Oathout: When you look at the budgets still being tight, but business is starting to grow again, IT leaders really need to look strategically at how they're going to tackle their budget problems.
What they need to do is to start to think about how, and what major projects they want to take on, so that they can improve their cash flow in the short-term while improving their business outcomes in the long-term.
In the past, companies have looked at outsourcing as a final step, versus an alternate step in IT. We're seeing more clients, especially in the tight economy, that we have gone through, looking at a hybrid model.
There are multiple sourcing options, there are multiple modernization tasks as well as application culling that they could do to improve their cost structure. At HP we look at modernization of the software and we look at outsourcing options and cloud options as ways to improve the financial situation and to improve the long-term cost structures.
There is a model evolving, a hybrid model between outsourcing and in-sourcing of different types of applications in different types of infrastructure.
Acklin: If you look at your current spend and how you are spending your IT budgets today, most see a steady increase in expenses from year-by-year, but aren't seeing the increases in IT budgets. By doing nothing, that problem is just going to get worse and worse, until you're at a point where you're just running to keep the lights on. Or, you may not even be able to keep up.
We call that "the cost of doing nothing." That's the real challenge.
The number of changes that have been requested by the business continues to grow. You're putting bandages on your applications and infrastructure to keep them alive. Pretty soon, you're going to get to a point, where you just can't stay ahead of that anymore. This is the cost of doing nothing.
If you don’t take action early enough, your business is going to have expectations of your IT and infrastructure that you can't meet. You're going to be directly impacting the ability for the company to grow. The longer you wait to get started on this journey to start freeing up and enabling the integration between your portfolio and your business the more difficult and challenging it's going to be for your business.
Rudd: Clients or companies have a wider variety of outsourcing mechanisms to choose from. They can choose to fully outsource or selectively out-task specific functions that should, in most cases, be able to provide them with substantial savings by looking at their operating expenses.
It's not going to get any cheaper to continue to do nothing. To support legacy infrastructure and applications, it's going to require more expensive resources. It's going to require more effort to maintain it.
The same applies for any non-virtualized or unconsolidated environment. It costs more to manage more boxes, more software, more network connections, more floor space, and also for more people to manage all of that.
The risk of managing these more heterogeneous, more complex environments is going to be greater -- a greater risk of outages -- and the expense to integrate everything and try to automate everything is going to be greater.
We help clients maintain their legacy environments and increase asset utilization, while undertaking those modernization and transformation efforts. From an outsourcing standpoint, the types of things that a client can outsource could vary, and the scope of that outsourcing agreement could vary -- the delivery mechanism or model or whether we manage the environment at a client’s facility or within a leveraged facility.
Working with a service provider can help provide a lot of that insurance associated with the management of these environments -- and help you mitigate a lot of that risk, as well as reduce your cost.
The risk to the client, to the client's business, should be better mitigated, because they're not having to coordinate with four or five different vendors, internal organizations, etc. They have one partner who can help them and can handle everything.
Oathout: As you look at service providers or outsourcers, there is a better menu of options out there for customers to choose from. That better menu allows you to compare and contrast yourself from a cost, service availability, and delivery standpoint, versus the providers in the marketplace.
IT managers have choices on where to source, but they also have choices on how to handle the capacity that fits within their four walls of the data center.
We see a lot of customers really looking at: How do I balance my needs with my cost and how do I balance what I can fit inside my four walls, and then use outsourcing or service providers to handle my peak workloads, some of my non-critical workloads, or even handle my disaster recovery for me?
So IT managers have choices on where to source, but they also have choices on how to handle the capacity that fits within their four walls of the data center.
... We can get a 10:1 consolidation ratio on servers. We can get a 5-6:1 consolidation ratio on storage platforms. Then, with virtual connectivity or virtual I/O, we can actually have a lot less networking gear associated with running those applications on the servers and the storage platform.
When you look at modernizing your applications and look at modernizing infrastructure, they have to match.
So, if we look at just standard applications, we have a way to migrate them very simply over to modern infrastructure, which then gives you a lower cost point to run those applications.
When you look at modernizing your applications and look at modernizing infrastructure, they have to match. If you have a plan, you don't have to buy extra capacity when you start. You can buy the right capacity then grow it, as you need it.
Acklin: Outsourcing can drive some initial savings, maybe up to 40 percent, depending on the scope of what you're looking at for a client. That's a significant improvement on its own.
Not every client sees that high of a saving, but many do. The next step, that migration step, where we’re also migrating over to a consolidated infrastructure, allows you to take immediate actions on some of your applications as well.
In that application space, you can move an application that may be costing you significant amounts of the dollars whether it be, license fees or due to a lack of skilled resources and so forth on a legacy platform. Migrating those or keeping the application intact, running on that new infrastructure, can save you significant dollars, in addition to the initial work you did as part of the outsourcing.
A phased journey
The nice thing, as you do these things in parallel, is that it's a phase journey that you are going through, where they all integrate. But, you don't have to. You can separate them. You can do them one without the other, but you can work on this whole holistic journey throughout.
The migration of those applications, basically leaves those applications intact, but allows them to have a longer lifespan than you may typically would. ... We can still drive significant 40-50 percent saving, just through this migration phase of moving that application onto this new infrastructure environment and changing the way that those cost structures around software and so forth are allocated toward that. It frees up short-term gain that can turn around to be reinvested in the entire modernization journey that we're talking about.
As you continue that journey, you're starting to get your cost structures aligned and you're starting to get to a place where your infrastructure is now flexible and agile. You’ve got the capacity to expand. When you move into that modernized phase, you're really trying to change the structure of those applications, so that you can take advantage of the latest technology to run cloud computing and everything operating as a service.
... The idea of putting the outsourced, migrated, modernized phases together is that they're not sequential. You don't have to do one, then the other, and then the other. You can actually start these activities in parallel. So, you can start giving benefits back to the business immediately.
For example, while you're doing the outsourcing activities and getting that transition set up, you're starting to put together what your future architecture is going to look like for your future state. You have to plan how the business processes should be implemented within the application and the strategic value of each application that you currently have in your portfolio.
You're starting to build that road map of how you are going to get to the end state. And then Even as you continue through that cycle, you're constantly providing benefits back to both the business and IT at the same time.
France Telecom as example
Oathout: One example that we worked very closely was in services with our customer France Telecom. France Telecom transitioned 17 data centers to two green data centers. Their total cost of ownership (TCO) calculation said that they were going to save €22 million (US $29.6 million) over a three-year period.
They embarked on this journey by looking at how they were going to modernize their infrastructure and how they were going to set up their new architecture so that it was more flexible to support new mobile phone devices and customers as they came online. They looked at how to modernize their applications so they could take advantage of the new converged infrastructure, the new architectures, that are available to give them a better cost point, a better operational expense point.
France Telecom emphasized the migration. They migrated a number of applications to newer architectures and they also modernized their application base. They focused on the modernization and the migration as the key components for them in getting their cost reductions.
Rudd: The things we're talking about don't have to occur in this particular order. I know of other clients for whom we've saved around 20 percent by outsourcing their mainframe environments.
Then, after successfully completing the transition of those management responsibilities, we've been able to further reduce their cost by another 20 percent simply by identifying opportunities for code optimization. This was duplicate code that was able to be eliminated or dead code, or runtime inefficiency that enabled us to reduce the number of apps that they required to manage their business. They reduced the associated software cost, support cost, etc.
Then there were other clients for whom it made more sense for us to consider outsourcing after the completion of their modernization or migration activities. Maybe they already had modernization and migration efforts under way or they had some on the road map that were going to be completed fairly quickly. It made more sense to outsource as a final step of cost reduction, as opposed to an upfront step that would help generate some funding for those modernization efforts.
Acklin: We offer something that's called the Modernization Transformation Experience Workshop. It's basically a one-day activity workshop, a slide-free environment, where we bring you and take you through the whole journey that you'll go on.
We'll cover everything from how to figure out what you have, what you are planning, how to build the road map for getting into the future state, as well as all the different ways that will impact your business and enterprise along the way, whether you are talking technology infrastructure, architecture, applications, business processes, or even the change management of how it impact your people.
You come out understanding what's you're getting yourself into and how it can really affect you as you go forward. But, that's not the only starting point. You can also jump into this modernization journey at any point in the space.
We can do a full assessment of your environment and figure out how your apps and your infrastructure are working for your business or, in most cases not working for your business. HP can help you figure out the right place for beginning that journey.
... Many of our clients we talk to, don’t know how they would pay for a journey like this. Actually, you have a lot of options right in front of you. There are good methods on how to cover this, how to put things together like these three-phase activities (outsource, migrate, and modernize), or how to go on these journeys that can still work for you even in tough financial times.