Managing for growth

23 Apr 2008

Irish organisations are embracing the managed services concept in greater numbers than ever, as they look to make the best strategic use out of their resources.

A recent report from IDC revealed a total of 80pc of the top 1,000 organisations in Ireland currently use outsourced or managed services. The report, The Irish Market for Outsourcing and Managed Services, points out that many more organisations — 46pc of the total — have plans to use such services in the future.

While Ireland has been behind the curve compared to our European counterparts in managed services, this reported activity will ensure healthy growth in the market for these services in the coming years. According to IDC, there is particularly good scope for growth in core IT infrastructure and network and communications infrastructure services. The opportunity is largely at the volume end of the market in what is typically called managed services, where there is no staff movement and contracts are short in duration.

The Irish market, as evidenced by the survey, shows less enthusiasm for outsourcing in the traditional sense of an external supplier taking responsibility for a major IT or business function and transferring personnel. IDC says the major drivers of the market are cost reductions and the lack of in-house expertise and the need to access external skills. Interestingly, fewer organisations cited cost reduction as a benefit they had achieved through the use of outsourced or managed services than cited it as a driver of their usage in the first place.

The report also found business continuity, disaster recovery and server management are the most-used core IT infrastructure services, while wide area network management and network break/fix are the most-used network and communications infrastructure services. Application maintenance leads the list of application services, while learning and training is top of the list of business processes outsourced. The report found that 68pc of contracts are of one year in duration. Another interesting aspect of the report findings is the fact that 90pc of customers expect to renew with their suppliers even though rates of customer satisfaction are moderate at 7.6 out of 10 on average.

Commenting on the results, report author and IDC consultant John Gilsenan says: “In a country that has lagged behind much of the rest of Europe in its use of outsourcing and managed services, we now have evidence that the market is well established and growing.” He says that while the survey points to the majority of usage being at the short-contract, task-outsourcing end of the scale, there have also been some high-profile full-outsourcing contracts announced in the past few months.

“This is good news for IT suppliers as it shows that Irish organisations now have more faith in the outsourcing concept. The fact that so many seem set to renew their contracts with existing suppliers suggests that the popularity of outsourcing and managed services has been established for the medium to long term.”

Selective move
Laurence O’Byrne of Fujitsu Services says Ireland has been moving towards what he describes as “selective” managed services over the past 24 months. Instead of a ‘big bang’ approach, with everything being handed over to a third party, Irish companies tend to outsource elements of their IT infrastructure. Different areas of industry also view managed services differently. For instance, O’Byrne says government departments would see the outsourcing of applications development as a managed service. “Now we’re seeing the start of desktop and IT infrastructure happening, albeit slowly, in government areas,” he adds.

As an interesting example of where the market is going, O’Byrne points to the Irish Courts Service, which had been looking for the delivery and management of a digital audio recording system in courtrooms throughout the country. This will be a fully managed service. “The Courts Service was set up around 1999 and it made a decision to outsource instead of building its own team, so it has people who focus more on the strategic end of the business,” O’Byrne explains.

Research conducted by Fujitsu Services throughout Europe — with close to 700 CIOs — found that up to 90pc of the IT budget is often absorbed by desktop and desktop support. “It’s soaking up a lot of IT resources and IT effort and that’s a big growth area for us. For example, we’re implementing desktop management companies such as Lloyds. That’s for 70,000 staff in over 2,000 different locations, managing the desktop and service desk for the company across the board,” says O’Byrne. The top three services Fujitsu’s clients are looking to have managed are desktop, infrastructure and application; however, the order is interchangeable, depending on the customer.

Cost savings
Ed Byrne, general manager at Hosting365, believes the managed-service model is an operating cost as opposed to a capital cost. And it is a particularly good model, especially in an economic downturn. “Instead of needing a rack of servers, backup, Windows and Office licencing, which would cost around €30,000 to install, you can get access to all of those services for a fixed monthly fee. So there are savings on capital costs, no depreciation and no stumping cash upfront to get something installed,” he says.

Byrne also points to the arduous job of building a room to house equipment if a business is after high-end performance, with a high-availability level. “To build a comms room or mini data centre in your office, the cost would be phenomenal, whereas in a data centre you have economies of scale,” he points out. Another important driver, according to Byrne, is 24/7 access to expertise and technical people. In addition, the outsourced managed-service model means companies can access the service on a per-usage or per-hour basis.

Jason Boyle, professional services manager of PFH Technology Group, says the increasing rollout and coverage of broadband is making it easier for companies such as PFH to provide and develop services for their clients. According to Boyle, in the corporate environment, the main driver is often a reduction in cost. “Either they’ve increased the services they’re offering internally and they can’t increase the headcount or they’ve tasked a person to do project work and new systems implementation, which takes them away from day-to-day system management,” he explains. “From a network-management perspective we can take on the day-to-day chores such as backup management, data management, offsite backup, antivirus and patch management — the stuff some companies don’t have the resources for or physically just can’t do. Essentially, managing the tasks that are not managed in the company’s environment,” he concludes.

By Eamon McGrane