Together, IaaS and analytics outsourcing, present new opportunities to organizations in terms of both global sourcing and business value.

1. The Offshore Analytics Making Sense of Data to Make Cloud IaaS: How secure is
Landscape Pg 10 Money Pg 19 the user? Pg 24
www.globalservicesmedia.com
May 2011
The gateway to the global sourcing of IT and BPO services
The
Promise
of
IaaS

2. Software Paradise, �Hangzhou Sourcing
Demonstration City of Chinasourcing
Hangzhou
Hangzhou was defined as the “China Service Outsourcing Demonstration City” in February 2009. Hangzhou is also the
one of eleven software industry base cities in mainland China. It has currently formed the several industries including
telecommunication, software, integrated circuit, digital TV, animation games and E-commerce.
The revenue of software business in Hangzhou was achieved at 47 billion RMB in 2009, the software export revenue reached at
460million USD. There were total 112 enterprises passed CMMCMI, ISO27001 certification. There were 20 IT software enterprises
have list on public market, two companies ranked at Top 10 of self-brand software products, total 15 enterprises have list at the
key software enterprises name list of the national strategic planning.
In order to accelerate the development of outsourcing industry, Hangzhou Municipal Government set up the leading team
to draw up the development plan, issue the supporting policy to make the rapid development of outsourcing industry in
Hangzhou. The total delivered amount of offshore outsourcing business reached at 919mllion US Dollars, risen to 352%
compared to the same period of last year (2008).
Hangzhou government has put more focus on the financial service outsourcing that is considered as the medium and high end
outsourcing industry, Hangzhou now is creating to become the financial delivery center.
International Financial Outsourcing Center
Promotion & Undertaker: Great-Idea International Outsourcing Consulting Center

3. Hangzhou, China
A City of Financial Delivery Center
To Combine the Global Resources and Facilitate the
Integration & Upgrade of the Global Service Capability
Please Attention October Trip in Hangzhou
China Sourcing Summit
& Delegation to China
Sponsors:
Ministry of Commerce of the People’s Republic of China
Ministry of Industry and Information Technology of the People’s Republic of China
Ministry of Education of the People’s Republic of China
Host City :
Hangzhou People’s Government
Official Promotion:
Hangzhou Municipal Foreign Trade & Economic Cooperation Bureau
International Financial Outsourcing Center
Contact: Tel-8610 85863613 Fax-8610 59081093 Email-salida-liu@great-idea.com.cn

4. Recognizing & celebRating SeRvice PRovideR excellence!
releasing : June 2011
compendium coverage
2010 sponsors
be there where it matters
For more information write to niketac@cybermedia.co.in

5. Global ServiceS
A CYBERMEDIA PuBlICAtIon
An integrated media platform which connects the
various constituents of the global technology and Pradeep Gupta
business processing services industry ecosystem. Chairman & Managing Director
Cyber Media (India) Ltd.
E. Abraham Mathew
Directory of ServiceS President
NewSletter Ed nair
Editor
A regular digest of key industry happenings. ed@cybermedia.co.in
Satish Gupta
DiGital MaGaziNe
Associate Vice President
The fortnightly digital magazine features research satishg@cybermedia.co.in
reports, articles and experts’ views. Available on Smriti Sharma
www.globalservicesmedia.com smritis@cybermedia.co.in
webiNarS Smita Vasudevan
smitav@cybermedia.co.in
Global Services’ web-based seminars aim to impart
Sourabh Chandra Pushp
useful information related to outsourcing indus-
sourabhc@cybermedia.co.in
try in the form of presentations and discussions
by industry specialists. niketa Chauhan
niketac@cybermedia.co.in
reSearch Gary Bindra
We deliver indepth analysis and research reports gurdeepb@cybermedia.co.in
on sourcing subjects. Virendra Kumar
x-virendrap@cybermedia.co.in
MicroSiteS Global Services
Online resource center designed to provide Cyber Media (India) Ltd.
focused content on special subjects to the out- CyberHouse, B- 35, Sector 32
sourcing community. Gurgaon-122001, India
Tel: +911 24 4822222
eveNtS Fax: +911 24 2380694
Contact:
From multi-day, high-level, resort conferences to
globalservices@cybermedia.co.in
intimate breakfast discussions we offer a number
of opportunities that connects the outsourcing Disclaimer
community. All rights reserved. No part of this publication may be reproduced
by any means without prior written permission from the publisher.
cUStoM ProGraM
Customized services rendered through different letterS to the eDitor
media platforms. Send letters to ed@cybermedia.co.in, or to
any of our writers. We reserve the right to edit
oSoUrce booK all letters. Postings submitted to our blogs and
A directory of global outsourcing service providers. letters to the editor may be published in our
www.osourcebook.com digital magazine or Website.

6. April 2011
features
12
THE PrOMISE OF IaaS 12
by Smita Vasudevan and Sourabh C. Pushp
Enterprises find building new data centers expensive, emerging
SMBs need to scale up infrastructure fast.
AnAlytiCS OutSOurCinG: MAkinG
SenSe Of DAtA tO MAke MOney 19
by Smriti Sharma
Analytics outsourcing has crossed the chasm from being a nice-to-
have proposition to a need-to-have practice.
10 xperts
“THE OFFSHOrE ANALyTICS ClOuD iaaS: HOw SeCure iS tHe uSer? 24
LANDSCAPE IS STrENGTHENED By by kumar Parakala, kPMG
AN ENTIrE ECOSySTEM”
by Smriti Sharma PlAtfOrM BPO: tHe GrOwtH trAjeCtOry
Excerpts of an interview with reetika Joshi, Senior research fOr tHe BPO inDuStry 26
Analyst at ValueNotes Sourcing Practice and co-author of the by jui narendran, Head - Valuenotes Sourcing Practice
HFS analytics report titled ‘Where offshore analytics is heading
in 2011.’
uSAGe-BASeD PriCinG: tHe PrOMiSe
AnD tHe reAlity 28
By nigel Hughes, Global Services Director, Compass
Management Consulting
GLObAL ServICeS DIGITAL MAGAzINe
Next Issue:
2011 GS100
2011 GS100 research by Global Services & Neo Group
recognizes and celebrates service provider excellence.

7. COMING SOON

8. Editor’s NotE
New Opportunities in
Global Sourcing: IaaS
and Analytics
o ne of the biggest changes in the services industry is dictated by how
enterprise applications ISVs predict and present the roadmaps for
their products. I was hosted by SAP at its annual Sapphire Now event
at Orlando this month. Attended by a record 6600 people and over 200
partner companies, the opportunity for services this year seemed robust.
Companies such as SAP, Oracle, and Microsoft are hugely reliant on a
partner ecosystem largely comprising services companies.
My conversations with companies such as Accenture, Capgemini, HCL
Axon, HP, TCS, CTS, CSC, Infosys, Neoris all point towards increased
Ed Nair services work in areas such as analytics, enterprise management, mobility,
Editor and cloud-based applications.
ed@cybermedia.co.in Cloud-based computing is no doubt the flavor of conversations at all
technology gatherings. In the enterprise applications area, the prospect of
on-demand applications delivered on SaaS platforms is now mainstream.
Together, IaaS But using cloud to deliver infrastructure services has been at the door for
and analytics quite a while. It is now being explored with great interest by organizations
outsourcing, present both large and mid-sized.
new opportunities Our cover story this issue is on exploring the potential and possibili-
to organizations in ties of infrastructure-as-a-service (IaaS). It is very clear that enterprise IT
infrastructure sourcing would be majorly disrupted by IaaS in the next few
terms of both global
years, but there are many caveats too. The story gives a bird’s eye view on
sourcing and business the area and some decision pointers for organizations pondering over new
value. infrastructure decisions.
Analytics is to business as diagnostics is to healthcare. And analytics is
eminently suited to being delivered offshore. The special report on analytics
outsourcing scopes out the potential in this area and offers perspectives on
the drivers of the growing trend.
Together, IaaS and analytics outsourcing, present new opportunities to
organizations in terms of both global sourcing and business value.
As a companion resource to our coverage on infrastructure services, our
May webinar titled ‘Understanding Emerging Models on Infrastructure
Management’, with Amit Singh, Partner, Avasant, covers the area in detail
and provides thorough insight into sourcing paradigms thereof. Do register
on our site for the webinar or download the webinar recording. GS

9. Harbinger Systems Expert offshore product
development partner
Your partner Mobile & Web 2.0 apps,
Enterprise & E-Learning
in technology Software
innovation From innovation to
market leadership
Copyright © 2011 Harbinger Systems Pvt. Ltd.
All Rights Reserved.

10. Analytics Outsourcing
“the offshore Analytics
Landscape is strengthened
by an Entire Ecosystem”
Excerpts of an interview with reetika Joshi, senior research Analyst
at ValueNotes sourcing Practice and co-author of the HFs analytics
report titled ‘Where offshore analytics is heading in 2011.’
by Smriti Sharma
GS: What are the key catalysts for Ao? l Availability of cross-functional, multi-skilled tal-
rJ: The case for global ent As the scale and scope of analytics expanded to
delivery of analytics is gain- accommodate several core functions, the delivery of
ing momentum. There are analytics called for maintaining highly specialized
two primary reasons for manpower across more diverse domain areas. This
this: enhanced efficiency manpower often remained under-utilized. Given their
and relatively lower costs. high cost, companies increasingly started looking
However, business value at third-party service providers to help. Increasing
plays a far greater role in demand for analytics also led to the emergence of pure
analytics delivery than pure play analytics service providers. These providers have
cost arbitrage and efficien- teams with deep domain knowledge, technology and
cy. Thus, a third emerging statistical expertise.
reetika Joshi aspect is the strengthening l Cost arbitrage for low-end analytics. According to
of an entire ecosystem of HfS research, for a typical analytics project, talent costs
offshored business intelligence, market research, IT and constitute approximately 60% to 70% of the total costs.
BPO services in tandem with analytics. With other costs (infrastructure, etc.) significantly lower
For many less complex offshoring activities, the cost of than in onshore locations, cost arbitrage can range up to
labor is the most compelling driver for offshore outsourc- 50% for offshore locations.
ing. In more specialized areas such as analytics offshoring, l reduced time to market With increasing competition
cost is a driver, though it is not the most important one. and the urgency to obtain first mover advantages, it has
The availability of highly qualified professionals, contextual become imperative for firms globally to access talent to
domain expertise, operational risk, the reliability of critical provide pertinent data supported by thorough analysis at a
infrastructure and market integrity are instead pivotal. faster and more efficient pace. Offshore delivery centers are
l Leveraging IT and BPO offshoring experience and attractive as they come with faster time to market and also
ecosystem Companies with existing outsourcing relation- provide accompanying support services on a 24x7 basis.
ships are looking to leverage their IT-BPO offshoring
experience to source analytics solutions, preferably from GS What exactly does the offshore analytics area cover
the same service provider. In most cases, the third-party in terms of scope?
service providers developed analytics solutions in a bid to rJ: With greater usage of analytics and increasing com-
move up the value chain. plexity, there is a tendency to break analytics projects
10 Globalservices www.globalservicesmedia.com May 2011

11. Analytics Outsourcing
into distinctly executable parts and outsource to dif- GS: Who are the key service providers and how are they
ferent specialized teams. Accordingly, there are four evolving?
levels in the analytics services mix, in ascending order rJ: The offshore analytics landscape has changed over the
of complexity: last decade from one dominated by captives of large com-
1. Data entry/de-duplication: This includes every- panies, primarily in India. Today, the industry features a
thing from cleaning to maintenance and actual. It is a low- large number of vendors offering end-to-end specialized
end service and offers low revenues to service providers. A analytics solutions to specific verticals. High-value third-
large chunk of KPO-centric analytics work (almost half ) is party analytics solution providers are focused on providing
dedicated to data preparation. value beyond cost arbitrage by leveraging a combination
2. Intuitive analytics: This entails running the of onshore-offshore delivery models and the use of tech-
models and generating new insights on a continuous nology.
basis. The outputs for these services may be in the form Third-party offshore analytics service providers can be
of dashboards, reports (of different frequencies), alerts, broadly classified into four categories. The grouping is
etc. primarily based on company origin, affecting the strategic
3. Model building: This is an advanced level of intent and objectives behind offering analytics services.
analytics, where models are designed to predict various The strategic intent of service providers in various
business outcomes. Statisticians and econometricians groups differs, depending on their overall business focus
build models focusing on business problems/opportuni- and aspiration. A strong desire to move up the value chain
ties at hand. In terms of offshoring, modeling is done by in order to improve profitability and boost the top line is
captives as well as third-party vendors depending on the common across all service providers.
maturity of the clients’ in-house teams.
4. Solutions: Solutions generally entail “bundled” GS: Expand on the issue of data security in Ao.
analytics components, delivered to clients to address rJ: There are workarounds for companies that are hesitant
their needs. Providers take a consultative approach about outsourcing analytics due to data security issues.
and leverage technology to deliver value. The aim is Several vendors offer onsite delivery teams (at client
to render the client self-sustaining and create a unified premises, client country, etc.) when data cannot reach
analytics delivery mechanism. This may be done by offshore. Companies also may want to look at creating
deploying an analytics platform or other tools. captive centers offshore that specialize in analytics, to
These constitute the main standalone analytics offer- maintain better control of company or customer data.
ings prevalent today. Beyond this, there are a variety of
embedded or value-enhancing analytics components GS: What are the new areas and adjacencies for Ao?
that are offered by IT/BPO providers. These include rJ: The opportunities for service providers may be
analytics to improve the efficiency of processes, identify looked at in terms of horizontals and verticals. Vertical-
problem areas or sub-processes with cost-saving poten- wise, retail and CPG, banking and financial services,
tial, and provide reporting and MIS for existing proc- healthcare insurance and telecom look to be the strongest.
esses. These services often are embedded as part of the Horizontal opportunities include sales and marketing ana-
solution to the client (as value-adds) without additional lytics, followed by supply chain management, logistics,
cost. operations and web analytics. GS
11 Globalservices www.globalservicesmedia.com May 2011

12. Tools & Technologies
The
Promise
of
IaaS
12 Globalservices www.globalservicesmedia.com February 2011

13. Tools & Technologies
“Enterprises have been moving high-value application workloads
to the cloud, as vendors prove their availability, security and
monitoring solutions.”
tim Beerman, Vice President,
Managed Hosting Product Management and engineering for Savvis
“While cloud computing has its share of
issues, when properly setup and utilized
provides tremendous value. It lets a
product company like July Systems focus
on the product building and less on the
infrastructure.”
Vikas Murthy, CtO, july Systems.
“There are three broad future trends to expect in IaaS-buyers to
become more educated, industry specific segmentation to take
place and a fair amount of hybrid cloud models to come up.”
Chirajeet Sengupta, research Director, everest Group
13 Globalservices www.globalservicesmedia.com February 2011

14. Special Report
the Promise of
infrastructure as a service
Enterprises find building new data centers expensive, emerging sMBs
need to scale up infrastructure fast. the answer seemingly lies in
infrastructure as a service (iaas), a model of cloud-based delivery.
Where do we go with iaas?
by Smita Vasudevan and Sourabh C. Pushp
M
ounting demand for computing Bright prospects
resources by enterprises around the Positive demand and supply side factors indicate that
world, rapidly changing technology adoption levels for IaaS will be on the rise in the near future.
needs and complex business environ- Increasing data center expenditure by enterprises and emerg-
ments have all acted as catalysts for the growth of ing SMEs (small and medium enterprises) eying significant
Infrastructure as a Service (IaaS). In the face of investments in IT infrastructure are fueling demand in this
new challenges, businesses are moving away from space. At the other end, a competitive IT market is driving the
the traditional model of procuring and owning IT supply of IaaS. Gartner’s Cloud Computing Special report on
infrastructure to a model in which infrastructure IaaS suggests that the segment is set to grow nearly threefolds
is sourced as a service. This external services-based from $ 3.7 B in 2011 to a whopping $ 10.5 B in 2014. There
approach to delivering IT services is termed as is currently a lot of hype going around IaaS and an increasing
Infrastructure as a Service or IaaS. The shift is a number of enterprises are showing interest in this area. Gartner
manifestation of cloud-based delivery in a utility estimates that over the course of the next five years, enterprises
computing model. will be spending $112 B cumulatively on SaaS (Software as a
“The shift is because these new environments offer Service), PaaS (Platform as a Service) and IaaS. United States,
an almost immediate fix to some of the most signifi- Western Europe and Japan will be holding a major share of the
cant hurdles that drive escalating IT costs,” according global cloud market.
to Steve Garrou, Vice President, Global Solutions
Management at Savvis. Enterprises are seeing benefits
in outsourcing their infrastructure needs over mak-
ing huge capital investments on buying the resources
physically. IaaS enables them to procure the necessary
IT resources from a service provider on an on-demand,
pay-as-you-use basis. This difference in the functioning
and pricing model of IaaS promises to significantly cut
down costs, support scaling up, and bring efficiencies
that may not have been possible otherwise.
The evolution of IaaS is the result of advance-
ments in the world of technology. rooted in the
erstwhile web hosting model, the pervasiveness of
virtualization and maturity of utility computing
coupled with cloud-based access has made IaaS a
clear possibility. Source: IDC June, 2010
14 Globalservices www.globalservicesmedia.com May 2011

15. The Promise of Infrastructure as a Service
Comparison of some Leading iaas providers
Providers Rackspace GoGrid Amazon Savvis
What does it offer ? The rackspace cloud GoGrid is a small, One of the pioneers Savvis is one of the
consists of three independent service of cloud computing, broadest and deepest
major services: Cloud provider. Its primary Amazon offers cloud in the industry. It has
sites, Cloud Files focus is its Xen-based services such as an above-average
and Cloud Servers. cloud IaaS. It's service Amazon S3 or eC2. customer portal
rackspace Servers is managed by a multi- Amazon's Auto Scaling and strong history
provide unlimited server control panel feature of eC2 allows it of delivering utility
online storage and operated by ServePath to automatically adapt offerings. Savvis has
CDN. In addition to the and features an API. computing capacity to vMware based IaaS
online control panel site traffic. (Symphony).
the service can be
accessed through API.
Free Support Yes Yes No Yes
Security Features bootable Mode Failover Features backup Storage Critical Data Privacy
Critical Data Privacy Persistency Persistency Data Protection
Data Protection backup Storage Snapshot backup Failover Features
Persistency Critical Data Privacy
backup Storage Data Protection
Snapshot backup Snapshot backup
Load balancing Yes, Free of cost Yes, Free of cost Yes, with a charge Yes, Free of cost
virtual Private Servers Yes, Free Yes, with a charge Yes, with a charge Yes, with a charge
Subscription Type Use based Use based and Use based and Use based and
Subscription Plans Subscription Plans Subscription Plans
Inbound bandwidth 8.00¢/Gb 0.00¢/Gb
Price 10.00¢/Gb
Outound bandwidth 22.00¢/Gb 29.00¢/Gb 11.00¢/Gb
Price
base Plan Cost 1.50¢/h 8.00¢/h 8.50¢/h
base Plan Details 256 Mb rAM,10Gb 0.5 Gb rAM,10 Gb 1.7Gb rAM,160Gb Flexible month-to-
local storage,10 Mbps local storage,Free local storage,1 eC2 month plan
Network Throughput inbound traffic. Compute Unit
Additional IP Cost 2.00$/month
Source: http://cloud-computing.findthebest.com
15 Globalservices www.globalservicesmedia.com May 2011

16. Special Report
Evolving, not yet mainstream and the objective varies in all these cases. Self-managed IaaS is
The market for IaaS shows huge potential but is still imma- normally used by customers with basic IT needs such as test
ture and in an evolving phase. There are numerous providers and development and in this case all the operational control
in this space and many more are coming up foreseeing the is retained in-house . In Lightly-managed IaaS, a part of the
opportunities. But there is lack of appropriate benchmark or operational control is retained by customers while there is
standards to compare the services offered by different provid- some intervention by the providers. Complex-managed IaaS
ers. These services generally follow a consumption model that are used by customers who have very complex and fast chang-
is based on pay-as-you-use, on-demand and self-service strate- ing IT systems that need to be fully operated and controlled
gies. yet there are lots of underlying differences. by service providers.
IaaS has still not found a place as a mainstream offering, Along with cloud services, providers may also offer a set of
though industry players believe that this is soon going to optional managed and professional services. Management of
change. “Adoption of IaaS solutions primarily includes test the server, infrastructure software, storage, security and other
and development workloads. While this has been the major network devices is what providers usually offer as part of their
adoption model for IaaS, we are seeing production workloads managed services. Professional services would include services
moving to the cloud. Enterprises have been moving high-value related to hosting like capacity planning, security auditing,
application workloads as vendors prove their availability, secu- performance testing and so on.
rity and monitoring solutions,” according to Tim Beerman, IaaS customers are more often served on a pay-as-you-use
Vice President, Managed Hosting Product Management and basis, though providers may at times also give the option of
Engineering for Savvis. multi year agreements on which enterprises can avail dis-
More often, business specific areas are maintained and counts. As the the market is in an evolving phase, providers
controlled in house, while common IT requirements like continue to change and upgrade their services frequently.
storage, hardware, operating system and so on are outsourced. Amazon, Savvis, rackspace and Gogrid are the leading
A deciding factor in this case is usually what areas does the global providers of IaaS. Here is a quick comparison between
business find critical and does not want to be controlled by their services and cost and pricing structures.
an external organization. Another factor is how efficient is the
internal IT system in handling complex situations. Buyer expectations
There are different types of buyers in the IaaS space
Services offered and accordingly their needs vary. Primarily, there are enter-
There are different types of providers in the IaaS space. prises that were using the web hosting model and are moving
Some of them are offering this service as an extension to their towards cloud IaaS and then there are others that are new and
traditional line of web hosting services, while there are many are trying to test and experiment to see if it can be beneficial
new players who are purely focused on IaaS. Providers also to them. Another differentiating factor is the size of these
differ significantly in terms of their size of operation. There enterprises. Large enterprises already have significant invest-
are large-sized providers who offer a comprehensive portfolio ments in IT infrastructure, so their objective is mainly to cut
of services as well as niche players with few selective offerings. down costs and bring efficiencies through IaaS. Whereas small
“Starting at a high level, IaaS services come in both public and medium enterprises look for growth and also aim to avoid
(multi-tenant, shared infrastructure) and private (dedicated huge capital investments on purchasing IT infrastructure.
infrastructure for single client). Differences between providers Real benefits : July Systems, a mobile media company
include the underlying hardware class, the virtualization solu- uses Amazon’s cloud computing services to cost-effectively
tion, network connectivity options, security implementation, scale its business. “At July we have seen flexibility and cost sav-
monitoring capabilities and performance, to name a few,” says ings as key benefits to an IaaS cloud based infrastructure. It has
Beerman. Other than public and private, there are community helped July Systems achieve unprecedented scale to meet the
and hybrid models as well. The cost, level of privacy and so on demands of the millions of users that access our platform each
usually varies for all these models. For instance, a community day. With the support of our IaaS service provider we are con-
cloud has lesser users than a public cloud and so the cost per stantly growing our footprint and crossing major milestones
user tends to be higher, while the level of privacy is better than like our recent announcement during Cricket World Cup,”
in the case of a public cloud. says Vikas Murthy , CTO, July Systems.
According to Gartner’s Magic Quadrant for Cloud “While cloud computing has its share of issues, when
Infrastructure as a Service and Web Hosting, 2010 report, properly setup and utilized provides tremendous value. It lets
there are again three different ways in which IaaS is used by a product company like July Systems focus on the product
customers. This includes Self-managed, Lightly-managed and building and less on the infrastructure,” adds Murthy.
complex-managed IaaS. The level of control and management
16 Globalservices www.globalservicesmedia.com May 2011

17. The Promise of Infrastructure as a Service
Issues involved : Most enterprises, though ready to adopt The third party’s access to company data should be secured as
IaaS, are not really aware of the numerous services available all the data hosted on the cloud are not protected under intel-
in the market. Also, there are security and privacy related lectual property rights.
issues that influence buyers. According to a report by Ernst &
young on IaaS Trends and Perceptions in India, 72 per cent The way ahead
of the respondents pointed out that data privacy and security Choosing the best service provider is one of the most
issues are the most significant concerns in the adoption of significant decisions companies face when venturing into
IaaS. When asked what elements were essential to moving the IaaS space. Not all service providers have the appropriate
more critical applications to the cloud, in Savvis’ March 2011 industry and technology experience to replace the in-house IT
research study with Vanson Bourne, 64 percent responded infrastructure for a company. So, the choice is not risk free. It
with full security implementation, followed by high avail- necessitates any company to assess IaaS providers carefully.
ability (54 percent). Enterprise-level performance was also Buyers should understand their needs well and opt for
required by 47 percent of respondents. a provider that is best suited for their requirements. Some
other key questions to consider here are- Is the hosting pro-
Data security and privacy 4%
88% vider able to understand your business and the overall needs
8%
of your company? Is the provider flexible in its service-delivery
21%
75%
approach? Is the provider having adequate expertise, scale and
SLA compliance 4%
geographical coverage and using technology that is not only
58%
Cost competitiveness
13%
29% up to date, but also stable and widely compatible with other
58%
technology standards?
Portability and interperability
13%
25%
Service providers must understand specific needs of
4%
46% each buyer segment and be able to offer services accord-
vendor support network
ingly. The objective of different enterprises for adopting
42%
13%
Pricing models
42%
46%
IaaS will be different. Providers should offer support and
13%
services that are in line with their customer requirements.
Past track record
38%
38%
They should also be able to show their customers how
4%
21%
by cutting down their IT cost they can save resources for
Source: ernst & Young – Cloud adoption in India growth and expansion.
According to Chirajeet Sengupta, research Director,
Legal issues involved Everest Group, “There are broadly three things to expect in
According to Nixon Peabody LLP’s report ( Laurin H. IaaS in the future-buyers to become more educated, under-
Mills, May 13, 2009 ) the most prime legal issues are: standing when, where and how to go about implementing
• Location: where’s the data ? IaaS. Secondly, industry specific segmentation to take place
your data could be stored in any country and you may not in terms of services and lastly, a fair amount of hybrid cloud
even know where the data center is situated. The location fac- models to come up.”
tor thus raises the question of legal governance over the data. As enterprises become more aware of the opportunities
For instance, if there is a conflict between the cloud vendor and benefits, there will be a great difference in the way they
and the customer, issues may arise regarding which country’s approach and adopt IaaS. “Clients want capacity when they
jurisdiction will be followed. need it and want to only purchase it when they want it. IaaS
• Security: who has the access ? approaches offer this flexibility and in the years to come will
The strongest security threats to cloud computing include no longer be considered an alternate delivery model, but a
insecure application interfaces, malicious insider threats and strategic choice for some critical solutions as companies seek
traffic hijacking. Cloud computing facilitates the storage of greater flexibility and the need to satisfy a diverse end-user
data at a remote site, so it is critical for the data to be protected. base,” says Garrou, about the future trends and opportunities
in IaaS.” GS
17 Globalservices www.globalservicesmedia.com May 2011

18. COUNTRY-IN-FOCUS
Ensuring Global Visibility
A special feature for countries to showcase their uniqueness
There are numerous outsourcing destinations that exist as
great alternatives to India and China.
Inviting Countries to showcase
capabilities that accentuate
their uniqueness.
Examples of Country-in-focus feature
Egypt Philippines Jordan
JORDAN
For more information write to satishg@cybermedia.co.in

19. Special Report
Analytics outsourcing:
Making sense of data to
Make Money
Analytics outsourcing has crossed the chasm from being a nice-to-
have proposition to a need-to-have practice.
by Smriti Sharma
I
n a globalized economy, information and data are interactions. By analyzing these, they understand
the backbone of a business. However, merely having customer buying patterns that helps identify poten-
access to numbers is not of much use. rather, it is tial cross-selling opportunities, improve marketing
analytics—the interpretation and application of data efficiency and rOI from campaign strategies (e.g.
—that makes businesses thrive. direct mail campaigns). Similar analytics is performed
Analytics has been titled as the smartest weapon in the for credit card companies, retail, and many other
corporate quiver. This credential can be attributed to the businesses.
fact that sans analytics it is difficult to sustain competitive- 2. Risk Management Analytics: Analytics for high risk
ness. Data analytics arm an organization with significant businesses. In such businesses, profitability depends on the
analyses - that highlight upcoming business roadblocks, ability to increase profits by retaining low risk customers
hidden trends and key insights- on which management can and at the same time reducing losses.
base strategic plans and operational policies. Example: In the insurance industry predictive
With ever growing competition and globalization, models are developed that predict expected claim
analytics has become critical for all businesses to support amount depending on past data. This data analysis
tactical and strategic decision making. Today, companies also helps in detecting fraud, predicting defaults and
can choose from a host of platforms and services-based bankruptcy.
tools that can be deployed to make intelligent use of infor- 3. operations Analytics: It includes IVr analytics,
mation enabling business decisions that impact both top demand forecasting and demand management, perform-
line and bottom line. ance and productivity, customer satisfaction analysis, col-
Analytics is basically the application of computing lections efficiency, etc.
resources, operational research, and statistics to solve busi- Example: Analytics is used to analyze IVr data to iden-
ness and industry problems. It covers areas like- marketing tify user segments based on usage preference and redesign
analytics, predictive and strategy science, credit risk analy- the IVr strategy accordingly.
sis and fraud analytics. 4. Finance & Investment Analytics: It includes equity
Viral Thakker, executive director, Performance and research, investment analysis for PE-VC funds, investment
Technology services, KPMG stated segments that this banks, etc. This is perhaps one of the leading segments of
service encompasses: analytics usage.
1. Marketing & Customer Analytics: Data mining Example: Organizations make use of financial analytics
and management to understand consumer behavior. in market-size estimation, competitive analysis and intel-
Example: Telecom and internet companies gen- ligence, apart from identifying investment opportunities,
erate a large amount of customer data during their due diligence or during M&A analysis and strategy.
19 Globalservices www.globalservicesmedia.com May 2011

20. Analytics Outsourcing: Making Sense of Data to Make Money
This extremely essential ‘game-changer’ does not in Bucharest, romania. Amongst the India locations,
naturally plug into the outsourcing model. The reason Gurgaon has the largest employee strength in research
being level of data sensitivity is very high. Due to this, & analytics division, with over 800 people, followed by
some clients set up captive units to deliver analytics, Mumbai, Bangalore, Pune, and Chennai.
instead of outsourcing. However, the last decade has Activecubes, a global firm providing Analytics Services
witnessed third-party providers gain significant expertise with associated Technology Solutions, focuses on US,
in analytics. Australia and India from the geographical perspective. From
an Industry angle our focus markets are Pharmaceuticals,
The offshore analytics market Financial services and retail-CPG industries. As of now,
US, UK and to some degree, the rest of Europe are its main offshore location is Bangalore and it plans to
major markets served by analytics service provider. Since expand to more locations in India as well as international
these mature markets embrace experience in offshoring locations.
business processes they are now moving up the value According to HfS research titled ‘Where Offshore
chain and are willing to outsource knowledge serv- Analytics is Heading in 2011’, Fortune 500 companies
ices. Some providers are also focusing on Australia and are the big-league clients for this knowledge service.
Japan. Enterprise from verticals such as FMCG, BFSI, and tel-
Main contenders in terms of delivery destinations are ecom are significant buyers for offshore analytics service
India, China and Eastern Europe. Others include near- providers. Service providers are also targeting mid-sized
shore countries to the US such as Mexico and Costa rica, clients to move up the value chain. Some providers are
and offshore destinations such as Singapore and Sri Lanka. also looking at tapping the rapidly growing domestic and
Vendors may be from these or other destinations, but they regional markets. Large IT-BPOs and KPOs are trying to
need to have delivery capabilities in at least one of these cross sell analytics services to their existing clients. KPOs
destinations. and BPOs need to create specialized capabilities to service
Genpact’s Analytics and research department has a parts of analytics projects and eventually take a vertical
large concentration in America and a large portion of their approach to growth in their chosen area to move up the
current revenue comes from this region. It has footprints value chain.
in Europe, China, India and Australia. In the coming
years, it is expecting to grow significantly in Europe and Key drivers
Asia-Pacific region. Leveraging specialized skill sets, access to affordable
Most of WNS clients are based in the United States and resources and better utilization of resources, achieve scale
European Union region. It is also expanding its client base across geographies and business units, overcome corporate
in the Asia-Pacific region. As their practice is a horizontal silos, establish and industrialize best practices, stand-
offering within WNS, most of their clients are spread ardization of the disparate analytical processes, establish a
across several industry verticals, including financial serv- well-defined delivery model...are some of the key drivers.
ices and insurance, retail, CPG, healthcare, professional Thakker pointed out drivers on the demand as well as
services, travel and leisure. supply side.
WNS provides analytics services from five offshore The demand drivers of analytics outsourcing include:
delivery locations in India, and one nearshore location • nalytics significantly enhances the client service
A
organization’s ability to generate top-line revenue.
However, a significant shortage of highly-skilled
knowledge professionals in the developed nations
is making recruiting of such professionals very
difficult.
• o remain competitive, organizations have realized
T
the need to use analytics to reduce time to market
for their services and products in areas such as mar-
keting, product development, product launches,
strategic decision making, etc.
• us, offshoring high-end services not only ensure
Th
access to professionals at a significantly lower cost,
but also ensure a gain in competitive advantage for
Source: HfS research, 2011 the customers.
20 Globalservices www.globalservicesmedia.com May 2011

21. Special Report
Some of the drivers of analytics outsourcing from the • endors would need to have stringent internal meas-
V
supply side are: ures to prevent any IP data infringement. Formal
• lobal as well as Indian vendors have demonstrated
G qualification assessments, certifications (such as ISO
their capabilities to execute high end knowledge 27001 certification in data security) and periodic
work efficiently. Vendors are moving up the value competency reviews would become essential.
chain and are using high-end analytics as a differen-
tiating factor for their service offering. Future aspects
• ue to the high availability of skilled labor espe-
D In this space there are many captives, people who still
cially in countries such as India, vendors are able to want it to be an in-house activity as they consider it to be
provide the clients with contextual domain expertise their core capability or core differentiator. But then, there
which is an important driver for analytics outsourc- are significant sizable integrated players that are now devel-
ing. Moreover, due to the relatively standardized oping in the market. Kulshreshtha spoke about where this
nature of analytics and a growing awareness of the whole discipline is going, “I think there will be a little bit
increasing quality of education systems in favored of convergence of the whole software and business intel-
offshore locations, this segment has seen a spurt in ligence side; whereby you do things like setting up data
terms of supply. warehouses and then setting up analytical process on top
• e technology and telecommunication develop-
Th of them. IT companies always did data warehousing type
ments have also helped the Analytics Outsourcing/ of work they did not do so much of analytics type of work
offshoring industry to grow, by making real-time data on top of that, Where else, we worked the other way, we
available and rapid data processing and analysis. used to do more of analytics services kind of work and we
have not done much of data warehousing side. All these
Are concerns over security justified? areas will emerge.”
Management of intellectual property (IP) and conflict- Second thing, he pointed, that is already happening
of interest issues are more demanding in analytics out- is people are going to drive their solutions to the market
sourcing and KPO than in BPO, where data protection with tag such as the one IBM uses. Genpact also use that
and privacy concerns dominate. tag, which was launched as smart enterprise processes.
Pankaj Kulshreshtha, senior vice president - Analytics Genpact is addressing this business along with some other
& research articulated, “I’ve been doing this for 13 years parts of their business as smart decision services. Other
now and I have seen companies evolve to a level where they folks are going to use words such as analytics, intelligence.
do not worry much about security. We work with 12 out Increasingly lot of third party players will go to the market
of 15 pharma companies so obviously we have a very legiti- with solutions that are woven around smart intelligent
mate way of addressing their concerns around data security type of theme.
and intellectual property protection. This is the case across Third thing, from Kulshreshtha’s viewpoint, is that
financial services and majorly other areas too.” social media explosion that is going on will transform the
From infrastructure prospects, Kulshreshtha added, base of how analytics is done. right now a lot of analytics
“We make sure that we create a completely secure environ- is done that analyzes the data companies produce around
ment that is as secure as our customers would like. We buying behavior. However, there is very little that is done
have situations where a part of dedicated team is placed in this space in terms of understanding what people
in an enclosure, that even I as a business leader require are saying about certain brands, what people are saying
written permission to enter. People inside that enclosure about experience with certain products and services. As
do not have access to any other mail apart from customers text mining and knowledge discovery type of technolo-
mail. They work directly on customers systems and have gies evolve to next level what will happen is we will find
the same data security systems applied as would be applied completely different ways of solving the problems that
to any analyst sitting in the customers own facility.” we currently solve using the hard data that is currently
Some significant issues that could emerge are: used.
• s ownership rights between service providers and
A Some of the emerging areas highlighted by Thakker
receivers become blurred, debate over intellectual v Customer analytics for the energy and utilities sector
property ownership and management of statistical (smart metering)
analysis models are likely to increase. v Fraud analytics in retail banking
• hen the same regulatory restrictions vary by coun-
W v Cyber-analytics to detect cyber crime and acts of ter-
try, conflict-of-interest management issues concern- rorism, cyber risk management, foreign espionage, intel-
ing violations of insider trading rules may increase. lectual capital theft, etc.
21 Globalservices www.globalservicesmedia.com May 2011

22. Analytics Outsourcing: Making Sense of Data to Make Money
v Learning analytics to assess students’ academic and KEY SERVICE PRoVIDERS
extra-curricular progress, predict future performance, and BPos- Genpact, Evalueserve, WNS, EXL Services
identify potential issues
It companies- Wipro, Infosys, TCS, HCL, HP
v Cloud based BI tools could see proliferation
v Social network data mining for customer analytics Specialized MR firms- Ugam, Marketics, eClerx,
v ‘Big data analytics’ – Big data refers to the tools, proc- Annik Systems
esses and procedures allowing an organization to create, High-end analytics- Aranca, Copal Partners
manipulate, and manage very large data sets and storage traditional MR companies- AC Nielsen, CrISIL
facilities
Boutique R&A firms- ValueNotes, SG Analytics,
Arun Kharbanda, business unit head- research &
Netscribes
Analytics, WNS Global Services opined, “The next decade
will be very different from the last one, with structural Financial services- JP Morgan
shifts in demographics that will reflect more prominently
in the international trade and economics, where outsourc- packaged solutions that combine consulting services with
ing will no longer be a choice. The KPO industry in India delivery”, added Kharbanda.
has gone through a “concept selling” phase in the last few Analytics Outsourcing started with financial and mar-
years for a majority of clients who have so far utilized BPO keting functions. Some of the first companies to take
services. At the same time, some clients have been able advantage of this were the MNC’s when they set up cap-
to create a competitive advantage for themselves through tives in India. Initially the heavy lifting in terms of data
establishing Analytics Centers of Excellence programs that analysis was being outsourced. Then came the higher
have resulted in improved decision making across multiple end statistical modeling. ramachandran K, Executive
business groups, markets and geographies.” Director & Head – Healthcare, Activecubes articulated,
“Some of the new opportunities we see are from indus- “Nowadays, high end business consulting (based on the
try verticals that were hitherto not very active in AO, data) is also being outsourced. Next will come a time when
such as Shipping & Logistics, Manufacturing and Supply companies in India will start services where they will own
Chain. From an offering standpoint, web and web related data and provide consulting / analytics based on the owned
services are very much in demand from the market, as are data as well as customer data.” GS
22 Globalservices www.globalservicesmedia.com May 2011

24. xperts by Kumar parakala, Kpmg
Cloud iaas: How
secure is the user?
All eyes towards the ‘Cloud’
C
loud computing is a prom- KPMG Cloud survey results of temporary failure during the test-
ising IT services’ delivery The cloud service models - ing phase of the cloud services pro-
model and today’s eco- Infrastructure as a Service (IaaS), vided by their vendors. This leading
nomic situation contin- Platform as a Service (PaaS), Software provider later apologized and prom-
ues to favor the cloud. This model as a Service (SaaS) - will drive increas- ised to compensate every affected
requires a limited amount of invest- ing business and IT activity, resulting customer using this service even if
ment on the customer’s side. The in hybrid architectures to manage their sites were not down by offer-
adoption of cloud will be driven by and a new cloud IT mission. ing a 10 day free credit. One such
businesses that are reshaping them- In another KPMG survey on incident will not bring the world
selves, as it enables the creation of Cloud adoption patterns, we found to a stand-still. However, users have
more efficient business models and that planned adoption for IaaS and started asking the question of the
ecosystems. SaaS service models is the high- Cloud’s reliability and other service
While Technology has often been est. Sixty-eight percent of the ini- providers have learnt the lesson with-
a savior during the downward eco- tial respondents indicated that they out burning their fingers.
nomic cycles, it has also been domi- largely plan to adopt either the SaaS Large enterprises could pos-
nated by concepts and trends that are or IaaS service models. sibly recover from such a mishap
several times like fads which come Even though IaaS benefits* have in the future but the real impact
and go. By now it is a well established been enjoyed by its users even before could be for the Small and Medium
fact globally that cloud computing is PaaS and SaaS gained acceptance, Enterprises (SMEs) who might not
here to stay. According to a 2010 with penetration across industries, able to bear the cost of recovery.
survey conducted by KPMG, 59 there still is a caveat: Is the cloud SMEs are moving up the value-chain
percent of the participants believed IaaS really that reliable and safe? of their cloud service requirement.
that cloud computing is the way According to independent research
forward. Did the ‘Cloud’ burst? firms, the worldwide SME spend on
recently, during a routine scaling the Cloud is expected to reach USD
activity at a leading 100 billion by 2014 with business
Statement : cloud computing is the future model of IT
Cloud service provid- applications, application develop-
er in the US the traf- ment/deployment, system infrastruc-
fic shift was executed ture software, storage and servers,
incorrectly causing being some of the key areas of spend-
a domino effect of ing. Hence cloud’s outage could be
failures that led to catastrophic on them. On a whole
website crashes at its every user will get adversely affected
clients’ end. This is if the cloud fails to serve the pur-
not actually the first pose for which it was built in the
time that a cloud first place- reliable, on-demand and
service went haywire. cheap computing resources with a
The media has earlier pay-as-you-go pricing model.
Source: From Hype to Future: KPMG’s 2010 Cloud Computing Survey reported minor cases
24 Globalservices www.globalservicesmedia.com May 2011

25. Infrastructure Management
How to save yourself in a benefits of using iaaS for data fault tolerance and elastic character-
‘hailstorm’? center requirements istics. For example, deploying loosely
Cloud’s failure can happen; this • A cost effective model. coupled apps into the cloud instead
would occur regardless of the pro- • Business are able to focus on migrating tightly coupled ones.
vider’s size or brand. The impact will on core activities. SlAs - Reading between the
be felt by all: the user, the provider • Management of peak loads. lines: Typically, the SLA could
and the end customer. Some of the include an ‘availability clause’ of any-
• Incorporates
important suggestions that could where around 99.95% availability or
concepts related to green
help prepare the user from facing a an unavailability of around 4 hours
computing.
cloud mishap or outages are high- 23 minutes in one year. Additionally,
lighted below: Source: KPMG’s The Cloud: Changing the business the SLA could define ‘unavailability’
ecosystem, 2011
Developing infrastructure as the unavailability of one particu-
redundancy : Cloud is not a magic lar service which is probably loose-
wand to deliver the best and like any the cloud. For the more conservative ly dependent on other service that
other service which is critical it is users, it is advisable not to have mis- failed and has no SLA but causes an
typically relied upon multi-vendor sion critical systems or processes in overall failure at the users end. Users
support system. Spreading the risk the cloud and initially test it with mostly remain unaware of the nitty-
across several servers on multiple simpler processes or services getting gritty of the SLAs before opting for
Availability Zones across geographic delivered. Alternatively, it will be a cloud services. Again, cloud advisors
regions and possibly multiple ven- good decision to take expert advice come into picture to assist the users
dors could be one such solution. from cloud advisors before internally and guide them. However, it will be
Companies can have multiple sets of deciding on the adoption of cloud. unrealistic to have 100% availability
infrastructure hosting their backend Developing the ‘right’ architec- SLAs from most of the vendors exist-
including one of their own and others ture : One of the key characteristics ing in the market. Even market lead-
from the service providers. Seamless of a website that could be hosted on ers are offering 99.95% availability.
integration between the user’s and the cloud and still manage the risk of A better option is to be prepared
the service provider’s infrastructure outage is the underlying architecture with a back-up plan.
will become essential in this case. that can make it capable of operating
However, all this comes at a cost. So in a risk prone zone. Without elabo- The verdict!
there is trade-off between data secu- rating on the technical aspects which Coming back to our story, the US
rity and opportunity cost. are many and rather complex involv- based cloud service provider regained
Establishing the ‘purpose’ of ing single vs. multi-host dependen- stability within five days time and
cloud usage : Organizations that can cies, time-outs and retries, partition- its business as usual again. What the
afford infrastructure redundancy by ing read and write data, etc., let me whole episode actually makes clear
having their own infrastructure could just say that one needs to architect of is the near omnipresence of the
have their mission critical business in one’s app to suit the inherent cloud ‘Cloud’ and the tools and facilities
that are actually available to handle
any cloud mishap.
On a final note, I would say
‘expect the worst and plan for it’.
Infrastructure failure at times is inev-
itable, be it your own or provided by
the vendor. The best way to tackle
this issue is to be prepared before it’s
too late as the ‘Cloud’ is here to stay.
The verdict is “Cloud IaaS is as
secure as the user wants it to be”.GS
kumar Parakala is Head of it Advisory,
kPMG eMA & india and Chief Operating
Officer, Advisory in kPMG in india. He is
Source: KPMG’s The Cloud: Changing the business ecosystem, 2011 also a global head for Sourcing advisory.
25 Globalservices www.globalservicesmedia.com May 2011

26. xperts by Jui narendran, Head - valuenotes sourcing practice
Platform BPo: the Growth
trajectory for the BPo industry
the current phase in outsourcing is about getting the right
partners to transform your business.
t
he outsourcing of business has moved beyond the hourly or FTE of platform based BPO solutions.
processes has gone well (full time equivalent) based engage- Analysts believe this is also a natural
beyond the labour and cost ments. The BPO industry is now on a progression for the IT service provid-
arbitrage and is not dis- growth trajectory rather than merely ers that ventured into BPO services
cussed as key drivers any more. The survival. in the last decade. Platform solutions
current phase in outsourcing is about gave them an opportunity to increase
getting the right partners to transform Marrying technology to the their footprint among clients of both
your business. Service providers are services services.
intricately linking their performance The introduction and inclusion The diagram below depicts the
to that of their clients. Discussions of technology in service delivery has growth and evolution of BPO serv-
are now around transformation and been the biggest game changer. The ices over the years. The trend has
outcomes, not just about cost sav- outsourcing industry has been all clearly been to include technology
ings. Services also evolved accordingly about technology and it was only a into service delivery and now, it
- from purely voice and back office matter of time before the delivery of seems like technology plays a major
support to multifunctional, multi- business services would be so integral- part.
horizontal. Delivery of these services ly linked to it. This was the beginning Today, the platform BPO serv-
ices straddle both
horizontal services
(F&A, Hr etc.)
as well as verti-
calised industry
offerings, such
as procurement.
Infosys, which is
aggressively devel-
oping its offerings,
is concentrating
on the horizon-
tal as well as the
vertical offerings
in Hr and pro-
curement. Infosys’
Source to Pay is a
procurement plat-
form solution and
one such example.
Source: valueNotes research Caliber Point, the
26 Globalservices www.globalservicesmedia.com May 2011

27. Infrastructure Management
don’t have to invest in an ErP plat-
form and then outsource some of the
business processes as well. This works
out for the service providers as well,
who are looking to expand beyond
the Fortune 500 companies.
This does not mean that larger
clients or existing clients will not
benefit. Platform solutions will offer
easier and cheaper ways to explore
newer avenues of business. It presents
service providers the opportunity to
help their clients deliver their business
efficiently and perhaps even cheaper.
Is Platform BPO everyone’s
cup of tea?
Not all service providers have the
capabilities to develop platform solu-
tions. Currently, we see that the larger
players have created platform offer-
ings. This is because developing a
platform based offering needs high
investments in infrastructure as well.
Moreover, since this model relies on
transaction pricing, mature relation-
BPO arm of Hexaware launched ships with clients would be needed.
republic in 2010, a multi-tenant Hr For the mid-sized service providers,
services delivery solution based on analysts believe this may well be an opportunity to
Oracle E-Business Suite release 12.
According to the company, republic
this is also a develop platform based solutions on a
select area of expertise.
is hosted and maintained by Caliber natural progression
Point and interfaces through a user- What is the future of
friendly and secure Hr portal. Tata for the it service platform BPO?
Consultancy Services (TCS) offers
platform solutions in multiple service providers that The evolution of platform BPO is
actually a gradual shift from the ear-
lines such as F&A, Hr, analytics and
procurement. EXL, with its recent
ventured into bPo lier models of BPO. However, plat-
form is in a way BPO on a cloud
acquisition of OPI, is likely to benefit services in the last model and since this is the way of the
from OPI’s platform based solutions future, it is also most likely to suc-
in the F&A space. decade. Platform ceed. Another reason why platform
Addressing the smaller clients
solutions gave them BPO will succeed is the inherent ben-
efit to the clients – in terms of low
Platform BPO solutions took an opportunity capital expenditure as well as transpar-
momentum with the recession a cou- ency in pricing. Therefore, whether
ple of years ago. Cost pressures on the to increase their platform BPO is a win-win solution
clients and the need to engage on a
long term basis with the clients have
footprint among for all is yet to be seen but surely a
model that will see exponential growth
fuelled investments by some of the clients of both in the next few years. GS
large service providers. Platform based
solutions will probably be a boon to services. jui narendran is head at Valuenotes
mid to small size clients, where they Sourcing Practice
27 Globalservices www.globalservicesmedia.com May 2011

28. xperts By nigel Hughes, global services director, Compass management Consulting
Usage-Based Pricing: the
Promise and the reality
the idea of pay-as-you-go consumption of it resources via
utility models and cloud platforms promises to transform
it service delivery and the nature of sourcing relationships.
But the transformation doesn’t happen overnight or by
magic, and achieving the benefits requires understanding
and addressing significant organizational and technological
obstacles.
t
he holy grail of utility At a basic level, utility comput- and implementation of “tensioned”
computing lies in the ing, or standard services delivery, pricing mechanisms that create
idea of dynamic, usage- is characterized by clearly defined incentives to drive more efficient
based pricing, whereby and standardized service levels and delivery and consumption of IT.
IT resources are flexibly delivered units of IT functionality based on For example, in a traditional
on-demand in response to business industry standards. These allow environment, a client pays a serv-
requirements. In principle, under service providers – internal or exter- ice provider a specified amount per
a utility model customers pay only nal – to drive significant economies server. The service provider seeks
for what they consume, and don’t of scale. Standardization, mean- to install additional servers, as
have to worry about idle or insuf- while, enables the development that generates additional revenue.
ficient capacity. Service providers,
meanwhile, benefit because they
are able to leverage their expertise
across multiple customers.
It sounds simple and appealing,
and indeed, many organizations
are benefitting from utility-based
models. But in reality a variety
of factors must be considered and
addressed before true utility com-
puting can be achieved. These fac-
tors include organizational obsta-
cles on both the client and vendor
side, as well as complexities around
how IT usage is measured, report-
ed, and priced. In other words,
while the “pay by the drink” anal-
ogy is useful in understanding the
concept of utility computing, it’s a
bit more complicated than that.
28 Globalservices www.globalservicesmedia.com May 2011

29. Infrastructure Management
Clients, meanwhile, have little vis- These challenges notwithstand-
ibility into how business uses IT. In ing, allocation models have the
a standardized utility environment, practical impact of driving stand-
tensioned pricing mechanisms are ardization across multiple custom-
applied so that the client organiza- er environments and making serv-
tion pays a specified amount for ices more utility-like. This allows
a CPU minute. This creates an vendors to leverage economies of
incentive for the service provider scale and deliver significant savings
to drive efficiency in the delivery to customers.
of that CPU resource, as greater Organizations that will drive
efficiency equals higher margin. challenge, particularly with regard the utility model to further matu-
The customer organization, mean- to revenue recognition. However, rity will be those that are will-
while, has an incentive to utilize he adds, “Most customers achieve ing to give up predictability for
CPU resources more wisely, as substantial savings once they have overall savings, and are willing to
every CPU minute consumed has a fully transformed into the util- work with cloud providers that
cost attached to it. ity model and are then able to are hungry for market share. Such
This visibility into IT delivery align and show a direct relation- customers – Amazon, for example
and consumption, coupled with ship between business demand and – include businesses with revenue-
usage-based pricing and incentives IT usage.” generating applications that need to
to deliver and consume efficiently, At present, most “utility” solu- scale rapidly. For them, scalability
underlies the potential of utility tions are based on some type trumps predictability, and growing
computing and its longstanding of allocation scheme. Here, the revenues can cover higher costs.
appeal. However, traditional busi- resource that a client is to be billed Another example: parallel process-
ness organizations are in many for has to be allocated first, thus ing applications that need burst
respects not quite ready for true allowing for predictability and pre- access to large resource pools.
utility computing. While paying approval of the expenditure. While T-Systems’ Smith adds that cus-
only for resources consumed is perhaps not true “utility” comput- tomer maturity in working with
appealing in theory, in practice it ing, this approach does offer the one or multiple service providers
means less control over expenditure benefit of flexibility and a more to manage ITIL processes – such
and income – a scary prospect for streamlined process for growing IT as request, order, change, incident,
both clients and service providers. infrastructure, as the provisioning problem management, and others
Under a strictly defined utility of new servers can be done in a –is essential to effectively manag-
model, a customer that dramati- matter of hours or days, instead of ing demand.
cally reduced consumption would weeks or months. As client and service provider
receive a dramatically smaller bill. For example, T-Systems charges organizations actively pursue trans-
That prospect gives pause to serv- a fixed monthly rate for a frac- formation initiatives based on util-
ice providers who need to dem- tional compute measure called a ity models, both parties need to
onstrate a predictable quarterly “compute slice” based on industry temper their expectations against
revenue stream to shareholders. standards. the realities of the existing envi-
Put differently, a vendor who will The allocation of memory is ronment. This requires a detailed
gladly implement a “pay as you go” another important aspect of utility understanding of current opera-
strategy will hesitate to support a computing. “Many applications are tions and constraints, in order to
“save as you shrink” approach. By memory-driven rather than com- quantify the size of the potential
the same token, businesses like to pute driven,” says Smith. “Because opportunity, identify the obstacles
predict expenditures, and the pros- the underlying infrastructure for to achieving it, and charting the
pect of unanticipated spikes in IT computing resources is ultimately optimal way forward. GS
costs can be unsettling. a physical server, the ratio of com-
Dr. Gregory Smith, Head pute capacity to memory is fixed. nigel Hughes is Director of Global Service
of Cloud Services Delivery & This presents challenges from a Development at Compass Management Con-
Technical Solutions for T-Systems service provider perspective, par- sulting. Bill Huber is Partner and Director of
North America, acknowledges that ticularly if oversubscription of CPO Services at tPi.
a predictable revenue stream is a actual resources is not allowed.”
29 Globalservices www.globalservicesmedia.com February 2011
May