Digital Transformation | Hybrid Cloud | IoT

Monday, November 10, 2008

Managing Enterprise IT Operations, from Afar


According to a recent McKinsey & Company report, their research results demonstrated that the potential for managing servers and other IT resources remotely is essentially underutilized.

However, changes in the current business environment will increase the adoption of this approach. Plato, a wise Greek philosopher, wrote about how "necessity is the mother of invention." Certainly, that perspective is equally valid today.

The motivation for utilizing the resources of a service provider can be considerable. A case in point: Fortune 50 companies, with budgets of $2 billion, can save as much as $500 million of their IT infrastructure budgets.

How, you may ask? Apparently, it's mostly from reducing fully-loaded labor costs.

Evaluation of IT Assets and Liabilities
McKinsey surveyed 141 CIOs at multinational corporations, and 34 percent of them said that they anticipate utilizing some infrastructure management services over the next three years -- which is an increase from 19 percent of respondents in a similar survey performed during the prior year.

Economic justification is the basis for the expected growth. As hardware costs fall, labor has become the focal point. They estimate that costs for non-labor IT components -- the hardware, software, maintenance, and facilities -- declined by almost 44 percent between 2000 and 2008 as prices have dropped.

McKinsey also estimates that total costs will fall by nearly half from 2000 to 2010, however the labor component will more than double -- to 62 percent, from 30 percent.

Apparently, the attraction of a managed service solution is due to changes in the deployment of infrastructure. Many organizations have simplified their IT and network architecture, making it easier to decouple components, and utilize service providers.

Selectively Out-tasking the Drudgery
Besides, standardization has made some management tasks ready for automation. As a result, it is now easier to manage some complex IT tasks, like network security monitoring, from a remote location.

Furthermore, organizations can selectively out-task parts of their IT infrastructure management. Some companies will choose to only out-task network monitoring, while others seek assistance with the total management of their data center needs. Clearly, it's a flexible model that can adapt to shifting business requirements.

In summary, McKinsey believes that the greater speed and security of data networking has made interactions between the service user and their provider more stable. This progress has therefore increased acceptance of the managed service delivery model.

By the way, before you rush to reduce your Business Technology deployment plans, you may also want to reflect upon McKinsey's guidance on IT spending cuts: they believe that "IT investments deliver more value to a company's top and bottom lines -- by creating new efficiencies and increasing revenues -- than any savings gained from traditional IT cost cutting."