forces at Work - EvOLuTION IN CORE TECHNOLOGIES AND IT ARCHITECTuRES

EvOLuTION IN CORE TECHNOLOGIES AND IT ARCHITECTuRES

2. forces at Work

EXHIBIT 2.1

Catalysts and discontinuities at work supporting RIM Catalysts and discontinuities at work supporting RIM

Changes in customer behaviour and Evolution in core technologies and IT Changes in customer behaviour and

demand Evolution in core technologies and IT

architectures demand

architectures

Productising infrastructure C1

Simplification in enterprise

T1 Productising infrastructure

services from users provides CIOs C1

Simplification in enterprise infrastructure architecture and

T1 services from users provides CIOs

delivery flexibility infrastructure architecture and

virtualisation make remote delivery flexibility

virtualisation make remote

management easier _Several

discontinuities C2 Fragmentation of Infrastructure management easier

discontinuities drive RIM

Fragmentation of Infrastructure value chain leading to sliverisation Labour has become the largest C2

T2 _{drive RIM}

“technology”

value chain leading to sliverisation of services

addressable cost in infrastructure T2

“technology” of services

Mid-market companies are equally Simplification of IT management C3

T3 Mid-market companies are equally

aggressive in leading the race to RIM Simplification of IT management C3

and governance tools T3

aggressive in leading the race to RIM Reduced accounting benefits of and governance tools

Remotely located data centres and

T4 Reduced accounting benefits of

asset transfer to vendors Remotely located data centres and C4

improved productivity of telecom T4

asset transfer to vendors improved productivity of telecom

networks is supporting RIM networks is supporting RIM operations

operations

Developments in the vendor and Developments in the vendor and offshore supply environment offshore supply environment

Rapid growth in the RIM workforce in S1 Rapid growth in the RIM workforce in

India S1 India

Increased transparency of reporting S2 Increased transparency of reporting

by RIM vendors S2 by RIM vendors

S3 Lean techniques in offshore S3 Lean techniques in offshore operations result in significant operations result in significant productivity improvements productivity improvements Vendors willing to give up select S4 Vendors willing to give up select

technology and architectural control S4 technology and architectural control

to provide customers flexibility

Source: McKinsey analysis to provide customers flexibility

Source: McKinsey analysis

Exhibit 2.1

36 The Rising Remote Infrastructure Management Opportunity: Establishing India’s Leadership

Simplification of enterprise infrastructure architecture and virtualisation are improving scale-related utilisation in-house and making remote management easier. IT shops in the mid 1990s had many server configurations and multiple storage technologies patched together with a combination of supporting networking technologies. In the last five years, customers have greatly simplified this complexity (Exhibit 2.2 and 2.3). For example, a pharmaceuticals company consolidated 95 different server configurations for each of its 95 applications in just one subdivision of its marketing and sales organisation into seven server configurations. Similarly, a global financial company consolidated 30 different corporate networks into five and reduced the number of network operating centres from 10 to three. IT organisations are also simplifying their networks (by migrating to an all IP-based network), storage architecture and desktops. All of these simplifications in architecture have provided scale efficiencies in standardising process, demand, supply and governance.

A significant impact of these efficiencies is that they take some of the “traditional easy money” out of IT outsourcing contracts, which increases utilisation through scale. In addition, it makes it attractive for vendors, especially those with remote operations in offshore locations, to manage infrastructure environments that are virtualised or on a path to being so. Reduced complexity lowers the risks for vendors and helps them deliver “higher order” benefits through better governance, automation and standardisation.

EXHIBIT 2.2

IT organisations are proactively reducing their complexity IT organisations are proactively reducing their complexity and technology footprint (1/2)

and technology footprint (1/2) and technology footprint (1/2)

Pharmaceutical company example:

Server configuration Financial institution example:

Network configuration Telecom vendor example:

End-user offerings Server configuration Network configuration End-user offerings

Number of different server Number of diff- Number of end- Number of end-Number of different server

configurations Number of

diff-erent networks Number of NOCs Number of

end-user products Number of end-user profiles

configurations erent networks Number of NOCs

130

user products user profiles

130 BU1

Before After BeforeBefore AfterAfter Before After BeforeBefore AfterAfter Before AfterBefore After6

•Allocate predecessor products to

•IT organisation had 95 applications •Consolidate duplicate, partitioned •Allocate predecessor products to products that can currently be

•IT organisation had 95 applications

supported by 95 different server •Consolidate duplicate, partitioned

bandwidth and leverage higher products that can currently be ordered

supported by 95 different server

configurations for 1 BU bandwidth and leverage higher speed, lower unit cost facilities

•Eliminate predecessor

•Rationalised and migrated 95 ad hoc •Reduce back-end dedicated network •Eliminate predecessor products and consolidate

•Rationalised and migrated 95 ad hoc

configurations down to 7 standard •Reduce back-end dedicated network

•Migrate to multi-service IP network

stationary/mobile products – 2 on Blade servers •Migrate to multi-service IP network •

•Review and redesign core network

•Consolidate similar profiles and – 2 on HP Proliant DL580s •Review and redesign core network

and traffic routing

create basic and role-specific packages

– 3 on Sun (V490, E2900 and E25K) and traffic routing

•Selective upgrade of equipment and

packages

•Extended to multiple BUs without •Selective upgrade of equipment and bandwidth was necessary

•Extended to multiple BUs without

extending number of configurations bandwidth was necessary Source: McKinsey analysis

Exhibit 2.2

Virtualisation, declining hardware prices, and the adoption of open source make labour the largest addressable cost in infrastructure. Infrastructure managers constantly look for alternative ways to reduce cost and shift money to projects that provide business with a competitive edge. In that quest, migrating infrastructure labour to a remote low-cost location could soon be the sine qua non of delivering infrastructure-related efficiencies.

Hardware prices of all infrastructure components have seen a healthy to precipitous fall over the last five years. For example, prices of the X86 and Wintel servers have dropped by 39 per cent over the last ten years. Labour rates on the other hand have remained constant or, if not, have risen mainly for some infrastructure roles.

Virtualisation has provided customers the same benefits as outsourcing: improved hardware utilisation therefore lower cost of ownership, while helping customers retain control of their IT assets. By enabling physical assets to be shared by multiple users, virtualisation allows CIOs to consolidate many instances of underutilised servers into a single instance of a more fully utilised system.¹ This has reduced operating system, hardware, related power and software costs per instance. Exhibit 2.4 illustrates the economic impact of virtualisation—the non-labour component has declined by almost 75 per cent causing the total cost of ownership to drop by almost 50 per cent, and labour’s share of total cost has nearly doubled from 35 to 65 per cent. Similarly, some customers have adopted open-source software (e.g.,

1 Users can run as many as 10–15 instances of “virtual” servers with independent instances of operating systems.

EXHIBIT 2.3

IT organisations are proactively reducing their complexity ^EXAMPLE IT organisations are proactively reducing their complexity

and technology footprint (2/2)

EXAMPLE

and technology footprint (2/2) and technology footprint (2/2)

Current Future

USA

USA Europe

Asia Asia Future model

Future model

•Number of sites with equipment

•Number of sites with equipment –350 total, 3 consolidated

Current model –350 total, 3 consolidated

•Unique tier configurations: 2

Current model •Unique tier configurations: 2

– Central services: Network, file/print, storage,

•Number of sites with equipment: 350 – Central services: Network, file/print, storage, backup/recovery, mail/collaboration

•Number of sites with equipment: 350

•Unique tier configurations: 15 backup/recovery, mail/collaboration

– Remote services*: Network, file/print**, storage**

•Unique tier configurations: 15

•Degree of centralisation: Low – Remote services*: Network, file/print**, storage**

•Degree of centralisation: High

•Degree of centralisation: Low

•Policy on one-offs: As needed by business •Degree of centralisation: High

•Policy on one-offs: As needed by business ••Policy on one-offs: Not supported

* Remote sites can be WAN-optimised or not, depending on bandwidth, but eventually all will be WAN-optimised

** File/print and storage services would only exist in non-WAN-optimised remote sites Source: McKinsey analysis

Exhibit 2.3

38 The Rising Remote Infrastructure Management Opportunity: Establishing India’s Leadership

Linux-based servers) and have seen a more than 50 per cent fall in hardware- and software-related costs, but a relatively insignificant drop in labour and in some cases higher support costs for Linux.

This means that hardware procurement and financing are no longer a major source

of value creation. This puts enterprises, smaller vendors and third-party financing companies on an equal footing. Further, it allows enterprise customers to reconsider decisions on asset ownership and the relative value of moving labour offshore.

Simplification and integration of IT management and governance tools have helped improve governance, reduce costs and create unprecedented transparency. Tools providing remote console access (for example to UNIX and Microsoft administration servers) are key enablers of RIM. These tools have simplified most infrastructure management to a set of well-defined tasks and made it easier for less experienced offshore personnel to learn these functions, quickly pick up new skills and run processes with fewer errors. At the same time, with all the development in the last few years, tools have never been more complex and costly (Exhibit 2.5). Vendors and enterprises that can cut through this clutter and focus on what drives productivity are creating value for themselves.

Pure-play tools providers are expanding their portfolio from standalone tools to

Exhibit 2.4

As hardware prices decline and virtualisation increases, the share of

Exhibit 2.4

As hardware prices decline and virtualisation increases, the share of As hardware prices decline and virtualisation increases, the share of labour as a portion of total costs rises

labour as a portion of total costs rises

Hardware prices have rapidly declined . . . . . . making labor and software key cost savings levers Hardware prices have rapidly declined . . . . . . making labor and software key cost savings levers

US $ / year per image

Average selling price, US $ US $ / year per image EXAMPLE

Average selling price, US $ EXAMPLE

X86 Servers X86 Servers

6,789 6,685 100% = 9,900 6,500 4,700

6,789 6,685

4,108 100% = 9,900 6,500 4,700

4,108 -39%

-39% 38

1995 2000 2005 60

Non- 38 Wintel Servers

1995 2000 2005

70 60

Non-labour

Wintel Servers labour 70

9,405 9,405

6,449 6,449

4,166 -57%

62 40

62 Labour

1995 2000 2005 Labour 30 40

1995 2000 2005 30

2000 2008 2010

Asset consolidation 2000 2008 2010

Asset consolidation supported standardisation supported standardisation

and RIM Without virtualization With

virtualization virtualization

* Includes network, telecom, facility costs, etc.

Source: IDC PC, server Tracker, Data Centre Trends; Meta 2004; Forrester 2005; McKinsey analysis

Exhibit 2.4

an integrated set of data centre automation tools that enable both infrastructure management and contract management. For example, HP has undertaken a series of acquisitions to assemble an infrastructure management bundle that includes server lifecycle management (Opsware²), application management and governance (Mercury), network configuration management (Rendition Networks), and provisioning (CreekPath) (Exhibit 2.6). Similar acquisitions by other pure-play providers include Symantec and Veritas, BMC and Emprisa Networks. Other players investing in this space include open source-based providers such as Zenoss Core, Hyperic HQ, GroundWork Monitor, and start-ups such as Bladelogic.

2 Opsware, in turn, assembled some of its tools through acquisitions—CreekPath, Rendition Networks and Tangram.

EXHIBIT 2.5

Landscape of current tools is complex with NOT EXHAUSTIVE

Landscape of current tools is complex with overlapping functionality

NOT EXHAUSTIVE

New entrant/pure players

overlapping functionality New entrant/pure players OEM vendors

overlapping functionality

Security/ Service

OEM vendors Networks Systems Storage Application Security/

risk Service

desk Asset Desktop

Networks Systems Storage Application risk desk Asset Desktop

Service OPNET Opsware Backbone eG iET

Micro-visibility OPNET Opsware eG

Innova-Backbone iET

Solutions

Micro-Microsoft soft

Touch Paper

Innova-tions Solutions

Microsoft SMS

HP OpenviewMOM Touch Paper

Data reporting

HP OpenviewMOM IBM Tivoli

Data reporting

CA Unicenter©

Automation of CA Unicenter© BMC Performance Manager Automation of

response Packet

design Blade

Logic Netuitive Brabeion

Service-Now Evident

CommVault

MarimbaBMC response

design Logic Vault Now Marimba

Ever-Analysis

Ever-dream

Analysis dream

Symantec

Integration and Symantec Symantec

interoperability Symantec

Voyence Tidal OpTier Citrix N(i)2

Data mgmt &

Voyence Tidal OpTier Citrix N(i)2

Data mgmt &

storage Cisco

Ciscoworks Ciscoworks Data mapping

Data gathering BMC RemedyBMC Remedy

Source: Role of tools in infrastructure outsourcing; Everest Global 2007; vendor input; McKinsey analysis; team analysis Source: Role of tools in infrastructure outsourcing; Everest Global 2007; vendor input; McKinsey analysis; team analysis

Exhibit 2.5

40 The Rising Remote Infrastructure Management Opportunity: Establishing India’s Leadership

India-based RIM vendors are also investing in proprietary tools (up to 10 per cent of RIM revenues in some cases) to plug gaps in functionality or offerings—especially in providing an integrated remote view across towers (Exhibit 2.7). Some examples are HCL, Microland and Tata (Exhibit 2.8). HCL has invested in a framework using industry best-of-breed tools, bolting on Solution accelerators and HCL’s IPR engines³ like My Dashboard and Smart Manage deliver service-driven outputs rather than tool outputs (Exhibit 2.9). Wipro has leveraged its “Global Command Centre” to provide “predictive” and “proactive” fault redress services across towers. The Global Command Centre allows seamless operation across five different locations including India, Brazil, Hungary, Uruguay and China. TCS has invested in a tool for zero-touch migration from older versions of Windows while Microland has tools for call Q management (Magnify Gold), performance audit and compliance (i2e) and root cause analysis of FMEA-based problems (Analyze).

Through their knowledge of what tools and features work best for an offshore vendor and their software development capabilities, Indian offshore vendors have been able to improve IT governance and, in some cases, save costs. Both provide a competitive advantage. Further, they have allowed offshore vendors to create unprecedented transparency for their customers, and so have played a critical role in alleviating trust and collaboration.

3 Smart Manage: provides detailed data and reports for the diagnosis of network traffic patterns.

My Dashboard: provides a status report on the different aspects of IT infrastructure to aid governance and decision making.

EXHIBIT 2.6

Vendors are augmenting tool offerings through acquisitions Vendors are augmenting tool offerings through acquisitions

NOT EXHAUSTIVE NOT EXHAUSTIVE

Acquisition roadmap Acquisition roadmap

Target Year Offering Target Year Offering

Dec 2003*

Tangram Dec 2003* •IT asset management May 2003 •Automated provisioning

Tangram

Enterprise •IT asset management

software May 2003 •Automated provisioning

technology Enterprise

solutions software technology

Jun 2004 •Automating data centre

solutions Jun 2004 •Automating data centre

management, optimising

•Network device

Dec 2004* management, optimising

application infrastructure,

•Network device configuration

Dec 2004* application infrastructure,

delivering real-time delivering real-time application analytics

Sep 2005 ••IT asset, systems Dec 2005 •Network management,

management service desk vendor

Dec 2005 •Network management, security management

vendor primarily for telcos

Jul 2006 •Application management, Jun 2005 ••Application relocation for transparent, stateful Jul 2006 •Application management,

application delivery, IT transparent, stateful

application mobility, fault-application delivery, IT

governance, SOA application mobility,

fault-tolerant computing governance, SOA

governance tolerant computing

•Asset and service Aug 2006

governance •Asset and service

management software, Aug 2006

management software, consulting

•Provisioning of storage

Jul 2006* Dec 2006 •Compliance, security audit

consulting

components Dec 2006 •Compliance, security audit

• Sep 2007 •Real-time data integration,

•Automated server lifecycle management

Sep 2007 •Real-time data integration,

data protection solutions Sep 2007

management data protection solutions

* Acquired by Opsware before its acquisition by HP Source: Press clippings

Exhibit 2.6

EXHIBIT 2.7

IT offshore vendors are acquiring and developing VENDOR EXAMPLE

IT offshore vendors are acquiring and developing integration and BSM layer tools to address gaps

VENDOR EXAMPLE

integration and BSM layer tools to address gaps integration and BSM layer tools to address gaps

IT offshore vendor developed/integrated

Dashboard Reporting +

Self Service (Service Requests/Demand Mgmt) BSM Layer

Service

Notifications Federated Unified Layer

Federated SYS

Alerting & Triggers Unified Availability Console Operations Operations Consolidation Workflow

Consolidation Layer Console

AI-based ECE & RCA Engine Integration Layer

AI-based ECE & RCA Engine Point tools

Performance & Configuration

Management Provisioning &

Job Scheduling Security

Management Element Layer

Topology Managers Performance &

Response Time Management Job Scheduling Management Element Layer Response Time

Source: NASSCOM member company Source: NASSCOM member company

Exhibit 2.7

EXHIBIT 2.8

Example offshore vendor proprietary tool offerings Example offshore vendor proprietary tool offerings

Example tools Description Example tools Description

•Smart Manage •Empowers you with NETWORK INTELLIGENCE so that you can run your network

•Smart Manage •Empowers you with NETWORK INTELLIGENCE so that you can run your network more intelligently and in an informed manner. It works behind the scenes without more intelligently and in an informed manner. It works behind the scenes without interrupting the normal workflow and captures relevant data on the network interrupting the normal workflow and captures relevant data on the network

•My Dashboard •Offers a unified web-based console to provide status on various parameters of IT

•My Dashboard •Offers a unified web-based console to provide status on various parameters of IT infrastructure

infrastructure

•Magnify Gold •Addresses proactive Call Q Management, Real-time Dashboard, effective call

•Magnify Gold •Addresses proactive Call Q Management, Real-time Dashboard, effective call assignment (load vs. availability), Alerts & Notifications, etc

• •

•i2e •Innocence to Excellence (i2e) is designed to add value and improve an

• •

organisation's operations in Process Performance Audit & Compliance

•Analyze •Provides closed-loop problem management to minimise recurring incidents and

•Analyze •Provides closed-loop problem management to minimise recurring incidents and improve MTTR* through a FMEA*-based approach

improve MTTR* through a FMEA*-based approach

•Zero-touch migration •Complete desktop migration solution accelerator developed to assist large,

•Zero-touch migration •Complete desktop migration solution accelerator developed to assist large, enterprise organisations with locations in multiple countries around the world to enterprise organisations with locations in multiple countries around the world to migrate earlier versions of Microsoft Windows operating systems to the Microsoft migrate earlier versions of Microsoft Windows operating systems to the Microsoft Windows Vista operating system

Windows Vista operating system

* MTTR: Mean time to resolution; FMEA: Failure Mode Effect Analysis

* MTTR: Mean time to resolution; FMEA: Failure Mode Effect Analysis Source: Service provider interviews and input

Source: Service provider interviews and input

Exhibit 2.8

42 The Rising Remote Infrastructure Management Opportunity: Establishing India’s Leadership

Consolidation and the remote location of data centres coupled with increased productivity of telecom networks are further separating physical infrastructure from users and administrators. Data centre consolidation has created significant scale benefits for organisations in both labour and physical infrastructure (Exhibit 2.10). More recently, with rising power costs, some large organisations are migrating data centres to locations with lower power costs, e.g., Northern Canada. For example, Yahoo and Microsoft have planned data centres in Quincy, Washington, while Google plans to open locations in Iowa, South Carolina, North Carolina and in Dallas, Oregon (Exhibit 2.11). Sun recently announced that it would co-locate a data centre with a coal mine in Japan to benefit from lower pit-head costs. The drive for cost reduction is facilitating innovation, taking components of data centres to their natural lowest cost locations. Labour decisions are also following the drive to remote locations. IT organisations are realising that 70 to 75 per cent of IT management tasks can be delivered remotely. In fact, a detailed analysis of each of the roles in an IT organisation indicates that only management functions (e.g., governance, demand management) need to be close to the user (Exhibit 2.12). It is increasingly common

In document The Rising Remote. Management Opportunity: Establishing. India s Leadership (Page 35-44)