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IT Outsourcing Enters a New Decade:
Current and Future Trends
Claudio Da Rold
VP, Distinguished Analyst
2010: Cloud Has Become the Metaphor For the
Industrialization of IT Services
Cloud computing represents a fundamental change
in the relationship between those who use solutions
based on technology and those who provide them.
The result will reshape strategies from "budget" to
"business" for providers and buyers alike.
Key Issues
1.
What are the key trends affecting the
outsourcing and IT service market in 2010?
2.
How market trends affects service providers and
what are the potential outcomes for the outsourcing
and IT service market?
What Are CIOs' Priorities for 2010?
What Are SOURCING Priorities? Traditional
Objectives, Traditional and Alternative Models
Top Sourcing Priorities of 206 European IT Organizations 2009/2010
Source: Gartner (May 2010)
Degree of Interest in
Alternative Delivery Models
0 20 40 60 80 100 Reduce cost, reduce assets or improve
cash flow (economic, financial conditions) Gain access to resources and capabilities
Improve flexibility
Improve scalability Improve agility/reduce processing cycles
(speed)
Reduce business risk
Percentage of Respondents 2009 2010 0 5 10 15 20 25 30 35 40 45 50 SaaS IU Cloud Computing RIM BPU SaaS IU Cloud Computing RIM BPU SaaS IU Cloud Computing RIM BPU 2010 2009 2008 Percent
Very High High
Potential Impact of the 2009/2010 Recession
and Service Industrialization on Prices
•
Typical multinational service providers' net margin is 6%;
Indian providers' is 17.6%, decreased from 19.3% in 2007
•
Providers must increase their flexibility and decrease
their cost:
-
Standardize services, consolidate, partner, aggregate, outsource
-Restructure workforce, salaries, subcontractors
-
Accelerate toward alternative delivery modes, IT service value chain,
new service/business models, cloud computing (= investments)
IT Infrastructure Outsourcing Services
Average Outsourcing Price Reductions
Data center services 5% to 15% Desktop/help desk services 5% to 10% Network services 10% to 15% Application hosting services 10% to 20%
Application Services
Contract or Area Price or Rate Reductions
Offshore rates in India 2% to 6% Offshore rates in China 10% to 20% U.S. on-site rates 12% to 17% Eurozone on-site rates 5% to 15%
Key Issues
1.
What are the key trends affecting the
outsourcing and IT service market in 2010?
2.
How market trends affects service providers and
what are the potential outcomes for the outsourcing
and IT service market?
Cloud-Based
Business Process
Services
Access
Management
Optimization
IT
Consultin
g
Custom
BPO~HR~
Logistics~F
&A
Custom
Solutions
ERP~SCM~
CRM~BI
Data Center
Outsourcing
App. Mgmt.
Business
Strategy
Consulting
Remote
Managed
Services
Desktop
Management
Network Services
Network
Utility
Storage
on
Demand
App.
Develop.
&
Integration
CRM Call
Center
Help Desk
Outsourcing
Hosting/
Colocation
SaaS
Infrastructu
re
Utility
Transaction
Processing
Cloud-Based
System
Infrastructure
Services
Cloud-Based
Application
Infrastructure
Services
Horizontal
Business
Process
Utility
Cloud-Based
Application
Services
Creation
Business Value-Add
IT Efficiency
V
al
u
e
Delivery
Vertical/Proce
ss-Specific
Business
Process Utility
Enterprise
One-to-One
Shared
One-to-Many
The Services Market Is Changing
Role of Recessions in the Industrialization
of the IT Services Market
Management
Optimization
Business Value-Add
Creation
IT Efficiency
Enterprise
One-to-One
Shared
One-to-Many
Access
Traditional
Service
Models
Global
Delivery
Process
Standardiz
ation
& Portfolio
Rationaliz
ation
Consumerization
Alternative
Delivery
Models
2001-2002
Dot-Com Crash
2008-2009
Economic
Crisis
Examples of Application Service Providers
in Nearshore Locations
Morocco: Atos Origin, Capgemini , Logica South Africa: Fujitsu, Patni, Zensar Hungary: EPAM, Neoris, SIS, TCS, Unisys Poland: Capgemini , CGI, HCL, HP, TietoEnato r Czech Republic:IBA, Infosys, TietoEnator
Romania: Ness, Wipro Slovakia: HP, Lionbridge, Ness, SIS Latvia: Exigen, TietoEnator Spain:
Atos Origin, Capgemini, CGI, Softtek Russia: Aplana, DataArt, EPAM, Luxoft, ReksoftUkraine:Aplana, DataArt, Exigen, LuxoftBelarus: EPAM, Exigen, IBA Group, TietoEnator
Examples of IT Infrastructure Outsourcing
Providers in Nearshore Locations
Poland:
AtosOrigin, Capgemini, TechTeam
Czech Republic:
CSC, HP, IBM, TietoEnator, T-Systems
Hungary: HP, Getronics, T-Systems, Unisys, IBM Romania: Capgemini, TechTeam, SIS Slovakia: HP, T-Systems Latvia: CSC, TietoEnator Estonia: Fujitsu Bulgaria: HP Ireland: Fujitsu, HP, SIS Italy: EDS Portugal: Fujitsu, Logica Scotlan d: Getroni
csSpain:Computacenter, HP, T-Systems, BT
South Africa:
Fujitsu, IBM, T-Systems
Russia:
Colocation, Hosting and DCO: Toward
Infrastructure Utility and the Cloud
Outsourcing/
Hosting
Infrastructure Utility
Cloud Computing
Amazon SimpleDB,Google App Engine,
Microsoft Azure Service Platform,
salesforce.com Force.com,
LongJump Application Platform
Utility Hosting
Dedicated
Managed Hosting
Shared Hosting
VPS Hosting
Cloud System
Infrastructure
Cloud Application
Infrastructure
(Application Platform as a Service)Amazon EC2, S3, EBS, SQS
Data Centre
Outsourcing
Application
Hosting
Colocation
AT&T, Rackspace, Telefonica,Savvis, Sungard, DataPipe, AppNexus,
StrataScale
Terremark (Enterprise Cloud)
Layered Tech, Enki, BT ServePath's GoGrid
AT&T (Synaptic Hosting),
Savvis (Virtual Intelligent Hosting),
Terremark (Infinistructure) Joyent, Linode, Rackspace Cloud Servers, Nirvanix Storage Delivery NetworkSites/ , Vaultscape, Joyent Accelerators, Bingodisk
Specialized Platforms
IU4 SAP, Exchange, Dynamics, …
AtosOrigin (x86 Utility), CSC Instance2Go, HP AiaaS,IBM FSO, Logica ODIS, FSC IaaS, HCL BRI,
Capgemini COD, T-Systems Dynamic Services
Capgemini (SAP Run), IBM (AoD for SAP),
HP USS for SAP T-Systems Dynamic Services for SAP,
Logica SAP ODIS HCL IU4SAP
1&1, Yahoo, GoDaddy and BlueHost
Utility Servers,
Storage, …
Note: Sample list
Emerging IU Categories That Lead to
Subcategories and Stand-Alone Offerings
Amazon, Rackspace, GoGrid, Joyent Terremark, AT&T, BT, Savvis, Savvis,Rackspace, Outsourcers
1&1, Yahoo, Verio, Lunarpages Examples $0.10 CPU/hr. $300 or more $700-1,000 or more ($5-$200) - $70-$300 Price (month) Unknown Hypervisor None Partition/hypervisor Virtualization Programmatic Full admin.
Hosting to full admin. Control panel, limited shell
Server Access Cloud Hosting Utility Hosting/VDC Dedicated/Managed /Flexible Provision Shared Hosting
Virtual Private Server
Attribute
Virtual Servers/Utility Hosting
Yahoo, Google Amazon AWS, Nirvanix Rackspace, Savvis, outsourcers CSC, EDS
Examples
Free to $.20 Gb/month raw space $.15-$.25 Gb/month + transport fee $1-$8 Gb/month allocated RAID 5 Custom quotePrice
High High Low LowLatency
Provider/cloud Provider/cloud Provider site Client siteLocation
Drive in the Sky Cloud Storage Hosted Remote Outsourced on PremisesAttribute
Storage as a Service/Storage Utility
Subcategories
Emerging Model: Infrastructure Utility for
SAP
• Virtualization used in every solution; automation still a work in progress.
• Clients get some choice of platforms but not all are available. Standard SLAs and T&Cs • Geographic availability is expanding (Germany, Europe, US, APAC)
• Transition — Two weeks to six months. Most providers indicate four to eight weeks. • Entry level price moved from 15€ PUPM (2008) to 10€ PUPM (2009)
• More than 450 clients and 500.000 named users by 5 providers – more providers are coming • Revenue growth of 45-100%+ and IU/OS revenue at 40%+ for key players
Connectivity:
Internet +VPN
MPLS Dedicated Frame Relay
Infrastructure:
AIX HP-UX Solaris Linux Win2003
Virtualization:
VMware LPar VPar IntegrityVM
Solaris Containers
Database:
MS SQL Oracle MaxDBSupport:
Help Desk 1-5 Language s Direct Account Manager Standar d Reportin g Service PortalSAP:
All Standard ModulesECC 6.0 R/3
IU for SAP: Industrialized managed service that supports and delivers
SAP production, tests and develops environments (based on clients' licenses
and their customized implementations).
Cloud Computing is Driving Net New
Business Opportunities (2010-2012)
Business Value-Add
Cloud-Based
Business Process
Services
Help Desk
Outsourcing
Desktop
Management
Data Center
Outsourcing
Network Services
Access
Management
Optimization
IT
Consultin
g
Custom
BPO~HR~
Logistics~F
&A
Custom
Solutions
ERP~SCM~
CRM~BI
App. Mgmt.
Business
Strategy
Consulting
Remote
Managed
Services
Network
Utility
Storage
on
Demand
App.
Develop.
&
Integration
CRM Call
Center
Hosting/
Colocation
SaaS
Infrastructu
re
Utility
Transaction
Processing
Cloud-Based
System
Infrastructure
Services
Cloud-Based
Application
Infrastructure
Services
Horizontal
Business
Process
Utility
Cloud-Based
Application
Services
Creation
IT Efficiency
V
al
u
e
Delivery
Vertical/Proce
ss-Specific
Business
Process Utility
Enterprise
One-to-One
Shared
One-to-Many
IUS 10 B$ nnb
Enterprise BPU 11 B$ nnb
SaaS 5 B$ nnb
ITS/cloud 4 B$ nnb
Adv 26 B$ nnb
Vertical/Process
BPU 17 B$ nnb
Cloud
Aggregation
Main Implications
1.
Cloud computing and alternative delivery models enable a
new balance of service quality, flexibility and price for
outsourcing and IT services.
2.
The market is changing, with traditional and new offerings
co-existing, and new offerings cannibalizing revenue.
3.
This is leading providers to focus on protecting their
margins and investing in new offerings and delivery
models to maintain and gain market share.
4.
It's leading customers to focus on managing risk, integrate
multi-sourcing initiatives and take advantage of
industrialized services.
Notes accompany this presentation. Please select Notes Page view.
These materials can be reproduced only with written approval from Gartner. Such approvals must be requested via e-mail: [email protected]. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
