Remote Management: Onus on CIOs than Service Providers

A quick look into how businesses in India expand, it’s clear that it’s more of cluster growth. The impetus is largely to capture the large population base of the country in length & breadth. So, there is a need to setup representative offices across the country as well. Typical segments which expand in such a fashion are Retail Outlets, Stock Broking Firms, Insurance Companies, Banks, Micro Finance Corporations, SHGs, Couple it with MNCs setting up factories/warehouses in remote locations across the country, while the head office being in a metro location. While these companies have efficiently and seamlessly integrated their business operations, the IT integration is happening at a rapid pace. The Business Layer of these companies such as ERP/SCM/e-Biz applications are largely integrated, which gives them a reduced operations cost & efficiency of operations. The connectivity solutions for such large spread have also been mastered and being matured with Telco's providing Enterprise Services. The CIO is quite happy or is he?
The biggest mystery in such an expansion is, how does the CIO maintain the levels of Service across the geographies of the country and how does he manage the IT Infrastructure piece which invariably is most crucial in the business application being available to the end-user of the company or the customer in the end. The single largest service line discovered in the last decade by System Integrators to help customers manage their IT Infrastructure is a magic jigsaw piece called - Facilities Management Service (FMS). Put in simple terms the System Integrator or the Service Provider deploys teams of "Specialists" onsite at the customer location to manage the IT Environment. The "Management" often encompasses handling the Desktop Environment/Facilities such as Printers, Switches, and Routers etc. The initial seed for such FMS services started when the System Integrators sold & integrated large IT Systems and "Left Behind" couple of resources "Free" as a value addition. This was feasible a decade or so ago when the hardware prices were high and only few System Integrators had the capability to sell & integrate the IT Systems. If any Service Providers commits, in today's environment to leave behind a Resource "Free" of cost to manage the 3 HP Servers, which they sold & integrated, I would be quite surprised, even raise an eyebrow to look into their business model. The maturity has evolved; the Resources are now being bundled & termed under FMS umbrella. The "Sell-Implement-Manage" model became successful model and many large successful System Integrators in India are a testimony to this fact.

This model was being served efficiently for primarily reasons listed below:

• Cost of Manpower cheaper in India
• Clients were not spread as large as they are today
• Not great influx of Multi-Nationals
• Not much IT Companies seeking manpower to support global projects(Indirectly raising these "Low Cost Manpower" salaries)
• Not much of "Client Process" Management being necessary
• It was a time, when clients were busy setting up IT Infra & ERP and weren’t keen on ITSM

None of the above reasons are valid anymore in today's context. The Companies have grown beyond their own imaginable expectations and the CIOs have been catching up with the expanding business. The first major and strategic mistake being done mostly is the CIOs asking their Service Provider to cover all the growing locations of the company through a comprehensive FMS model. If I am a System Integrator I would accept that model gleefully, because any mid-sized company has at least about 200 branches across India, and I would be giving a minimum of 200 resources. 200 resources at a staggering monthly bill rate, wow!! that's a huge revenue model, 4-5 such clients and I have made my day.
CIOs have to watch out. This model although seemingly simple comes with extremely complicated future. Some of the drawbacks of this model:

1. Cost of Resources going up all the time
2. Attrition
3. Cost of Re-hire
4. Cost of Re-Training of Customer IT Environment
5. Service Provider's inability to setup central project governance model
6. Lack of Knowledge Retention
7. Inability to scale

Service Providers would seldom dare to innovate their business model simply because their FMS Revenues are at stake and would constantly strive to discourage the CIOs to go towards a different model of operational streamlining.
Therefore it’s the CIO's core responsibility to drive their vendors/service providers to make them constantly re-look at the way by which the service is being delivered. Some of the tactics would be to squeeze the vendors on cost on service renewals. Any Vendor, who has purely banked on FMS model alone, would feel the pinch since his cost actually inflated but the CIO is looking at a cost reduction.
It’s not a bad idea for CIOs of such large corporations to look at an emerging service line: Remote Infrastructure Management. As per IDC estimates 85% of Data Centre activities can be handled remotely and this model is anyway a huge hit in the international market moving towards a new service line projected at US$ 96b by 2013.
CIOs can evaluate vendor capabilities in their RIM practice along these following lines:

1. The Vendor's Operational Model & Infrastructure Facilities
2. How does the vendor propose to enhance operational efficiency through process standardization
3. How does the Vendor drive differentiation through increased Service Levels
4. Vendor's adoption of standards such as BS15000
5. Pricing Models - Device Based/ Incident Based

Left to the Service Providers, however large they are, would seldom look into compromising their FMS revenues. In an Indian context even if the resource cost goes up substantially, there is a huge geography to exploit for these providers( Such as North-East) or even when the entire India becomes a high resource cost nation, these service providers would look to exploit low cost nations such as Sri Lanka / Bangladesh/Vietnam and move those resources here.
The request to CIOs is not to drive India into another US market bringing large number of low cost resources , but should constantly push the service provider to innovate through emerging service lines like RIMS.

Indian IT Scenario: Whats in it for Service Providers

Indian IT Market is both perplexing & exciting, reason, its evolution is logarithmic and not exponential. While the top Indian IT conglomerates were busy automating, hospitals across the world, setting ticket management systems from Railway Houses to State Transport corporations, using RFID to track, Indian corporates was in a deep slumber. e-Governance was seen as a deterrant to "Under The Table Revenue" and that which create "Transperancy & Accountability". Barring a few corporates which invested in IT, most usually the Indian Corporate Houses never really took greater interest in IT investments as much as they did for their own business divisions. The age old central EDP room was a stigma and a "Cost Center" and the EDP manager of 80s did everything from Electrical Cabling to Telephone Maintenance in addition to his core activities(which often took a beack seat!).

The evolution if anything to go by is purely extraordinary. From buying Hardware in 80s to buying ERP softwares in 90s to automate the Production Planning & Purchase Divisions, today's corporates talk about IT-Business Alignment in India. The impetus has certainly been there to make IT pay for the efficient business functioning, one to improve productivity. With the advent of Internet in 90s, the corporates felt the need to use the power of internet to create a distinct marketing strategy to sustain a continued Comptetitve edge and so the use of Websites & e-mails increased their internal IT complexities.
The companies now talk of "IT Stragey" formulation much similar to "Business Strategy" and "Finance Strategy". CIOs have become more aware to align IT Strategy to Business Strategy and are also looking constantly at ways to achieve this. Words like Selective Outsoucring, Co-Sourcing & Smart Sourcing are going a buzz and Outsourcing Daily Operations of Data Center & Applications to WAN is a common Sight in today's context.

From a Service Provider Perspective, this is a monumental phase as it has seen turnaround from a Central EDP room operation to Distributed Computing and Wireless access. The same service providers or the system integrators started off by selling IT Hardware to ERP Packages are now part of any corporate's core "Outsourcing" strategy managing the Systems Integration as well as Annual Maintenance of the IT Systems. This created an operational revenue stream for Servoce Providers and breather to plan & innovate their business model better. But, looking at massive economic growth, the corporates whether financial Power Houses, Manufacturing or Banks are expanding at exponential rate and also reaching out to far remote corners of the country and would therefore seek a seamless integration of IT Services provisioned at the same pace and rate at which a head quarters is provisioned. Obviously this looks to be a huge business opportunity for any IT Service Provider and would look to build large teams of professionals to manage such massive expansion plans of their clients. But this comes with potential risks such as:

1. Manpower Inflation in India
2. Knowledge Retention
3. Customer's de-risking strategy of chosing multiple vendors and thereby each vendor getting a smaller pie of the business
4. Cost of Recruitment, Training and Overheads

The Service Providers need to carefully analyze the pros & cons of a pure SI/ Manpower based model to help support their customer's expansion. Its nimble footed and on a weak wicket and the model might crumble under its own weight of deployed manpower. Service Providers must look to innovate the business model and instead of deploying large amounts of Onsite Manpower, must look to ration out a model of Onsite - Remote Support Combinational model. Remote Model not only reduces large manpower dependance, it also creates specific business advantage such as:

1. Centralized Project Management
2. Knowledge Base & retention
3. Provisioning Uniformly and periodically
4. Managing Scheduled Change Management Strategies
5. Asset Management
6. Superior Client Reporting & Acountablity

The adoption of Remote Model of Support and other techniques such as S-a-a-S actualy helps bring down customer's TCO down substantially and also at the same time helps the Service provider to invest in innovation at the back end and bring further cost benefits and transfer it back to customers. Service Providers can also look to adopt stratgies such as ITIL to drive their Remote Team to efficiently manage end Customer Delivery.

The Future:

Once the operation management dust settles in Indian corporates the next phase would be to look into aligning IT with Business using various methodolgies such as COBIT/ITIL and other ITSM strategies. Service Providers, while they are currently addressing the present SI/AMC market must have an eye for the future and start a core small team within to invest in the newer emerging areas so that they can have an early mover advantage in the future market.

The IT Services Market is directed as below:

Hardware->Software(MRPs)->Systems Integration(AMC)->Remote Support(S-a-a-S)->Consulting(COBIT,ITIL) ->Compliance(SOX, BASEL,GLBA)-> Enterprise Risk Management

Certainly the Service Providers who have seen this trend are the ones emerging victorious in the market space.

The Bottom Line Paradigm

"Bottom Line" classically defined as the money left on hand after paying all business expenses, is a phrase used by business across the world to define and mark their arrival and exit from capital markets, a phrase which runs close to any CEO's heart, one that has been the stellar differentiating factor betwen successful corporates and not so successful ones. From Selling Bolts & Nuts to Assembling Cars to Setting up IT Systems, any business thrives hard to keep the "Bottom Line" intact and growing.

In the era of unyielding economic aggression, corporates have risen to great heights & fallen into deep trenches and most ususally the corporates which have fallen have failed to understand that being successful in the market is not a factor of just having a healthy bottom line but also the ways & means of making it healthy. Many successful corporates which change their strategies according to growing & changing market conditions have been near perfect in Innovation which is a direct co-relation to the Vision of that company's CEO.

Some of the predictable failures often seen are attributed to simple things like:

1. Inability to understand Globalization
2. Inability to foresee Market Conditions
3. Inability to understand defining forces of Market
4. Inability to understand competition landscape
5. Metrices to Govern growth Internaly

Recently I was attached to a firm which wanted to venture into a new service line of offering. The vision although was not shaped well, was present in pieces but the views expressed during my interview with their heads was pragmatic so to say. I was to take up an company wide integrating task of collating the common vision to take this new service offerings to our exisiting customer base and create a good platform from where we could make a big & sizeable Business Unit.

When I set upon the task, I was shocked to figure out that the company lacked basics of Management from simple Sales Lifecycle Management to Customer Delivery Management to Project Management. The exisiting revenues were coming purely on past year's merit and exisiting clients and was also diminishing year on year. Instead of focussing on expanding market, expanding service lines, the company was focused more on internal processes which over a period of time with a lack of automation became a burden than a neccesity. The sales team or the customer delivery team were tired of filing excel sheets of data which bore no value to a customer and it became a pure form of apeasing one's imediate boss which would reflect in the year end performance appraisal. By time, this company became too top heavy with designations amounting to "Vice Presidents" taking precedence over the actual ground reality of failing market share. Around this company, I saw the other competitors who started pretty much around the same time grow into large massive operations still not transfering their overhead costs to the cust0mers. What surprised me was that this company was in operation for last 20 years or more and clocked revenues in millions of US Dollars and there was completely no initiative to strengthen internal forces and blind disorientation towards moving & chaging market conditions.

The most immediate conclusion was that scalability within this company to lauch new service is going to be tough because they had no clue to understand where they were currently and how their revenue was split with regards to their exisiting service lines. This was an incredible situation as much as precarious one since any one failing service line in the market where we were strong can bring the whole company down within no time. Also, since we were focussed heavily on internal processes, we never set upon new client force and were banking heavily on set of selective clienetele which were also going to competition since the competition was both innovating and bringing overall cost down and transferring this benefit back to the customer.

There are strong learnings from this corporate:

1. Companies "Must" focus on Bottom Lines but never be a "Slave" to it
2. Companies must create a strong internal process to ensure tight integration with Customers
3. Gone are the Days of Customer Satisfaction, this is the age of "Customer Delight"
4. Keep "Market" & "Clients" as central to the strategy formulation and not "Internal People"
5. Innovation is key to any flourishing business
6. Money is always a by-product of a Good Service
7. Clients are Human Beings also, they have a passion towards good service providers

With the anguish and expectation, I gave this feedback to my reporting head and silently relinquished my responsibilities. Not all companies are successful, but the difference lies where how each one of them attempt to do so and certainly going behind just the "Bottom Lines" isnt certainly a good route.