There have been few shining lights in the IT industry over the past months. Budgets have been cut, staff shed and projects delayed. A heavy fog of uncertainty has dimmed the vision of many IT decision makers.
But one of the few positives has been a shift away from investing in internal infrastructure towards variable costs and increased spending with thirdparty IT services providers. In accounting terms, it is essentially a migration from CapEx to OpEx.
The ASX-listed services providers are a case in point. Although a few, like Oakton and ComputerCorp, posted poor results, the managed services arms tended to be growth businesses. Other integrators such as Data#3, CSG, and ASG also pointed to this part of their businesses as a highlight of the first half of the financial year.
Combine this trend with the centrality of the datacentre in the contemporary IT infrastructure, and the fog lifts to reveal pockets of opportunity.
“Some of the emerging trends we are seeing in the market are related to the economic climate and some are related to just the general evolution of what customers are expecting,” EMC global services head, Gary Cox, said. “People want to have much better access to information wherever they are. And they are beginning to question whether it makes more sense for them to manage that infrastructure themselves, or if it can be managed by a third party.”
But like any emerging trend, there is still some confusion about what constitutes a managed service.
Managed services are not outsourcing, let’s make that clear from the start. While some like to paint any service or operation performed by an external IT provider as outsourced, there are important differences to make with managed datacentre services. NEC Australia datacentres and hosted solutions product manager, Loren Weiner, said there was confusion around what managed services really are.
“Managed services in the datacentre can be simply a customer coming into a datacentre for colocation, which is just a bare bones rack where the customer puts their equipment in there,” he said.
“Managed services can be as simple as a customer using our equipment. The other thing is they could be using their own equipment but we could be managing it for them. Both of those are managed services but completely different things.
“From the channel partner side, it is about filling in the gaps that they have got. Quite often a channel partner has this fear of a datacentre managed service and they think, ‘if we hand off to a datacentre service provider like NEC to manage the services there is nothing for us to do and we can’t add any value’. But it is really the opposite. We are kind of filling in the gaps and helping them offer the value.”
Key to the definition of managed datacentre services is flexibility and specificity. In other words, a managed datacentre service is usually one that is able to reinforce or extend a solution being provided while being scalable at the same time.
“We have to make sure it is positioned not like an outsourced environment, because inherently the approach behind it has much more flexibility. The goal is to make sure clients can do things a little bit more easily. With changing requirements, they can adapt quite quickly as well,” EMC’s Cox said. “Traditional outsourcing tends to have been broader brushed. It takes the gamut of ‘here is our IT environment, you guys go and look after it’. This is quite different.
“When we say managed services, we are trying to offer a service the customer deems to be something that they don’t necessarily need to retain ownership of and something we can offer on a scale they would struggle to provide themselves.”
Playing right into this concept of managed services out of the datacentre is the much-hyped cloud computing and software-as-a-service trends. In the last 12 months, there have been dozens of highprofi le vendors launch offerings from the cloud – Microsoft and Sun Microsystems being just two. For many, this is not just a fad. The cloud computing model is here to stay and will continue to penetrate the market further with more and more services being offered. Fundamental to all of this is the datacentre and networks like Telstra’s Next G and the planned National Broadband Network (NBN).
The continued improvements in Australia’s networking capabilities, such as Telstra’s new modem, Telstra Turbo 21, which provides speeds of up 21Mbps with peak network speeds to increase to 42Mbps later this year, add juice to the cloud computing and managed services trends.
“The hosting or facilitation of professional IT resources has been around for some time,” APC channel sales manager, Bart Mascorella, noted. “I think a lot of partners have been trying to get into that area for some time, but the idea of cloud computing and software-as-a-service and all the other services that wrap around that are probably what will be the biggest trend from an integrator’s perspective.
“But a lot of other partners are still trying to work out how to do it. They don’t have the means to build a datacentre, so a lot of them are looking to partner with existing facilities managers and others are establishing joint ventures.”
There are several models of managed services on the market with more being unveiled on what seems like a weekly basis. While there is no one dominant approach, the majority of offerings are being taken through the channel – even Google has now gone down that path with third parties able to resell Apps Premier from January this year.
“The so-called managed services arena is providing an opportunity for people like EMC, but as importantly for our partners,” EMC’s Cox claimed. “It’s an opportunity to re-think about how they touch customers. We have offerings in the market today, such as Mozy – which is really an offering that can be licenced by any of our broad partners in the market place and they can on-sell that offering.”
The general idea behind this kind of approach is that vendors don’t have feet on the ground or the close relationships with clients to be able to achieve the results they want – a classic channel story. But they do have the financial and technological capacity.
Yes, there are legitimate concerns about the channel being cut out of the business, but in many cases – such as the ASX-listed integrators mentioned above – the opportunities outweigh the threats. Managed datacentre service offerings can be industry vertical specifi c or touch a greater range of the economy. SpectrumData CTO, Chris Holloway, pointed to backup and data management services.
“Litigation is a hot topic right now and there are a lot of e-discovery services in the datacentre coming to the forefront,” he said. “We see a lot of opportunity in that space and it has increased our offering by about 30 per cent over the last 12 months. Not only that, but with all the economic instability and uncertainty at this stage, there is also an opportunity with managed services in site replication and data replication. Those are the three big movers in the past 12 months.”
Add in greater compliance requirements from the proposed changes to the Privacy Act and the predicted upswing in merger and acquisition activity, and the e-discovery angle shines brighter. Most companies are simply not across all the legal obligations they are bound by and this presents an opportunity for managed datacentre service providers to play a consultative or educational role.
“A lot of what we see is more reactive than proactive strategies or thinking when you are dealing with an SME or a corporate and education is definitely at the forefront,” Holloway said. “It is pretty much a hand-hold them through the managed service environment.”
The same could also be said for the introduction of carbon emission reporting under the National Greenhouse and Energy Reporting (NGER) Act. Most companies are exempt from reporting in the initial phase, which kicked off mid-2008, but this is likely to change going forward with many more being required to submit extensive reports. Whether individual companies want to spend the time and resources getting up to speed on their obligations, however, is not clear. Thus, an opportunity for managed datacentre service providers exists. Besides this, service providers can also leverage the greater power and newer technologies on offer from within advanced datacentres to help clients be early adopters.
CSC, for example, offers storage-as-a-service, dynamic desktop, dynamic server and is supported by Symantec.
“You’ll fi nd that a large number of services we are offering now or are about to offer hinge out of the datacentre. Either the back-end in a cloud like platform with storage as a service, infrastructure as a service area – it’ll all come out of the datacentre,” CSC platform services portfolio manager, Nigel Smith, said.
“We perform many assessment services with customers looking at how we can deliver that service in a way that suits the customer.” Notably, CSC is using virtualisation to supply dynamic servers to clients and claims to be able to provision them within half an hour.
“It will be provisioned to you within 30 minutes, which will be critical to businesses and enable them to manage growth and changes in their business,” Smith claimed. “We all need servers that look at different things at different times and we can quickly bring them on and spin them down as necessary.”
Many internal IT departments can already do this, but there are also broad sections of the economy that don’t have the requisite skills. They also need to have access to the right equipment – the likes of which any modern datacentre has readily available.
Finally, another positive aspect of managed datacentre services is the removal of power management pain points from the client’s IT department.
“It is fair to say all the existing problems that our clients are experiencing around power utilisation, power and cooling, most of the managed services companies or facility providers are experiencing the same problems,” APC’s Mascorella said.
“With the development of new facilities, many customers we are working with are struggling with how they can scale that business from the business. Because there are so many extra costs involved with building a facility.”
Yet, offering services out of a datacentre – whether they are from a facility you manage yourself or on-sold from another premise – helps clients avoid having to deal with the inherent shortcomings in Australia’s electricity grids.
As the data growth trend is forecast to continue on its rocket ship trajectory, there will always be opportunities for IT service providers to help clients who don’t have the resources, desire or capabilities to run everything out of their own datacentre. And in the prevailing economic climate, those who have a strong managed datacentre service approach can not only help their clients see through the fog, but also boost their own operations out of the gloom.
“The datacentre is the fastest Internet connection and a more resilient environment,” NEC’s Weiner said. “The trend is in needing more faith in who you are using for your datacentre infrastructure and the managed services. It is not just somebody who can give us an Internet connection and have somewhere to put our equipment. You need somebody who can give you peace of mind and deal with issues, while knowing your processes.
“Keep it simple. Some in the industry make it more complicated than they need to.”