Posts Tagged ‘Cloud’

‘State of IT’ report shows companies more concerned with cloud than adding new staff

July 29th, 2014

2015 might not be a big hiring year for IT as more companies focus resources on the cloud. But there is also some good news, including the latest on IT spending, according to a new report.Outsourcing3

The IT industry is showing signs of stability according to The State of IT, an annual report from Spiceworks, covering tech adoption trends.

The results of the survey were compiled from the answers of 1,100 IT professionals, drawn from the professional networking site’s roughly 5 million users, according to Spiceworks’ content marketing manager, Peter Tsai.

About 60% of respondents in the US and abroad, reported that their companies do not plan to add additional IT staff within the year. Only 4% plan to reduce staff, meaning the majority of companies polled will either stay the same or add staff.

“We view this is a net positive thing,” Tsai said. He also explained that since many of the companies included skew on the smaller side, many of them do not have the budget to hire new employees.

Though these businesses aren’t necessarily bringing on new staff, they are reporting (42%) plans to increase IT budgets. Tsai said that the added budget, for many, will likely go toward the continuing adoption of cloud services.

“When you’re purchasing the use of a cloud service, you’re in effect, outsourcing some of the maintenance that an IT [professional] would do internally,” he said. For a smaller company that may be strapped for both cash and knowledge, cloud services allows them to grow their business without growing their head count.

Nigel Hickey, an infrastructure administrator at National Specialty Alloys, said his budget next year will in part go toward investing in cloud services and virtualization.

“We virtualize now, and I’m hoping to use virtualization as a stepping stone to disaster recovery at a second failover site that either I manage or a software as a service provider manages,” he said.

As far as staffing, he also said he’s like to add a desktop support person, but the job wouldn’t be full time.

“I need another set of hands to do helpdesk and desktop support so I can focus on my higher level projects. I don’t think I can ask management for another 40 hour a week person, but there’s days where I wish I had somebody so I could work on other things,” he said.

Looking broadly, Tsai said there does seem to be a sense of optimism in increase of IT budgets for 2015. He cited a few external sources – Gartner’s projection that worldwide IT spending would hit $3.8 trillion in 2014, up 3.1% from the year before, and data from the US Bureau of Labor Statistics forecasting growth in the industry through 2020.

Other trends Tsai marked as important included the inverse relationship between the size of a company and the cost of IT support per employee (see chart below), and the slightly higher IT budgets in North America versus Europe, the Middle East, and Africa, possibly due to tendencies toward early adoption and a less concerned attitude toward privacy.


Cloud, outsourcing and m2m driving european data center growth

July 18th, 2014

As companies look for easier ways to process a growing volume of data, without the problems associated with in-house data centers, the uptake of data center services will continue to rise says a new survey.Outsourcing27

The market is expected to see a compound annual growth rate of 16 per cent up to 2018 despite several restraints. The United Kingdom, Germany, France and Benelux are predicted to be the largest markets in the region.

The cost advantage of outsourcing as well the growth in cloud, machine-to-machine connectivity and content-heavy applications is lending momentum to the European data center services market.

New analysis from Frost & Sullivan, European Data Centre Services Market, which covers the retail colocation and managed hosting segments, finds that retail colocation will witness lower growth rates than managed hosting due to its market maturity.

The retail colocation segment generated revenues of $2.83bn in 2013 and is estimated to reach $5.27bn in 2018; managed hosting revenues will increase from $2.01bn to $4.90bn over the same period.

“The pressing need to focus internal resources on innovative IT tasks and capitalise on economical IT management services compel enterprises to turn to managed hosting providers for data centre services,” says Frost & Sullivan Information and Communication Technologies Research Analyst Shuba Ramkumar. “The growth of cloud services will also drive the colocation services market in the short term.”

In the long term, however, increasing efficiency and security of the cloud will challenge the growth of the retail colocation market.

An additional problem is that organisations across Europe are bound by regional data laws that complicate outsourcing buying decisions. The location of data centers, therefore, becomes an important consideration for users when choosing a provider.

The regional nature of European organisations also means that many of them are wary of foreign companies and prefer local providers. These cultural and language barriers are especially strong in countries such as France, Spain, and Italy says Ramkumar.

“In order to widen their customer base across Europe, it is important for providers to offer services from a data center located within a region,” advises Ramkumar. “At the same time, they must provide efficient IT support as well as ensure data confidentiality and security to win the trust of potential customers.”

Due to the need to implement different infrastructure frameworks based on application type, enterprises will use traditional data center services alongside the adoption of cloud services. As a result, the European data center services market is focussing on more hybrid data centre services that combine colocation, managed hosting and cloud solutions.


Gartner: Rising Enterprise Software Spending Won’t Lift IT

July 9th, 2014

CRM and ERP spending will rise through 2015, but the switch to cloud and hosting means data center spending won’t keep pace.Outsourcing13

Enterprise software used to be an engine of growth for the entire IT market, but with the move to cloud computing and hosting, those days are gone. That’s one of the key findings of a just-released IT spending forecast from Gartner.

Gartner’s Worldwide IT Spending Forecast, released in late June, has spending on pace to total $3.7 trillion in 2014 and $3.8 trillion in 2015 — 2.1% and 3.8% increases, respectively. Enterprise software is leading all categories, with 6.9% and 7.3% spending increases forecast for 2014 and 2015, but with little trickle-down value for other categories, such as data center systems or telecom services.

“It used to be that, if you saw growth in enterprise software, you’d see corresponding growth in all of the other categories, but on-premises deployments are slowly going away or headed toward an equilibrium point,” John Lovelock, a Gartner research vice president, told InformationWeek in a phone interview.

Where multi-tenant services used to be viewed as “true cloud” and hosting or single-tenant a form of cloud washing, many enterprises are now choosing hosting as their preferred route away from on-premises deployments, Lovelock said.

“Hosting gives organizations more control over version changes than multi-tenancy, and there’s also more customization possible in a hosted offering that’s not [availabble] in the cloud,” he said. “Security is also raised in industries where they prefer to know where their data and servers are located.”

CRM is among the hottest categories in enterprise software, and Gartner is seeing cloud-based CRM as a disruptive force, beating on-premises options in competitive deals, replacing on-premises CRM deployments earlier than usual, and even winning in deals where companies weren’t even looking for CRM.

“There’s a desire to reach out proactively with web, social media, mobile, and other [cloud] pieces that make it easier to interact with clients,” Lovelock said. “There’s a perceived value in the marketing functionality, e-commerce solutions, and some of the customer-service support applications.”

This description matches’s success in pitching the Salesforce1 platform (formerly as a route to mobile, social, and cloud enablement, both for enterprises and ISV partners, even if the apps aren’t about classic CRM.

ERP is another hot ticket in enterprise software, with core financials spending expected to grow 7% in 2015, but organizations are in search of “post-modern ERP,” according to Lovelock.

“In a big data world, as we move toward digital businesses, the current crop of ERP products are stifling innovation,” he said. “What’s required is a much more agile ERP requiring less customization and more support for standards that allow for integration of modules and a quicker reaction to the market environment.”

Here, cloud and hosted ERP options such as Kenandy, Microsoft Dynamics GP and Nav, NetSuite, Oracle Fusion, Plex, and Workday come to mind. SAP and Infor, meanwhile, are highlighting hosting options and modern, mobilized interfaces (Fiori in SAP’s case and SoHo in Infor’s case).

Of course, demand for hosted and multi-tenant enterprise applications also sparks demand for more servers and storage, but this aspect of these services falls into the IT Services category, rather than Data Center Systems. IT Services is the second strongest category in Gartner’s spending forecast, but Lovelock said services related to the cloud represent “a trivial amount” of the total IT Services category.

IT Services splits into product support, for both hardware and software, and business services, which includes consulting, implementation, IT outsourcing, and business process outsourcing. Though on-premises deployments may not be driving growth, Lovelock said the cloud remains a comparatively small (though fast-growing) pocket of the total market.

“In 2015, IT Services will total $1 trillion, and the cloud portion will be $17 billion,” he said. “Yes, cloud is important and interesting, but it’s never going to surpass even half of either the hardware-support market or the software-support market.”


How to Tame Social, Mobile, Analytics and Cloud Multisourcing

July 8th, 2014

Multisourcing parceling out the IT services portfolio among a number of vendors — is the new normal in IT outsourcing. And as social, mobile, analytics, and cloud (SMAC) services become increasingly important to the IT environment, companies will find themselves managing an ever larger pool of smaller deals that are, in many ways, different from their traditional outsourcing relationships.Outsourcing3

And, says Lois Coatney, partner with outsourcing consultancy Information Services Group (ISG), that’s just the beginning of the added complexity these relatively nascent technologies are bringing to outsourcing customers.

“Integrating SMAC technologies increases the number of providers involved in the service delivery chain. Moreover, the new providers are delivering new technologies and have different business models, and this further complicates matter,” Coatney explains. “So it’s not just a matter of bringing more providers into the mix. It’s bringing in a new set of players who do things differently.”

As a result, maintaining an integrated or standardize environment becomes more difficult. And, says Coatney, “the established rules don’t necessarily apply.”

At the same time, SMAC technologies are generally built on top of shared, multi-tenant platforms, which means that contract terms, service levels and pricing units are actually highly standardized and biased in favor of the supplier. “Negotiating these agreements can present a challenge, especially once the provider gains scale,” says Coatney.

Outsourcing customers are used to having their IT suppliers adapt their processes and requirements, not the other way around. “What happens is that clients have to fit into the provider’s contract structure rather than making the supplier fit into theirs,” says Coatney. “So, in addition to managing disparate processes, service levels and pricing units, there’s a new set of challenges for procurement, legal and vendor management, who are accustomed to dictating their standards to providers.”

Also, Coatney says some SMAC vendors sell discrete solutions to multiple parts of the business — sometimes excluding the centralized IT function–causing further disparity across the environment. “Because there are so many emerging SMAC products, they are being applied in a fragmented approach,” explains Coatney.

IT Leaders Need SMAC Strategy

Exacerbating these issues is the fact that most traditional IT service providers have been in a state of denial about the impact of SMAC technologies even as their clients faced pressure to apply these new capabilities to innovate and drive change, says Coatney.

“That’s changing as the provider community has recognized that the SMAC technologies aren’t going away, and in response they’re embracing the new capabilities,” Coatney says. “We see traditional providers increasingly highlighting their capabilities around cloud, automation and big data because they see that such capabilities are going to provide a critical competitive edge.”

As IT organizations implement best-of-breed outsourcing strategies that incorporate SMAC, they can take some steps to better manage the evolving multisourced environment. IT leaders should include SMAC technologies in their strategy and planning, identifying the areas where these capabilities will deliver the most value to the organization.

“This allows you to continue to drive standardization where needed, while enabling the flexibility SMAC technologies can offer,” says Coatney. To do that, IT organizations must develop deep SMAC expertise in their organization to best seek out and evaluate opportunities in those areas.

It’s also important to develop a service integration and management strategy before these additional deals are made. “Understand how you will employ governance for SMAC services and providers,” says Coatney, “And ensure that you contract for SMAC technologies accordingly.”


IBM Boosts Enterprise Collaboration With Connections 5

July 4th, 2014

IBM has refreshed its Connections enterprise social and collaboration platform, an integrated suite of tools that also include content management and analytics.Outsourcing37

Connections 5, launched July 2 in the IBM Cloud marketplace, is available as a cloud service or as on-premise software.

It can also be deployed within a hybrid environment to embed collaboration, analytics and content capabilities within existing business processes.

The platform provides a number of social tools, including file sharing, communities, blogs and wikis, which a company can use to support business relationships with partners and customers. The software can also be used internally to improve collaboration among employees.

What to Do:
Consider interacting with business partners and customers through cloud-based or on-premise collaboration portals to provide more immediate services.

“The ability to bring key internal and external stakeholders into the conversation can facilitate a more collaborative, responsive and authentic way to work and deepen engagement,” Jeff Schick, vice president of social software for IBM, said in a statement.

Connections customer Superior Group, a provider of workforce services and outsourcing, said Connections’ social tools helped reduce email volume by 20 percent.

IBM refreshes Connections enterprise social software
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“IBM Connections gives us an open, agile and customizable platform with fully integrated collaboration, analytics and content management capabilities,” Tom DeClerck, CIO of Superior Group, said in a joint statement with IBM.

IBM enterprise social software is used by three-quarters of Fortune 100 companies, according to the vendor.

IDC predicts global enterprise spending on standalone social software will grow at a compound annual rate of 22 percent through 2017, when it will reach almost $2.7 billion from $1 billion in 2012.

The predicted growth is significantly less than previous predictions, because companies have been integrating and embedding the software’s capabilities into other primary enterprise technology “to support business-critical decisions and more social workflow,” IDC said in a market analysis.

Vendors are also embedding social capabilities in products. For example, Microsoft announced last September that it was adding such tools and services into its Dynamics 2013 customer relationship management (CRM) software.

Many of the functions of Connections started as collaborative projects within IBM, Jeanette Horan, CIO for Big Blue, told CruxialCIO in an interview last year. The company often deploys new capabilities within IBM before releasing to customers.


HP Improves Its Cloud Offering With SAP-HANA SaaS

July 4th, 2014

Outsourcing31Technology giant, Hewlett-Packard, has been restructuring its business to boost profitability and focus on new verticals that offer better growth opportunity. As part of this strategy, the company is continuously expanding its portfolio of cloud services. In a recent move, the company has struck a partnership with German enterprise software developer, SAP AG, to deploy SAP’s in-memory database platform HANA as a Software-as-a-Service (SaaS) model. We believe that this offering was a logical extension to an earlier deal according to which HP is the primary infrastructure provider for SAP-HANA deployment that will be carried out by Accenture. In this article, we will explore why cloud services are important for HP, and how it can generate more revenue for the company in the future. Furthermore, we will briefly explain the new cloud product offered by HP.

Why Are Cloud Services Important for HP?

HP generates nearly 75% of its revenues from hardware sales or hardware related activities. However, this business has low margins primarily due to intense competition from other manufacturers such as Dell, IBM, Lexmark etc. While the hardware business is HP’s cash cow, it is constantly diversifying its business by expanding its services division, especially the cloud business to infuse growth and improve profitability. HP’s services division contributes nearly 31% to its estimated stock value. Within this division, the three verticals i.e. technology services, infrastructure outsourcing and application and business services provide cloud related services. This division and its three sub division are expected to drive revenue growth for HP going forward, primarily due to adoption of cloud services by its clients.

According to our estimates, the technology services make up 15.5% of HP’s estimated value. The technology services division focuses on helping organizations improve their IT operations and transition to new technologies, such as virtualization, cloud computing and converged Infrastructure. We believe that technology services is responsible for delivering Platform-as-a-Service (PaaS) services since it combines all the ingredients such as cloud computing, converged infrastructure and virtualization. Currently, we estimate that revenues from this division to grow from $8 billion in 2013 to $10 billion by 2020. We believe that majority of this growth will come from cloud services especially PaaS. If HP can capture 5% of the expected $44 billion PaaS market, the revenue for this division can be significantly higher.

According to our estimates, the infrastructure outsourcing services makes up 10% of HP’s estimated value. It encompasses the management of data centers, IT security, cloud computing, workplace technology, networks, unified communications and enterprise service management. Since this division extensively deals with the infrastructure needs of a client, we believe that HP’s IaaS solution fall under its umbrella. Currently we estimate IOS revenues to increase from $14.6 billion in 2013 to over $17 billion by 2020. However, if HP were to get a significant chunk of IaaS market due to its dominant presence in the hardware (Server, storage and printing) industry, its revenues can be significantly higher, and our stock price estimate can increase by 10%

According to our estimates, the application and business services makes up 6% of HP’s estimated value. This division helps HP’s clients to modernize, develop, manage and integrate applications and information assets. HP delivers most of its SaaS solution through ABS. Considering, the expected growth of SaaS in the future, this division will be an important driver for HP’s revenue growth. While currently we project revenues from this division to grow from $8.7 billion to $10 billion by 2020, if HP were to capture 5% of the SaaS market, ABS revenues can grow to over $13 billion by 2020.

HP Expands Cloud Offering

As part of its strategy to focus on cloud services, the company has recently tied up with SAP to offer its in-memory HANA as a service. HP As-a-Service solution for SAP HANA can include the software license for SAP HANA, along with hardware and ongoing management services, bundled into a complete solution provided in a cost-effective, as-a-service model.

We believe that the company is well positioned to ride the wave of growth in the cloud computing industry through its portfolio of services. However, it remains to be seen whether the company can capitalize on its longstanding relationship with its clients to deliver outstanding Cloud computing services, especially in the face of intense competition from Amazon, IBM, Rackspace etc.

We presently have a $25.04 price estimate for HP, which is 25% below the current market price.


IBM In 10-Year Outsourcing Deal With Banco Popular

July 2nd, 2014

IBM has snagged a 10-year contract with Banco Popular to manage the Spanish bank’s tech infrastructure.Outsourcing25

The deal, which will include management of Banco Popular’s private cloud, is expected to help save $200 million over the next decade. Banco Popular is Spain’s fourth largest bank not owned by the state.

“With this agreement, with IBM as our technology partner, we will achieve market standards in terms of technology services needed to run an important digital transformation in Banco Popular, always aiming to deliver the best service to our clients,” Banco Popular said in a statement.

The bank will transfer 41 tech infrastructure employees over to IBM, which also assisted the organization to modernize its data center and the firm’s new tech headquarters in Madrid.

Banco Popular recently agreed to purchase Citigroup’s retail-banking and credit card business in Spain.

“The progressive adoption of innovative solutions such as cloud computing will enable the bank’s technology infrastructure to be more flexible and adaptable to business needs, which will result in better client service,” said Juan Antonio Zufiria, General Manager of IBM Global Technology Services Europe, in a statement.

What to Do:
Consider outsourcing routine IT functions to a trusted vendor to help cut costs and better focus on core business processes. Look for contracts that allow flexibility in payment, such as pay-as-you-go options.

IBM has made a number of similar deals with financial services firms in 2014, including a five-year services agreement with French online banker Boursorama, in which the banker will move its Web-based IT to IBM’s SoftLayer Cloud infrastructure.

Last December, Big Blue acquired a controlling share in the IT division of European financial services firm Dexia SA to help provide provide services in outsourcing deals worth $1.3 billion over the next seven years.

IBM first announced its plan to acquire SoftLayer for $2 billion in June 2013. Since 2007, it has invested more than $7 billion in 17 cloud-oriented acquisitions. The company has turned to the cloud, which in addition to big data services, it hopes will help offset falling hardware revenues.

In late June, IBM also opened a new cloud data center in London for enterprise use, part of a $1.2 billion investment to increase its data center presence across the world. Over the course of 2014, IBM will add 15 new data centers with plans to expand further in 2015 to the Middle East and Africa.

Banco Popular hands off IT ops to IBM under 10-year outsourcing deal.
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Gartner has predicted that more than 60 percent of banks worldwide will process transactions in the cloud by 2016.

IBM has also made waves in the banking community with its Watson cognitive-computing platform, which it will invest $1 billion into over the next few years.

In January, DSB Bank in Singapore agreed to begin using the technology, joining Citibank, ANZ Bank in Australia and South African firm Nedbank, which have already been using Watson-based tools. Nedbank has saved more than $105,000 per year while increasing customer service productivity levels by 20 percent using these analytics tools.


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