivered as a managed service," he said. Creely said that managed services providers could derive extra value from technology and equipment companies had already invested in. "Some organisations, if they are unable to invest in new infrastructure, are looking to see how they can get better value out of the infrastructure that they have," she said. "Technologies like virtualisation, unified communications and managed print are areas where organisations can consolidate what they have and get better value out of what they have, and become more productive and efficient."
Companies which have bought IT hardware or software from a number of suppliers are increasingly looking to bundle the management of these together, according to Creely. This should give a better overall service and cut down on all the administration and management tasks that they would have."
Creely said that the slowing economy was prompting companies to take stock and review ITefficiencies to save on costs. "Managed print might not have been high on some peo-. pie's list of priorities, but now, due to the tangible cost savings it brings and its green IT element, people are looking at managed print more than before," she said.
Purdy said that offsite management of infrastructure was a huge growth area in managed services. "More than 70 per cent of our calls are being dealt with remotely," he said. "We can take control of desktops, peripherals or servers and deal with issues as if we were sitting right at the desk. From an efficiency, cost and timing perspective, that is much better."
Demand for managed services will grow on the back of externally hosted solutions, according to Anoop Sagoo, se-nior executive within Accenture's global outsourcing practice. "Cloud computing and software-as-a-service [SaaS] will have a very positive affect on how managed services are provided," Sagoo said. "Although we do not see a huge 'big bang', with cloud computing and SaaS coming in all at once, we think it is a very supportive and encouraging, enabling technology to drive the growth of managed services and IT outsourcing."
Melvin said that a lack of connectivity was slowing the delivery of hosted solutions by managed service providers. "In Dublin, you have multiple connectivity options, but around Ireland, in a lot of locations, Eircom is the only leased line provider," he said. "Also, while the costs of that are coming down at the moment, they are still relatively high compared to Britian and the US, where the cloud idea is more widespread."
Purdy said the outlook was positive for managed services providers operating in the Irish market. "The evidence is that good managed service providers will have a growth phase over the next 12 to 24 months," he said. "The downturn is telling organisations that they have to be more efficent and look at ways of doing things in a smarter way. As organisations come out of this, they will find that they do not have the skillsets in house. As they look to re-build, they will rely on services partners to do things for them."
Melvin said he expected the uptake of managed services to increase significantly, particularly among smaller companies "I think managed services is the way forward for most SMEs In Ireland". They should not be looking at having their own internal IT staff, when they can get a better service at a lower cost point for themselves."
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