Innovation, automation keep down outsourced data center bills

Renewals for data center outsourcing deals during the past year reveal a drop in prices, thanks to increases in automation, and server and storage demand.

Gas prices have been steadily falling lately — something outsourced data center costs have also done for buyers during the past year.

In the $70 million data center infrastructure utilities space in the U.S. and Canada, prices on renegotiated contracts have eroded by about 10.5% in the past 18 months, according to a survey of about 200 clients by Gartner in 2015. This is among several major data center outsourcing trends identified by the analyst firm.
“What we are seeing are continuous improvement and automation efforts,” said David Ackerman, a research director at Gartner.

Among the top outsourced data center vendors are IBM, Hewlett Packard Enterprise, Dell, HCL Technologies, Computer Sciences Corp., Atos, Unisys and Accenture, based on rankings by Gartner that examined each provider’s market understanding, product strategy, innovation, customer experience, market responsiveness and operations.

About 30% of outsourced data center pricing is variable, according to Ackerman, with unit-based pricing the most common practice. Variable pricing is also based on shared risk and reward, and some is incentive-based, he said.

One of the data center outsourcing trends Ackerman wants changed is for buyers to push for more innovation in outsourcing deals, and to share the responsibility for the risk and reward from that innovation.
“If you don’t have it in the contract, don’t expect it,” he said.

The price drop comes as demand increases, with a 24% increase in server capacity and a 38% increase in storage demand annually.

The onus is on companies to decide whether to outsource some of their data center operations.

“How long are we going to see value in having our own data center?” said Nick Everard, senior manager of North American Technology Services at Ferguson Enterprises Inc., a plumbing distribution company in Newport News, Va.

Everard is trying to be better informed about his outsourcing options while he operates one on-premises data center and one colocation data center.

I am always analyzing the cost and benefit of maintaining the infrastructure we have.
Nick Everard
senior manager of North American Technology Services, Ferguson Enterprises
“I am always analyzing the cost and benefit of maintaining the infrastructure we have,” he said.

Outsourcing his data center might not be the way to go, Everard said. Four years ago, as part of a project to put in place an ERP system from SAP, he moved into two colocation data centers near each other.

Everything changed, though, when the company aborted the SAP move.

“When we threw SAP out and fell back to the legacy ERP, we dropped one of the colos,” he said.

The company’s on-premises data center is “not quite an enterprise data center,” used mostly for test and development with some production applications, according to Everard.

The colo space is an enterprise-class data center, and the goal is to move all of the company’s production there.

Don’t forget about the cloud

One of the biggest weaknesses for data center outsourcing vendors is that they don’t promote cloud computing well, Ackerman said.

Those providers often do not aggressively push to move legacy environments to the cloud, and they should be more aggressive with contracts that allow companies to move to the cloud without penalty, according to Ackerman.

“Many CIOs that I talk to say they would like to see their data centers empty out over time, because they are moving workloads to the cloud,” Ackerman said. “That needs to be embraced by providers and their contracts going forward.”

Some companies have found that the quality of service from so-called low-cost geographies has been poor, and some providers may not be using data center tools well, such as a data center infrastructure management system.

“It doesn’t mean they can’t use the tools or know what the tools are, but they may not be using the in-depth features of the tools that can really bring some capabilities to the data center,” Ackerman said.

Enterprises need to know their business and IT needs, and pick a vendor to meet those needs. Most users are looking for service providers that can support a specific workload, and not necessarily the biggest vendor or the market leader, Ackerman said.

Strengths of data center outsourcing vendors lie in standardizing processes, consolidating data centers and the service management that is provided, according to Ackerman.

“There’s definitely some consolidation and reduced complexity going on out there, and the providers have done a good job on that,” he said.

One of the most significant challenges for buyers is dealing with mainframe workloads. The number of Ackerman’s clients that are looking for help with mainframe workloads has “escalated significantly” during the past year, with staff retiring and enterprises wondering what to do with the mainframe workload.

IBM is not the only choice for mainframe work, Ackerman pointed out — half of the top data center outsourcing vendors also do mainframe work.

“You don’t have to [go with IBM],” he said.

Some enterprises are also using data center outsourcing for hosting virtual desktops, with 18% of the users surveyed by Gartner doing it with Citrix, VMware and Microsoft making up most of the work.

During the next year, buyers will continue to see vendors make use of economies of scale, and capitalize on expanding server and storage demand, bundle more services — for example, data center with networking — and devise more standardized portfolios.

Source: techtarget-Innovation, automation keep down outsourced data center bills

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Cognizant’s new business in 2015 likely to exceed combined incremental revenues of Infosys, TCS, Wipro

US-based Cognizant Technology Solutions has reportedly earned more incremental revenue than the top three Indian IT companies — Tata Consultancy Services Ltd (TCS), Infosys Ltd and Wipro Ltd — together, in 2015.

Cognizant is expected to report $2.15 billion in incremental revenues for the calendar year 2015. The income is higher than the $1.96 billion earned by the three largest domestic IT firms put together.

While India’s largest IT firm Tata Consultancy Services (TCS) saw incremental revenue of $1.18 billion last year, Infosys and Wipro earned $570 million and $211.5 million, respectively.

The gap between Cognizant and the Indian IT firms in acquiring new business is expected to widen going forward as “more commoditised outsourcing deals” consist of digital technologies, according to some experts.

The increase in incremental income for Cognizant was partly led by the acquisition of TriZetto Corp. for $2.7 billion in 2014. Indian IT firms also spent huge amounts on acquisitions last year, but did not see much addition to revenue growth from such buyouts. Infosys and Wipro had spent nearly $800 million to acquire six companies in 2015.

“By my estimates, TriZetto commanded annual revenue of about $720 million, and Cognizant booked about $80 million in revenue from TriZetto in 2014 and an incremental $640 million in 2015. This means about $640 million of Cognizant’s revenue addition in calendar year 2015 is stemming from the TriZetto acquisition or inorganic revenue growth,” Mint quoted Rod Bourgeois, founder of DeepDive Equity Research — a US-based equity researcher, as saying.

Another reason for the gap is slowing growth of domestic IT majors. While Cognizant continued to post encouraging growth rates in the past few years, Indian companies have witnessed their growth slowing to six-year lows.

Cognizant’s 21% growth last year is far above that of 7.8% and 6.6% growth recorded by TCS and Infosys respectively. While Indian IT companies have “struggled” to improve their business from clients in the banking and finance vertical, Cognizant has been “able” to increase its business from the segment.

“Banks are the largest technology spenders and so BFSI (banking, financial services and insurance) is the largest industry for all IT companies. Banks are again emerging as the largest buyers of new technologies as they look to transform their operations. Indian tech firms have lagged until now in garnering a big share of this new tech spend, and so growth is slowing,” said a Mumbai-based analyst at a domestic brokerage firm on condition of anonymity.

Source: ibtimes.com-Cognizant’s new business in 2015 likely to exceed combined incremental revenues of Infosys, TCS, Wipro By Besta Shanka

The top 10 IT outsourcing service providers of the year

Everest Group’s inaugural service provider awards name Cognizant, Accenture and IBM the top three outsourcing providers. In addition, Accenture is highlighted as ‘leader of the year’ for continuing to transform itself and HCL as ‘star performer’ of the year for its embrace of innovative service models.

Outsourcing consultancy and research firm Everest Group recently unveiled its ranking of top 20 IT service providers, but it wasn’t legacy powerhouses like IBM or HP that topped the list. Teaneck, N.J.-based Cognizant (now India’s second largest outsourcing providers) claimed the top spot, followed by Accenture and Big Blue.

Everest Group has been ranking service providers individually based on their performance in 26 different categories, including key business lines, geographies, and technologies and categorizing them leaders, star performers, major contenders, or aspirants in each area. But this was the first year the company consolidated that information to come up with overall rankings for the global outsourcing industry.

“We were surprised [that Cognizant came in first]. We’d typically see Accenture as a leader in many of the matrices we had, and our assumption would have been that Accenture would be No. 1 and IBM would be No. 2,” says Everest Group practice director Abhishek Singh. “But as we began to consolidate and analyze the data, it was clear that Cognizant had upped their game by way of year-on-year growth. That’s what landed them on top. Only Cognizant had a star performer rating in five areas.”

Rounding out the rest of the top five were India’s TCS and Wipro.

Top 10 IT Service Providers of the Year

  1. Cognizant
  2. Accenture
  3. IBM
  4. TCS
  5. Wipro
  6. HCL
  7. Dell
  8. Infosys
  9. CapGemini+IGATE
  10. CSC

Source: Everest Group 2016

How the IT service providers were chosen and ranked

Everest incorporates both market success (revenue growth, deals won or renewed, margins generated) and IT service capabilities in its scoring model. This year, it recalibrated its methodology to place more emphasis on innovation, intellectual property and emerging technology capabilities.

“Historically when evaluating development capabilities, we placed a lot of emphasis on scale—number of employees, scope of coverage, geographic footprint. But we’ve seen all of that become commoditized in recent years,” Singh says. “The differentiation enterprises are looking for today is on the innovation side. So we look at what they’re investing in, how they’re devising their sourcing strategies, whether they experimenting with new service models or engagements with their customers.”

 

While Accenture came in No. 2 overall, it was highlighted as leader of the year. “Accenture has been a firm which has continually transformed itself,” says Singh. Historically much of Accenture’s outsourcing opportunities flowed down from its management consulting engagements. “They were able to connect with key stakeholder and got invited to the table for transformational deal for more than a decade,” says Singh. But the firm is also expanding beyond its consulting legacy into product solutions and an integrated infrastructure model that will give them at shot at deals that were typically purview of business process providers, Singh says.

IBM, No. 3 overall, has also rolled with the industry punches. “They went from total outsourcing in the 80s to platform solutions in the 90s to offshoring and beyond,” says Singh. “Where we’ve seen EDS and Perot Systems fall by the wayside and get acquired, IBM has remained relevant. Whether its cloud or digital transformation, no one has mad the kinds of investments IBM has. They are defining the paradigms of what’s getting discussed next.” They are, however, being challenged by increasingly powerful upstarts like Amazon and Rackspace, notes Singh, “but when it comes to new technology, IBM is always there.”

TCS and Wipro performed particularly well in banking and financial services, which account for more than half of their revenues. But Cognizant had the upper hand on them due to its increased coverage in the increasingly important areas of healthcare and life sciences.

HCL was honored as “star performer” of the year. “HCL has transformed itself, particularly on the infrastructure services side, and is getting invited to deals where in the past only IBM or HP might,” says Singh. The Indian company is known to have one of the most aggressive sales forces in the industry as well. “They’re willing to take on assets even though they’re really a remote infrastructure provider. They’ll take a chance on new outcome based deals,” says Singh. As a result, they’ve built a solid pipeline of long-term deals. But time will tell how those agreements perform. “Winning the deals is one thing,” Singh says. “What we don’t know yet is the quality of the deals they’ve signed on for. It’s not clear yet whether they’re compromising or they are truly bringing something new to the table.”

HP Enterprise and IBM jointly came out on top in the cloud and infrastructure space. “That was very much in line with what we expected,” says Singh. “The primary reason is innovation and pedigree. They’ve been incrementally investing to be better in that space than anyone.”

Source: CIO.com-The top 10 IT outsourcing service providers of the year By Stephanie Overby

5 Insights on Outsourcing to the Balkans

A quick search on Google on the potential tech scene in South East Europe, also known as the Balkans, reveals some interesting articles and facts on the potential of the countries of the region. Everywhere you might face the line that South East Europe is driven by highly skilled (skills that reflect a tradition of strong math and engineering education that goes back to communist times) and certified workforce, with technical expertise, low prices, no language barrier and quite the proximity to Europe, which makes things quite convenient for communication and flight connectivity to European Cities. And on top of everything the Balkans is not shy of entrepreneurs.

 

Read more at: 5 Insights on Outsourcing to the Balkans

Research and Markets: Global Infrastructure Outsourcing Market 2015-2019 With Accenture, CSC, HP & IBM Dominating

“Global Infrastructure Outsourcing Market 2015-2019” report to their offering.

The Global Infrastructure Outsourcing market to grow at a CAGR of 6.2% over the period 2014-2019

Infrastructure outsourcing refers to the outsourcing of data centers, desktop services, help desks, networks, and other related services. This enables the transfer of managerial responsibilities that include offering an optimized, secure, and scalable IT infrastructure to an external provider. The demand for service integration and automation of infrastructure services has been driving the demand for infrastructure outsourcing services.

One of the rising trends in the market is the emergence of cloud-based outsourcing services. Some clients are adopting this technology to get instant access to applications without the need for infrastructure related installations. Cloud-based outsourcing offers other advantages, such as cost reduction, reliability, scalability, and agility.

According to the report, one of the major drivers of this market is the need to enhance network infrastructure. The complexity of network infrastructure puts a heavy burden on enterprises managing their computing infrastructure. Enterprises are focused on increasing the productivity of the computing infrastructure. Therefore, there is growing adoption of virtual equipment and infrastructure, which further increases the productivity of the network.

Further, the report states that one of the most important challenges that the market faces is the rising attrition rates. Outsourcing jobs are taken up on a temporary, or part-time basis, and turnover rates are very high.

The top four end-users of the market are:

  • BFSI
  • Government
  • Manufacturing
  • Telecommunications

The market can be segmented into six divisions:

  • Data Center Outsourcing
  • Network Outsourcing
  • Help Desk Outsourcing
  • Desktop Outsourcing
  • Outsourced Cloud Infrastructure Services
  • Others.

Key Vendors

  • Accenture
  • CSC
  • HP
  • IBM

For more information visit http://www.researchandmarkets.com/research/xwf7lv/global

IBM still a bellwether despite industry departure from traditional IT services

Reports that IBM is reducing its offshore workforce are the result of cloud computing, automation and artificial intelligence (AI) shaking up the IT outsourcing sector, and 2015 could see acceleration in the sector’s evolution.

IBM used to be described as the bellwether of the IT sector, yet, in today’s world of internet giants such as Google and Facebook, this no longer appears to be the case.

But although the company might not be as vocal as the fast-growing giants, which have their fingers in all sorts of pies, IBM is quietly getting on with its transformation. Recent huge IT services deals are evidence that IBM remains a constant fixture on the contract lists of large enterprises. In December 2014, IBM announced deals worth $3.6bn.

All suppliers must transform, as IBM has, if they are to prosper.

Traditional outsourcing models, which have seen third-party suppliers take over the running of IT or business processes for organisations, are changing. Customers want IT services contracts to add value and suppliers want to increase their profit margins.

This might appear an uncomfortable marriage, but both can achieve their goals by harnessing the latest technologies.

By using technology such as automation software, AI and cloud platforms, businesses can become more efficient without spending heavily with suppliers for human resources. At the same time, suppliers are increasing sales and margins, because they are not just adding costs in line with business volumes and are instead moving to non-linear business models.

 

Read more at: Computerweekly-IBM still a bellwether despite industry departure from traditional IT services by Karl Flinders