Consider the Source

Will Volcanic Ash Impact Your Data Center?

by Gaurav Kumar, Senior Advisor, TPI India

Volcanic ash continues to disrupt travel and business across continental Europe without predictability, while also compounding environmental and climate change issues. IT executives globally are pausing to reconsider whether their existing data center facilities can stand the test of time and the ever-more-frequent tests of nature making headlines almost daily around the world.


Here are the TPI Top 5 considerations for IT executives looking to determine the efficacy of their current data center facilities:

1. Air contaminants and RF interference: Frequent breakdown of critical IT equipment in the data center facilities (e.g., due to oxidation of motherboards) have often been tracked back to the contaminants in the ambient air. Contaminants such as SO₂, NO_X, NO₂, O₃ and lead react with some of the components of IT equipment (primarily silicon) affecting their performance. Such contaminants may be carried by chimneys of upstream industrial units, which are usually missed without a detailed assessment. Similarly, radio frequency (RF) transmission from nearby mobile or TV towers may interfere with the performance of network equipment.

2. Soil composition: Since resilience to earthquakes is derived from the resilience of the bedrock, sampling of the soil from the data center facility provides an informed view of the structural composition of the soil. Additionally, one should investigate if the area was previously a swamp or used as a landfill, which in turn compromises the bedrock’s resilience. Soil sampling also aids in detecting any contaminants that may have spread from nearby landfills, municipal sewage treatment works or industrial drains.

3. Building structural stability: Commensurate with the subsurface profile and the expected Tier level (per the Uptime Institute or TIA-942) of the data center, the expected structural strength of the building can be derived. Contrasting this with your building’s current structural stability should indicate any need to fortify the building structure.

4. Assessment of flood patterns: Understanding the susceptibility of the site to any impact from coastal, river, surface, or drain/sewer water better informs the remedial measures that need to be adopted. Any required measures should also consider factors such as the accessibility of the site for evacuation and measures needed to ensure operational continuity.

5. Scalability of shared infrastructure: In a co-located setup, the cooling and power infrastructure is frequently shared across multiple clients. The ability of the installed shared infrastructure to continue to support the demands of multiple clients― either on account of business demand or adoption of advanced technologies (e.g., blade servers) ― determines how much runway the facility has left to support your operations.

The pre-Socratic Greek philosophers and Vedic Hindu thinkers believed the world constitution and fundamental powers were derived from four classical elements – Earth, Water, Air and Fire. These may just be the things to watch while reflecting on the robustness of your existing data center in light of the vagaries of nature.

TPI’s seasoned experts can help you achieve your IT Infrastructure and global sourcing goals through objective advice, knowledge of your industry and experience with arrangements from simple to complex.

E-mail Gaurav Kumar, Senior Advisor, TPI India, or phone him at +91-99451-99951 to learn more.

 

Large Contract Restructurings Lifted Outsourcing Market in First Quarter

By Mark Mayo, Partner & President, TPI Global Operations, TPI

In last quarter’s TPI Index, I was happy to report that the market which had bottomed in the first half of 2009 had made a turn in the second half, signaling the beginning of a gradual recovery in the outsourcing industry. In today’s 1Q10 Global TPI Index, we reported that total contract value (TCV) rose 25 percent from the first quarter of 2009, but the underlying market is recovering slowly and unevenly.

Contract restructurings, in which clients renewed, renegotiated or expanded existing contracts, were the real reason for the growth in the first quarter of 2010. Restructurings accounted for 42 percent of TCV, far surpassing the previous record of 29 percent set in 2006, and greatly impacted Americas and Europe, Middle East & Africa regional performance.

Restructurings also fueled the growth in IT outsourcing (ITO), which expanded 46 percent, with particular strength in Application Development & Maintenance (ADM) and ADM-plus-Infrastructure contracts. In addition, three of the four mega-deals awarded in the quarter were ITO restructurings.

Looking ahead, TPI anticipates that contract restructurings will continue to have an impact on the outsourcing market. Between $10 billion and $12 billion in annual contract value due to expire in 2010 will be renegotiated, up 20% to 25% from where the industry stood last year.

We don’t expect a huge rush of new-scope contracting. Instead, we foresee a steady flow of new opportunities as the recovery continues at a slow pace.

Check out the full 1Q10 Global TPI Index presentation or listen to the replay at 800-332-6854 (Replay Conference ID: 231877).

4th Quarter Global Index Signals Gradual Recovery for the Outsourcing Industry

By Mark Mayo, Partner & President,  TPI Global Operations, TPI

 

Today I am happy to report that fourth-quarter contract values have signaled the beginning of a gradual recovery in the outsourcing industry. Contract values are up 47 percent – its highest value in 18 months. After the market reached its bottom in the first half of 2009, the second half clearly showed positive momentum as businesses became more confident about making strategic decisions in this economic environment. The main factors driving the market’s upswing in the broader market were:

 

Strong IT outsourcing (ITO) demand. Activity in this area dominated the broader market for the entire year with total contract values (TCV) up 54 percent from the previous quarter.

The Europe, the Middle East and Africa (EMEA) region was significantly impacted by a number of large deals in the fourth quarter, delivering its best quarterly performance since the second quarter of 2008. The UK – like the U.S. – has seen its TCV steadily decline over the last five years due to the maturity of both markets, but other markets in the region are maintaining decent performance levels.

A resurgence in mega deals and mega-relationships was a positive sign that contributed to the market turn with fourth-quarter total contract values at their highest in six quarters.

It is also important to note that financial services, manufacturing and telecom & media  -

industry sectors that have traditionally driven the outsourcing market - all showed a strong second-half upturn in total contract value. These sectors have traditionally driven the outsourcing market so a continuing positive curve for all three will be crucial for new growth in the market.

With companies growing more confident and the market stabilizing, we expect to see growth in 2010.

Check out the full Q4 TPI Index presentation at:

http://www.slideshare.net/TPIIndex/4q09-tpi-index-presentation-final?from=share_email

 

Considerations for Financial Services Operations (FSO) Outsourcing

By John Clements, Director, TPI, EMEA

Although many of the considerations that apply to Financial Services Operations (FSO) outsourcing apply to any type of outsourcing, certain considerations are amplified because of the regulated environment in which financial services institutions (FSIs) operate.

Here are the TPI Top 5 considerations to take into account when outsourcing an FSO process.

1. Institute, maintain and demonstrate control

In most jurisdictions, FSIs will not be able to outsource their regulatory responsibilities when undertaking a material outsourcing project. Regulators are likely to require early communication about a potential outsource and will want to know how the FSI is going to maintain control in the outsourced environment. Therefore, it is important that structures and processes are put in place pre-contract to maintain control (e.g., your governance team, management information and reporting, compliance and audit plans, risk management, etc.).

2. Manage regulatory change

No organization can predict the entirety of regulatory change that may be coming down the road in an outsourcing relationship. Therefore, in an outsourcing agreement, a certain amount of regulatory change can be bought from a service provider via a contractual concept called “regulatory buyout.” This means that the service provider assumes the risk of making regulatory changes to its outsourced environment. 

3. Factor in the end-user experience

It is probable that the outsourcing of an FSO process will result in end-user contact (e.g., the people who buy or advise on financial products) being outsourced to a service provider. Therefore, it is vital that the end-user experience is a critical part of the contractual service level agreement regime, and effective process handoffs should be planned into transition so as not to impact the end-user experience. 

4. Actively manage operational risk

Operational risk can be introduced into an outsourced arrangement via a multitude of channels such as staff attrition leading to loss of key skills, data protection risks (particularly as customer data may be processed by a third party), cutover of operations to the service provider, unsuccessful system re-platform leading to the loss of customer data, and more. Therefore, an FSI must manage operational risk by instituting and enforcing an effective risk management framework that encompasses the outsourced environment.

5. Know how you will exit the arrangement

Understanding your exit strategy is a crucial part of any FSO outsourcing project — even before service transition has begun. This involves more than just ensuring that the service provider has contractual obligations to produce an exit plan. What are the trigger events for bringing a service back in-house? How would you bring the service back in? What team would you set up, and with what skills? How long would it take? How are you maintaining the knowledge that you have outsourced? 

TPI’s seasoned FSO experts can help you achieve your sourcing and goals through objective advice, knowledge of your industry and experience with arrangements from simple to complex. E-mail John Clements, Director, TPI, EMEA, or phone him at +44(0) 7879 424 075 to learn more. 

Tips for Making IT Service Management & Governance (SM&G) Work

By Andrea Spiegelhoff, Director & Head, SM&G Competency, EMEA, TPI 

If you are planning to establish, re-design or improve your IT service management and governance (SM&G) operations, here are five key considerations for making it function most effectively:

1.  Align the organisation to the business environment. IT organisations have become more sophisticated in managing their service providers; but on the other hand, effective service provider management is tied inextricably to the buy-in and cooperation of the business. To this end, establish IT operations with one face to the customer and service provider. Today’s sourcing models provide end-to-end services from multiple internal and external service providers, covering an integrated service catalogue, demand management, chargeback, etc.

2.  Plan for change. SM&G organisations should be as flexible as the businesses they serve. Create yours in a flexible way from the outset so that it can keep pace with change in the overall enterprise. Because organisations often have difficulty initiating change, use an impartial third party to provide insight and methodology for issue identification and remediation. Apply change management practices throughout the sourcing life cycle to make the necessary adjustments in philosophy and business execution to institutionalise the needed changes and enable effective SM&G. The mantra is “communicate, communicate, communicate!”            

3.  Find the right balance between centralised and local IT decision making. Take a close look at the drivers for centralisation versus decentralisation. The balance of decision-making power between centralised and local IT functions will have a major impact on the sizing — and therefore the cost — of the SM&G organisation. Most organisations have experienced organic growth in their SM&G function as the services matured, with attendant cost ramifications. External benchmarks can provide a useful tool to help evaluate the sizing of the SM&G organisation against market best practices.

4.  Retain the right skills within your organisation. An organisation is only as good as its people. Even if you are confident that your employees have the right skills to deliver excellence, continuously benchmark these skills by asking these questions:

  1. What are the considerations, skills and capabilities necessary for effective SM&G?

  2. How can we assess available resource capability and skills?

  3. What can we do to maintain these skills in the long run?

At each stage in the life cycle, the issues to be managed are different, and that often drives an evolutionary approach to organisation, sizing and required skills.

5.  Create transparency in value creation and costs. Implement a central “gateway” process for all IT expenditures and projects to give a clearer view of customer demand and to help control decisions and costs across IT. Alongside this, establish a formal SM&G operating model and processes. These approaches will help to realise value and reduce any strife and conflict in the service provider and internal customer relationship.

The establishment of a strong and supported SM&G operating model will bring the organisational capability to its highest level. Interested in establishing IT SM&G operations or improving the process you have? TPI’s SM&G specialists can help you achieve your organisational goals through objective advice, knowledge of your industry and experience with SM&G arrangements from simple to complex.
Contact us today to learn more.

Read TPI’s new research report on SM&G in Europe.

Vive la Difference!

Today’s guest blog on the demand for outsourcing comes from Duncan Aitchison, Partner & President, TPI EMEA.

With the data now in for the global outsourcing market in the first half of 2008, two facts stand tall above all others: demand for outsourcing has never been healthier and Europe’s love affair with outsourcing is the reason why.

The last nine months have witnessed the largest volume of total outsourcing contract value ever signed during three successive quarters and the first half of the year has been the best for the last ten years. By any measure – Total Contract Value (TCV), Annual Contract Value (ACV), number of contracts signed, number of mega deals – the outsourcing market is now at its most vibrant.

What makes today so different from the boom outsourcing markets of yesteryear is where demand is coming from. So far this year Europe has accounted for 65 percent of the contract value awarded around the world. Indeed, in each of the last six quarters, Europe has led the markets in terms of TCV signed. It also now leads the way in terms of numbers of contracts, ACV and big deals awarded. In fact, nearly 80 percent of the $1 billion contracts signed so far this year have been in Europe.

The billion dollar question is: how long will Europe’s current love affair with outsourcing last? When will we see demand in this region begin to emulate the recent buying patterns in the U.S.?

Paradoxical Market Metrics

Today's blog on TPI's 2008 second quarter Index comes from Peter Allen, Partner and Managing Director, TPI.

Having just posted the scorecard for the global outsourcing industry’s contract awards for the first half of 2008, I must say that there are more than a few conflicting messages being bantered about.

We’ve been producing the TPI Index for almost six years now, and our track record of reporting on the market size and trajectory has a consistently small margin of error. No one is perfect in this art, but our business intelligence analysts are usually right on target. We invest considerably in tracking the market to help guide our clients with facts about peers and providers in particular domains.

The report for the first half of 2008 was striking.

European Roulette

Today's blog on European outsourcing comes from Duncan Aitchison, Partner and President of TPI’s operations in EMEA.

You would think that a shift in global outsourcing demand away from the U.S. would be accompanied by an increase in outsourcing activity in Europe. Surprisingly, this has not been the case.

If one looks at the Total Contract Value (TCV) of private sector outsourcing transactions conducted in Europe each year since 2003, the amount has been consistently around the $40 billion level.

What is more interesting, however, is the pattern of outsourcing activity at the country level within Europe.

Europe remains a challenging market for any business. It doesn’t behave as a definable, targetable concentration of homogeneous demand.  It is a collection of diverse countries and regional markets with different cultural and linguistic characteristics, as well as a variety of legal and industrial structures. Together, these factors influence what is bought, where, and how it needs to be sold.