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Can an outsourcing supplier manage IT infrastructure remotely? Anant Gupta, Chief Operating Officer of HCL Technologies's Infrastructure Services Division (HCL ISD) and Corporate Vice President of HCL Technologies, has written a book to answer that question. The Indian supplier, which self-published The Blackbook, researched the question when the IT Industry at large sought demystification of this new Industry called remote infrastructure management (RIM). The result is a primer on how RIMO is shaping up.

The answer is an undeniable yes. "We see a market that has adopted a remote infrastructure model," says Gupta. "Customers have become a lot more comfortable with the idea of remote--whether it is inside the US or in any other part of the world."

The Everest Research Institute predicts that the RIMO market, which is approaching $1 billion today, will grow to over $8 billion in the next five years, further promoting this outsourcing model. The Indian suppliers pioneered RIMO. Today traditional IT suppliers are adding RIMO to their offerings. Together, they are propelling its growth.

Buyers are interested because "it's a lot more economical to do the management in India," Gupta explains.

The assets rarely move from their home data centers (and depending on the customer's geography, can be moved to a nearshore center) when a buyer selects the RIM model, Gupta explains. It's an "asset-light model," which differs from traditional infrastructure outsourcing, where the supplier typically owns the infrastructure. This becomes a useful option since not all buyers want to forfeit their assets and not all suppliers are in a hurry to accept them.

The HCL executive says RIM is "not the solution to all problems. But it meets certain needs, especially if you want to reduce the footprint." He believes RIM can reduce up to 35 percent of a company's IT operations budget and still provide as good or better service.

What Can Buyers Outsource Remotely?

Exactly what can buyers safely outsource remotely? Infrastructure services, the run side, are at the top of the list. Gupta maintains an outsourcer can manage 85 percent of these services remotely. "This is possible because the technology has become a lot more robust. The performance of the applications on the boxes is the real issue; it's no longer the availability," he says.

On the build side, RIM works well when suppliers work with their buyers to build the right architecture. "Buyers clearly know their business and guide us," says Gupta.

What about roll-out and implementation? Typically this requires travel to where the assets are, so most companies historically have done this on site. However, Gupta says the thinking is changing due to powerful new tools. Suppliers can now test, configure, and distribute software remotely.

Except for putting a panel plug in a socket, Gupta says suppliers can manage all network and security devices remotely. "An IT or telecom technician can do the on-site work. High-level engineers can configure the system remotely," says Gupta.

What Buyers Need to Know

Gupta says buyers and suppliers have to agree on who is responsible for the services that remain on site. One way to prevent disagreements is to categorize every task so there are no gray areas.

Gupta says a typical engagement typically takes place in three stages:

• Phase one: Assessment. Suppliers make a detailed assessment of the buyer's current IT environment, using it as the foundation for a detailed roadmap for potential transition of services. The supplier assesses each service's transition characteristics on parameters such as ease of transition, risk, and savings available from offshore delivery. Both parties agree to an initial plan to minimize risk and maximize financial benefit.
• Phase two: Transition. The two parties prioritize speed of transition for service support, stability, and continuity of service delivery. They minimize risk and establish service delivery service-level agreements (SLAs) with a process documentation foundation. The time they need to complete this phase depends on the availability of knowledgeable buyer resources and the extent existing processes are standardized and documented.
• Phase three: Transformation. The transformation phase's initial objective is to maximize the benefit from remote delivery and to upgrade service capability in areas such as support (e.g., via more efficient processes with better documentation or event correlation to improve problem identification). Continuation of this phase can include investigation of more advanced means of service improvement, such as improvements to tools, processes, or infrastructure upgrades.

The three phases constitute a value-optimization cycle (depicted in Figure 1), in which the initial outsourcing benefits--by capitalizing on opportunities to save costs--allow reinvestment in more transformative outsourcing practices. The eventual objective is to optimize the organization's IT capabilities in stages that match the buyer's appetite and capacity for change.

Gupta says it typically takes between 12-18 months to fully deliver the business benefits of relocating services to low-cost, remote locations and the operational benefits of process documentation and more mature processes. By the later stages of this cycle, suppliers aim to consider opportunities to incorporate service pricing based on business value delivery rather than IT service delivery metrics.

Figure 1

Origins of the Blackbook

In the past, moving IT offshore involved application development rather than basic IT infrastructure services such as network management, server administration, maintenance, and desktop support. CIOs have been uncomfortable sending these critical IT tasks offshore because they were concerned about access to high-end, trained resources, governance, loss of control, and process and role engineering.

The early companies that came to HCL were either outsourcing only a limited part of their IT Infrastructure or they were relatively small in size and could not afford solutions given by the IBMs of the world. Since they were testing the waters, HCL had to deliver cautiously and in a timely fashion. These early adopters were so satisfied they became its brand ambassador and helped the supplier promote the new business model.

HCL began testing the RIM waters in 1993 for a US technology company. The original test went so well the two parties held a workshop to see what other services the buyer could give to HCL. "We offshored one tower at a time; there was no big bang," he adds. Soon HCL's 15 employees grew to over 100 to manage the infrastructure remotely.

Today the supplier has done so many RIM outsourcing engagements, "we know what works and what doesn't." The Blackbook is a compilation of historical lessons from HCL's technical and transition teams mixed with trends and statistics.

"HCL having pioneered this industry, I am often asked how we ended up opening this window which has today unlocked a billion-dollar door for India," Gupta writes in the Blackbook. "My first answer to that is it was easy--we just gave the world an alternate way of managing their IT Infrastructures."

Lessons from the Outsourcing Journal:

• New technology and supplier expertise now allow suppliers to manage many towers of IT infrastructure remotely. Anant Gupta, HCL COO, maintains buyers can outsource up to 85 percent of their infrastructure remotely.
• RIMO is cost effective because experts in lower-cost countries can manage both the build and run sides. Buyers just need lower-cost technicians to make changes on site. RIM can reduce up to 35 percent of a company's IT budget and still provide as good or better service, according to Gupta.
• This asset-light model allows buyers to leave their infrastructures in place, an important consideration since not all buyers want to forfeit their assets and not all suppliers are in a hurry to accept them.
• Process transformation is not possible at the outset. The value comes in two phases. First, the partners have to optimize the existing IT operations to get upfront savings. Then they can reinvest savings for transformational gains.

Publish Date: May 2007

Copyright © 2007 - Everest Partners, L.P.

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