IBM Global Technology Services Balancing Risk and Innovation with Sourcing Alternatives

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1 IBM Global Technology Services Balancing Risk and Innovation with Sourcing Alternatives Helping IT managers and CIOs raise the ROI of IT

2 2 Balancing Risk and Innovation with Sourcing Alternatives Managed Services Managed services are not a new phenomenon. They have been sold and delivered by service providers and purchased by customers for many years. Prior examples of managed services from IBM and other providers include web hosting, Software as a Service (SaaS), utility computing, infrastructure and IBM on Demand, grid computing and others. Adding to the array of managed services, cloud computing and remote infrastructure management services are now in the press on a regular basis, though one could argue that these services have been around for a number of years, as well. While managed services have existed for some time, there are new market dynamics which will impact customer consideration for these services. Information technology (IT) departments continue to be asked to take on more functions with limited resources and expertise. Pressure on IT will continue as companies are forced to significantly cut costs in response to global economic turmoil. An increasing regulatory burden, in which IT is expected to take a major role, will place further demands on strained budgets. As a result, businesses will need to use managed and outsourced services to allow them to focus on more business-critical and strategic functions. Businesses will not have the luxury of deciding to retain non-differentiating services in-house if a significantly more cost-effective, high-quality service is available from a third party. Given the variety of service options available, businesses are taking advantage of a number of service types to meet their management needs both in IT and in line-of-business functions. The need for business transformation Today s economy is accelerating the need for business transformation. A recent IBM Global Chief Executive Officer (CEO) Study found that 83 percent of CEOs reported their companies required substantial change, and a total of 94 percent of CEOs felt their companies required substantial or moderate change. With the need to transform their business models in order to ensure their ability to compete globally, drive innovation, ensure lowest costs and penetrate new markets to name a few leading issues companies are increasingly looking to transform their IT and business processes to meet these market demands. This is summarised in Figure 1 below. Compete globally Competitive advantage Evolving business needs Penetrate new markets Global economic downturn Cost pressures INCREASING NEED FOR CHANGE Drive innovation Increase value of IT Focus on core business Accelerate time to market Like many other companies, we are always exploring the possibility of utilising external entities to help manage the day-to-day IT operations so that, internally, we can focus on more strategic initiatives. Kurt Rao VP, Time Warner Inc. In the next three years, change will drive the criticality of decision support. Therefore, we must find better ways to do transaction support and control activities with improved processes and more automation. Bob Driessnack CFO, Intermec Inc. Figure 1: Accelerating the need for business transformation Most managers are focused on cost, but often with different areas of concentration, depending upon their primary responsibility. The CEO focuses on competition and business productivity, whereas the chief information officer (CIO) often concentrates on time-to-market and increasing the value of IT. The chief financial officer (CFO) is driven by risk avoidance as the paramount issue. CFOs are now refocused on short-term financial matters, such as cutting costs and reducing or eliminating capital expenditures. With the attention shifted to swift payback on investments, CFOs are also open to considering outsourcing for certain elements of their business. This can lead to a discussion of a different sourcing strategy, such as managed services.

3 IBM Global Technology Services 3 Challenges facing CIOs and IT managers How do you easily and flexibly drive growth while managing risk? How do you keep up with day-to-day IT infrastructure challenges and do so with no more money than you are spending today, while getting more productivity out of your people? Some of the key challenges include: Aligning IT to support innovation and growth goals puts the right focus on supporting the future needs of the business. Improving service levels aligns with customer expectations of responsiveness and total IT availability. Reducing the costs of running IT infrastructure this aligns with the expectation that costs for activities will show continuous improvement over time. Enhancing operational efficiency as IT activities are expected to reach a level of industrialisation that results in very high efficiency. Adjusting to tighter IT controls as some IT flexibility is lost to tighter controls, typically resulting in high costs. Gaining access to new technologies and skills addresses the challenge of finding the skilled personnel to make it possible to exploit IT innovations that can help the business. Increasing IT infrastructure complexity as heterogeneous IT infrastructures grow in complexity, creating management challenges. From challenge to opportunity We know that we have to move past today s challenges to seize tomorrow s opportunities. This means taking a stronger leadership role in the face of the current complexities and challenges while also laying a foundation for what is needed ahead. This means meeting higher service expectations, rising cost pressures and new risks and threats while embracing breakthrough productivity, accelerated value creation and increased velocity. As in other businesses, government and institutional leaders look to develop strategies for change. Those strategies must align with existing realities that manages through the current economic crisis in a way that begins to solve the above challenges and lay a foundation for future growth. To do this, we must think differently about infrastructure. Flexible sourcing managed services and cloud computing Managed services and cloud computing from IBM are concentrated on improving service, reducing cost, and managing risk. The use of these services results in improved operational efficiency and responsiveness, optimised IT and business processes, improved access to desired services and capabilities, improved cost control and predictability, freedom from technological obsolescence and skills shortages, greater infrastructure flexibility, and increased competitiveness. Functionality is in continuing demand Clients still demand a wide range of functionality, including infrastructure hosting that spans the managed services continuum and cloud computing. IBM Managed Services have built in the flexibility as they use different approaches that moderate the level of support you receive from IBM. Staff augmentation or flexible labour support from IBM is a good way for some clients to get started with IBM. In this model, we often help you monitor and manage your environment. IBM can also host and manage your infrastructure. In this model, we can also work with you to help you manage your infrastructure, as you retain the management of your applications. Outsourcing has the most support from IBM, where typically your personnel and assets transfer to IBM. Cloud computing is emerging as a foundational underpinning in relation to managed services. This range and flexibility is summarised in Figure 2 below. Client perception of the managed services continuum Help me with some tasks Monitor my servers in my data center Started 1998 Host my servers Manage my servers Manage my apps Shared Take IT off my hands All IT Custom Run my process Business Process All Business Process IT Shared MIS MIS MIS MIS MIS MIS MORE CLIENT CONTROL CLOUD COMPUTING IBM instantiation of client perception Staff Aug RMIS Co-Lo Managed Hosting on Demand MORE IBM CONTROL Strategic Outsourcing MBPS/ BTO Figure 2: Clients demand a range of functionality, including infrastructure hosting spanning the managed services continuum and cloud computing

4 4 Balancing Risk and Innovation with Sourcing Alternatives IBM s comprehensive services portfolio IBM offers a comprehensive services portfolio with flexible sourcing options. Our portfolio of services has two general categories, including managed services and cloud computing. Each category has its own set of values, and these services can be combined in flexible ways to meet your service needs. Options that yield results and save money It is often a challenge to find and retain the skills you need to support today s broadly heterogeneous IT environments. With managed services, clients reduce their skills-related risk as the responsibility for attracting and retaining skilled individuals falls on the managed-services provider. Providers are often in the best position to pool and utilise their human resources among multiple clients, offering them greater skill diversity than they might achieve for themselves at a lower cost point. The typical cost savings that can be expected from IBM Managed Services are summarised in Table 1. Table 1. Options that yield results and save money End user Servers, storage, network and devices IBM SmartCloud desktop Managed help-desk services IBM SmartCloud Backup services Remote managed infrastructure services Up to 30% payback in 8 18 months 15 25% payback in months Up to 40% payback in 1 12 months 20% payback in months Security Managed security services Up to 55% payback in the first year Resiliency Managed resiliency services Up to 25% reduction in recovery time and recovery point objectives Support Hosting Managed technical support services Packaged, flexible and application hosting services Up to 40% reduction in support costs with payback in 6 12 months 25 50% payback in the first year Table 2. Leading managed and cloud services from IBM IBM managed service IBM Managed Security Services Managed help desk services IBM Remote Network Management Services Enterprise server managed services IBM Virtual Server Services IBM Managed Resiliency Services Managed technical support services IBM Managed Hosting IBM cloud service IBM SmartCloud Backup services IBM SmartCloud Desktop IBM SmartCloud Storage IBM SmartCloud Enterprise IBM Tivoli Live monitoring services Brief description Provides trusted global security solutions backed by real industry validation of top industry analysts like Gartner, Forrester, Frost and IDC. Backed by the world-renowned IBM X-FORCE research team; over 3000 security and risk management patents; over 15,000 researchers, developers and SMEs on security initiatives: and over 40 years of proven security success. End-to-end incident and problem management, including escalation control 24x7. Provides 24x7 monitoring and management of enterprise networks. Enterprise server managed services are custom services for System z and System i platforms, with local service delivery where offshore delivery is noncompliant (i.e., government regulations, other public sectors) and native language and operating system support is required (Japan, Korea and China). IBM Virtual Server Services offers a highly standardised, shared infrastructure service hosted at a centralised, security-rich, partitioned IBM facility. The features for this solution provide flexible, scalable, resilient server and storage capacity - on demand. Services are pay-per-resources allocated or usage-based, with variable pricing for consumption of server, storage and network resources. Provides continuous availability services for client s critical processes, functions and infrastructure, as required to make business decisions, measure performance, meet regulatory compliance mandates and support governance. Establishes a single point of accountability for multivendor hardware and software support that spans a heterogeneous IT environment, offering consistent enterprise-wide support and simplified business processes among IT silos. Helps you run infrastructure with a single point of accountability and service in an IBM data center. Brief description Organisations can protect all critical information from disaster without upfront costs, capital expenditures or additional IT resources. Services are fully managed, automatic, with end-to-end data protection. Reduced client and deskside support and helpdesk costs, reduced power costs, reduced security and user administration costs, reduced hardware and software costs, reduced network engineering costs and reduced software distribution costs. Provides a highly scalable, flexible global file storage system. Makes virtual servers available for a variety of workloads delivered using a usage-based model. World-class Tivoli monitoring, utilising a software-as-a-service model with low upfront costs and no onsite infrastructure requirements. A good fit for environments between 25 and 500 instances of operating systems and middleware to be monitored.

5 IBM Global Technology Services 5 In short, IBM offers a full range of IT infrastructure managed services that can help you improve service and manage risk while reducing costs. Table 2 (previous page) contains a summary of the managed and cloud services available from IBM. A century of real-world solutions In 2011, IBM became a 100-year-old company. We know infrastructure technology better than anybody else. We do it for ourselves and we do it for our clients; we make our own underlying hardware; and we make our own chip sets that go into the hardware. We develop our own software and develop our own services. We are uniquely positioned to understand complex IT challenges because we face them ourselves, everyday. And, we continue to stay at the forefront of innovation and new standards, exploiting our combination of business, technology and research knowledge and capabilities in every client partnership to give you a competitive edge. IBM s real-world experience plus our skilled people have resulted in an unmatched history of delivering real business results. We bring this experience and talent together for you and for all of our clients. You can count on our combination of business, industry and IT expertise and our proven practices to give you a competitive edge. In the end, all that matters is performance and results your business results and supporting IT performance. IBM managed services can augment your capabilities where needed or manage all of your IT for you. IBM can help you maximise your return on investment, minimise risk and enable greater business responsiveness. IBM provides a broad range of flexible services from one IT service provider, across a heterogeneous IT environment making use of standardised, repeatable, predefined services and asset-based delivery, based on industry-recognised best practices. Our goal: To help you implement the right sourcing strategy for your IT infrastructure Let us work with you to prioritise the target areas to exploit flexible sourcing to reduce costs and enhance your IT delivery approach. Please contact IBM today on or IBM Executive Assist on assist@au1.ibm.com to explore how IBM can help you develop the right sourcing strategy aligned with your business. IBM Global Technology Services is a leader in the IT industry. We have a long history of thought leadership. We are the first to bring game-changing technology to our clients through our services. We faithfully employ significant best practices captured through years of experience with thousands of clients. You can count on our partnership and commitment to your success. We are here to make clients satisfied. One of our core corporate values is Dedication to every client s success, and we are here to build a partnership with you in the corner office and in the trenches to optimise your IT and help your business flourish.

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