"RIM Services - The Next Frontier in Offshoring"
Debbie McLaughlin | Published in the MIS Australia magazine - February 2011 Issue
With over a third of the private sector now sending their applications services to offshore locations, the question for some time has been: can infrastructure services follow the same route? Until recently, the answer was a resounding no.
Infrastructure offshoring has consistently lagged, with market penetration hovering at around 5% for a number of years. With infrastructure opex typically representing around 40% of total IT opex, this reticence has ruled out opportunities to take advantage of offshore savings for a large proportion of the organisation's IT spend. But this appears about to change. During the last year we have seen market penetration for infrastructure offshoring jump to around 12%, largely on the back of growing interest in 'remote infrastructure management' or RIM services.
RIM refers to the separation of 'logical' IT infrastructure management from the physical location of the data centre and IT systems, and is being fuelled by the development of new technologies and services that are characterised by remote-delivery, standardisation, automation and virtualisation.
This separation removes a key historical inhibitor to offshoring, namely the need to physically move the entire data centre offshore. Under a RIM service, the service provider supports data centre activities such as application monitoring and server, storage and network management from an offshore management centre, while the data centre and assets remaining in Australia. Importantly, this will allow organisations to leverage large low cost resource pools, and at the same time retain control of sensitive data and assets, including ownership of the data centre.
Who are the early adopters of RIM services? The appetite for RIM services is currently strongest in highly competitive, capital intensive industry sectors such as utilities, transport and retail. But expect to see broader interest in RIM services as organisations look to optimise their investments in virtualisation technologies and standardisation. Some organisations are also seeing RIM services as a logical stepping stone to cloud based offerings.
For CIOs interested in RIM services, the crucial initial questions are what model do I use, and which service provider will best suit my organisation.
Models used are similar to those for applications offshoring, and include the direct model, indirect model and the captive model, but ultimately it is the philosophical approach that will be of most relevance. This varies markedly between providers, and is strongly influenced by their heritage. Approaches can range from a fully flexible, staff augmentation based model where the service is highly customised, to a standardised fully managed RIM service with committed service standards and outcomes.
Similarly, while the average percentage of service delivered by offshore resources sits at around 75%, the ratio varies considerably between deals and depends on a range of factors such as the type and criticality of remotely managed infrastructure and the level of business logic embedded in supported systems. This ratio will underpin the business case and will be the key driver for any cost savings.
And who are the market leaders? Indian 'pure play' service providers such as HCL, TCS and Wipro are leading the RIM services market in terms of cost saving opportunities and maturity of capability, as they seek to expand revenue streams beyond their traditional applications and business process outsource offerings. Providers such as Wipro are investing in local delivery centres to complement their offshore capabilities. There are also some good examples of the captive model including ANZ Bank's Indian based operations, but this type of model requires significant upfront investment in terms of cost and effort.
RIM services are not without challenge and will not suit everyone. The three top challenges you will need to consider are:
- Offshore access to sensitive data: Although the physical databases remain on-shore, access to these systems from offshore locations still poses security challenges for most organisations, especially Government.
- Standardisation and automation of the environment: This is really a prerequisite to the organisation's ability to acquire RIM services. Those with disparate technologies and largely manual processes will find it difficult to move to a RIM model, which is dependent on remote management capabilities.
- Increased support and management complexity: The introduction of offshore support into the IT service chain increases complexity and ability to achieve an end-to-end service experience. There are no leading systems or tools to ensure the organisation and its suppliers work effectively together, so it becomes critical for the organisation to design a service management framework that incorporates offshore complexities.
As the deployment of automation technologies expands, expect to see most of these challenges addressed and the RIM market grow to around 30-40% take-up in Australia over the next 3 years, particularly in the private sector. Initially this trend will be motivated by cost savings, but access to a large resource base in the face of local IT skills shortages will become an equally compelling motivator.
