The new outsourcing option recently announced by IBM allows firms to test the waters of outsourcing without giving up complete control of their IT infrastructure -- addressing a major roadblock to mainstream acceptance of outsourcing, experts say.
While the technology IBM brings to the table is key, the model itself isn't new. But it does offer a new approach that could appease the fears of CIOs and IT managers who are wary of letting someone outside the company handle their data.
"This isn't a new strategy or approach," said Jeff Kaplan, managing director of ThinkStrategies, Wellesley, Mass. "There are a lot of concerns about who controls the data center. This lets them taste test the ultimate solution that IBM has to offer, without giving up the ship."
IBM is making huge investments in its Global Services Group, which is responsible for its outsourcing services. No wonder. The growth potential for outsourcing is staggering. Gartner Inc. expects the worldwide IT outsourcing market to grow at a 7.5% rate between now and 2007, when it is expected to be a $232 billion market.
Outsourcing is hugely lucrative for IBM. The company already has about 25% of worldwide market share, and last year it signed $15 billion in contracts, including agreements with most of the major telecommunications firms, including Nextel. This week, it signed a deal with Sprint to outsource part of its wireless support operations. The deal will move about 8% of Sprint's 68,000 employees to IBM, which is expected to save the company between $2 billion and $3 billion.
Technology raises bar
In the more familiar outsourcing model, IBM becomes the exclusive manager of hardware, software and employees, many of whom are hired as IBM's own. But IBM said that the new outsourcing plan is designed for customers who own and operate their own IT equipment, software and staff -- and want to keep it that way.
The new hybrid outsourcing model strategy lets companies take advantage of IBM's on-demand technology without having to transfer their IT infrastructure and employees to IBM. The key is IBM's Universal Management Infrastructure (UMI), known under the code name "Project Symphony." The UMI will manage customers' IT infrastructure remotely -- automatically bringing servers and storage online, correcting problems, and scaling to meet demand.
In October, IBM released a slew of announcements about Project Symphony and Tivoli products that allow IBM's on-demand solutions to be deployed in several ways -- as internally owned and operated solutions, as outsourced services, or as hybrids.
Project Symphony introduced the concept of "orchestration" and a new class of automated infrastructure-management capabilities, which are marketed under the Tivoli brand name.
The products that make this new outsourcing model possible range from software-management tools, to integrated solutions deployed on a customer's site or delivered through a hosting service. Other new offerings include Infrastructure Management Assessment Services, Tivoli Intelligent Orchestrator software and Web Server Orchestration, a blade server-based Web and application server-automation solution.
Users prefer to test waters
This is really a technology story, said Charles King, research director at the Sageza Group, Mountain View, Calif. Through the recent acquisitions of Rational Software and Think Dynamics, IBM has the technology to really make this offering work -- which makes for an appealing alternative for those CIOs who prefer to enter the water toe first.
"When you're dealing with people with a conservative view on privacy [and] security, and debates [exist over] who owns the data … there's a halfway point to allow them to start outsourcing," King said. "This will be especially well received by customers who were uncomfortable with outsourcing data functionality completely."
King said that this new model gives customers the security of having the data box in their own centers because, to some, there's a big difference between someone outside the company managing your data and getting to keep the data on premises.
"It's fine slicing and dicing to me, but it makes the customers happy," King said.
Jim Gant, vice president of strategic outsourcing at IBM Global Services, said the technology allows IBM to manage the data center remotely with an ease and efficiency that was not possible before.
"We've created a hybrid outsourcing model that lets users take advantage of the UMI, while retaining control," he said. "We don't hire the people. We don't buy the equipment. The client keeps that. What we provide is remote support, some level of automation of management, and standardized software buildout."
Gant said that the concerns businesses have about outsourcing aren't security and privacy, as many people contend.
"Most of the concerns are about control and responsibility," Gant said. "For the most part, people know how to protect data in these kinds of environments. Security and privacy is rarely raised."
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