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Reduced costs drive IT outsourcing

Where managed services were common practice for large enterprises in the past, the market has seen a significant shift into the SME space driven by the uptake of cloud-based solutions, says Jasco Enterprise’s Karel Botha.

Where managed services were common practice for large enterprises in the past, the market has seen a significant shift into the SME space driven by the uptake of cloud-based solutions, says Jasco Enterprise’s Karel Botha.

Businesses need to constantly grow, which means introducing new technologies to remain competitive. This is becoming more and more challenging, so it’s not surprising that cost reduction remains the biggest driver for IT outsourcing, particularly for SMEs.

So says Karel Botha, MD of Jasco Enterprise, commenting on one of the key findings of the ITWeb-Jasco Enterprise Managed Services Survey, which ran on ITWeb Online for 14 days in August, attracting 85 respondents.

“IT outsourcing often offers the most affordable means to acquire these technologies by eliminating the need to invest in costly capital infrastructure. However, organisations should realise that it is not only a matter of cost reduction, but rather a reduction in total cost of ownership. That means outsourcing strategies should specifically address opportunities for improving efficiencies by outsourcing non-core IT processes to companies that are specialists in those areas while allowing the organisation to focus on its core business,” Botha explains.

The majority of respondents (34.52%) chose cost reduction as their major driver for IT outsourcing. This was followed by a need to improve IT management processes and working practices (14.29%), a focus on core competencies (9.52%), a need to optimise availability and performance, while minimising downtime (8.33%), and a desire to achieve greater overall control over the IT environment (7.14%).

According to the survey, most respondents (45.68%) would most probably consider outsourcing storage and backup applications, followed by disaster recovery (38.27%), and telephony and network management (30.86% each).

[EMBEDDED]Outsourcing services typically include e-mail archiving and day-to-day backup activities, while taking into account legislative compliance, risk assessment and data use, as well as operational considerations such as life cycle management, backup and security.

Botha comments: “Outsourcing of storage and backup has seen massive growth over the past decade and has become accepted practice within most organisations worldwide. This is a mature market and the decision to outsource storage holds very little business risk to most organisations.”

Interestingly, it also emerged that while most organisations ‘completely’ trust the work done by in-house IT teams, most respondents ‘very’ much trust the work done by IT outsourcers. Therefore, can it be surmised that organisations have more trust in their in-house IT teams than outsourcers?

“Outsourcing the configuration, maintenance and administration of your company data and business-critical services to an external party is a big decision that requires a high level of trust in the relationship with your selected outsource partner,” says Botha.

However, he adds: “The bad experiences are the exceptions and I do not believe that organisations in general have less trust in their outsource partners. The landscape has transformed in recent years. Where managed services were common practice for large enterprises in the past, the market has seen a significant shift into the SME space driven by the uptake of cloud-based solutions.

“As the market matures, organisations will learn to create business models and contracts that support real partnerships aimed at solving real problems. Outsource models that embrace a shared risk and reward business philosophy built on strong partnership models will become the norm and organisations‘ perceptions about their outsource partners will improve.”

The study also revealed that the hybrid cloud is the most popular cloud model, and Botha believes this is because the hybrid cloud essentially allows organisations to combine the benefits of private clouds with public clouds.

“Many organisations are concerned about taking their data beyond their firewalls onto the public cloud and use a hybrid cloud that allows them to keep sensitive data behind their firewalls while taking advantage of the flexibility of the cloud. Large enterprises, in particular, will always retain and manage selected IT resources in-house as determined by compliance issues, performance requirements and security restrictions.

“At the same time, we have seen a trend of customer-driven requirements becoming more aggressive and linking closer to measures of business agility and cost-efficiency. For example, IT resources can be allocated to the cloud for short-term projects much quicker and at a lower cost than it would be to make changes to their infrastructure.”

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