Archive for March, 2011

Five Metrics for Managing IT Outsourcing

IT takes on a new role when the organization turns to cloud, SaaS, and outsourcing. Instead of being managed, IT finds itself in the role of manager, of being the group charged with enforcing SLAs and governance policies as well as integrating the results with the systems and data remaining in-house and, ultimately, ensuring the expected business outcome.

The IT outsourcing market growth has slowed recently but expect outsourcing in one form or another to be a part of almost every organization’s IT strategy going forward. IDC predicts the global IT outsourcing market will grow at a five-year CAGR of 2.9%, reaching $128.4 billion in 2014, more if you include other forms of outsourcing—cloud, SaaS, PaaS, IaaS—too.

The key to managing these providers is metrics. The business school truism—you can’t manage what you can’t measure—holds equally true for IT outsourcing.

And the measurements with which you will manage the outsourcing vendors come from the vendors. The metrics they provide can be a critical management tool for managing both IT and the business itself. “Our metrics and measurements help customers in better designing, planning, and deploying their IT investments,” says Rodrigo dos Santos, Senior Managed Services Manager, CPM Braxis Capgemini, a leading remote infrastructure management outsourcing (RIMO) firm.

IT outsourcing is a highly measurable service where the right metrics can be used to manage not only IT but the business itself. The trick is to whittle down the abundance of IT system and application measurements to a handful of key performance indicators (KPIs). These you can use to craft effective and fair SLAs and enforce them. At the same time, you can use the metrics to gain insight into the state of the business processes themselves, not just the systems.

Start by looking at the basics: number of service requests, incidents, events, response times, changes, problems resolved, problems escalated, and time to resolve. For application outsourcing you can look at function points, lines of code, coding policy violations, and such.

Even with a RIMO provider you can monitor applications by looking at the performance of the systems on which they run and infer business process-related metrics, such as new contracts opened, payables collected, time to close customer service requests, the number of service installations scheduled, and more. A good outsourcing vendor can, when authorized, see into the applications running on the IT systems it is managing. Almost any business process can be measured by correlating and monitoring the IT components that support it.

Five key IT metrics to start with:

  1. Number of service requests
  2. Service response time
  3. Time to resolution
  4. Length of system downtime (impacts customers, productivity, opportunities)
  5. Frequency of system downtime

From here dos Santos suggests you can interpolate a wide range of business process metrics. These might include number of new contracts signed, volume of customer service calls completed, or the number of credit requests approved. These and more tell you not only about the state of the systems but of the related business processes too.

Every competent cloud, SaaS, and outsourcing provider should track and monitor a variety of metrics. When selecting a provider look closely at the metrics it captures and shares with the client. Also look at examples of its reports and analysis as well as how KPIs are benchmarked against industry norms. In the end, what you know about the performance of your IT infrastructure can also tell you much about your business.



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Telecom Cost Reduction through SIP

IP telephony and Session Internet Protocol (SIP) are emerging as a key way to cut telecom cost as well as deliver the benefits of unified communications. Those benefits focus on collaboration, centralized management, and streamlined communications, such as 4-digit dialing and follow-me capabilities.

A Frost & Sullivan research report lays out the core rationale for IP telephony. The savings include reduced calling costs; faster and more efficient moves, adds, and changes; lower overall network monitoring, management, and configuration costs; and reduced access and long distance call calling costs through voice-over-IP (VoIP) and SIP.

IP telephony also brings enhanced services. These include such capabilities as soft phones; rich presence information; chat; audio, video and web conferencing; mobile access to enterprise applications; and advanced contact center applications, according to Frost & Sullivan.

Although the Frost researchers estimate 30% of organizations have some level of IP telephony many businesses today continue to organize their telecommunication by office or location through conventional local phone lines. They still rely on traditional TDM (time division multiplexing) telephone technology delivered by the local telecom provider. Such traditional networks are location-oriented and need physical provisioning, maintenance, and management at the site of the voice lines, all of which makes this phone setup inherently inefficient and costly.

The problem lies in TDM, the port-based technology that requires fixed-line provisioning at each location. With TDM, the trunks (individual phone lines) require proprietary line cards that terminate the phone company’s dial tone at an organization’s on-premise equipment, often a PBX. Costs include on-premise equipment, carrier dial tone service for each phone line, and ongoing maintenance and support.

And that’s not the worst. Most companies install more phone lines than they really need to handle the rare peak usage when everyone at the location is on the phone at the same time. Given the way the carriers package TDM lines as T1 or PRI trunks with 24/23 voice channels the inefficiency can be startling, as much as 48% underutilization of trunk packages even though such bulk buying still is cheaper. Even in the best cases more than one-fifth of the contracted line capacity may go unused.

In a published report, industry analyst Irwin Lazar at Nemertes Research estimates that on average companies adopting SIP save as much as 60% over what they pay for traditional TDM service. In one case a company used 1,500 SIP trunks to replace 2,250 TDM trunks, which reduced telecom expenses from $5.4 million per year to $945,000 per year.

As IP telephony, SIP takes advantage of the flexibility and inherent efficiency of the IP network, allowing organizations to centralize and consolidate phone lines, simplify management, and redeploy underutilized lines on the fly. In short, SIP eliminates the need to physically deploy extra—and often idle—TDM circuits in each location. Centralized management of such activities as moves, adds, and changes, which can be accomplished with the click of a button, further reduces costs while enabling a more responsive organization.

There are a number of paths to IP telephony. The usual way is through one of the carriers, such as Verizon, or one of the networking vendors, such as Cisco. More recently, IP telephony vendors, such as Smoothstone, have been cropping up in the cloud to provide fully hosted IP trunking to each location using SIP or some form of TDM emulation or a media gateway.

The immediate benefits are substantial costs savings, flexibility, and efficiency. In the long term, IP telephony lays the foundation for unified communications and collaboration, the benefits of which I summarized here last fall.


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IT in the Post-PC Era

Judging from the latest research, it looks like we’re about to enter the post-PC era and taking us there is the smartphone. According to Gartner, 2011 is the year of the smartphone. Gartner projects 95 million smartphone sales this year, up from 67 million in 2010 compared to 50.9 million PC sales. For now, devices like the Apple iPhone or the Google Droid will usher in the post-PC era, not the tablet device despite the recent hype around tablets like the Apple iPad or Motorola Xoom.

A year ago an article of mine suggested that your next PC might be a smartphone. It appears to be happening faster than the WiFi providers can build out their networks.  The WiFi network at Mobile World Congress a few weeks back apparently was saturated and slowed to a crawl. Even the WiFi network at my local Starbucks sometimes seems to choke.

But WiFi network constraints aren’t slowing down some organizations. Wells Fargo reportedly is ramping up a mobile payments pilot using selected iPhone and BlackBerry models. Is IT ready to handle high volume transactions and payments via smartphone? It’s coming.

WiFi congestion, as it turns out, shouldn’t be a long term constraint. The big problem is with free WiFi, but smartphones can also use the cellular phone network to surf the Web, for which customers pay an extra $30-$50 a month. At that price there will be plenty of bandwidth.

Gartner clearly is bullish on smartphones. One report has Gartner predicting that US consumers are more likely to buy a smartphone than any other device due to the ongoing price wars that keep prices down and the popularity of smartphones for applications like email, Web surfing, Twitter, Facebook, GPS, and games.

In the early days of PC adoption ease-of-use was a major barrier to adoption. Smartphones beat the ease-of-use problem from the start. If anything, early iPhone adoption was driven in large part by its slick, intuitive user interface. With a few glaring exceptions, the other vendors have done reasonably well imitating the iPhone’s ease-of-use.

The first question facing the organization considering smartphones is which device. Unlike the PC, there is not yet a standard OS or device. Each vendor’s device will require specific support, which could turn into an IT support nightmare unless the organization standardizes on one. The main selection criteria are reception/coverage and apps availability.

Beyond that, organizations need to consider security, governance policy, new app development, and integration with existing applications. Each raises significant concerns. For example, smartphone users already are developing apps to solve little, annoying business problems, a phenomenon Gartner calls citizen developers, or worker developers.  But these apps are being developed outside of IT, which can either embrace such innovations or fight it, which ultimately will be a losing battle for IT.

Can the organization adopt the smartphone today as a replacement for the laptop or desktop? It depends on the particular users. For users only doing email and Web surfing (and phone calling, of course), sure. For those working in any serious way with documents, spreadsheets, PowerPoints, or enterprise applications, probably not yet and maybe never. We may be on the cusp of the post-PC era but plan to hold onto your laptops a bit longer.


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IBM Puts Watson to Work on Business

IBM’s Watson is the powerful computer that defeated its human rivals in a Jeopardy match against Jeopardy’s two grand champions. In case you missed it, check out Watson here.

Watson represents a startling achievement of computer science from many standpoints.  The most important thing it demonstrates, however, is the machine’s ability to respond to natural language.  Alex Trebek, the host of Jeopardy, asked regular Jeopardy questions in the normal way. OK, Watson would get the questions simultaneously as text, but they contained all the convoluted syntax, puns, double entendres, and tricks that characterize Jeopardy game questions.

To make Watson competitive, it had to understand the question and come up with the right answer with sufficient confidence in less than three seconds. Watson didn’t have time to go out to the Internet searching for answers. IBM loaded it with all the information it might possible need right in memory—15TB worth, which drew on another 20TB of clustered disk storage. Then it had to pack in all the deep analytics and natural language parsing algorithms Watson needed to be competitive.

The resulting system consisted of 90 tightly integrated IBM Power 750 servers running Linux and containing 2880 POWER7 processor cores as well as the 15TB of onboard memory. The POWER7 ran at 3.55 GHz and had 500 GB per sec. of on-chip bandwidth. Although the scale of Watson’s technology is impressive, even more impressive is the fact that Watson is assembled from off-the-shelf commodity components.  The same commercially available off-the-shelf components are available to you today should you want to whip together Watson yourself.

The commodity components are key to Watson. IBM didn’t go to all this trouble just to win a one-off trivia contest. It expects to sell configurations of Watson’s technology to solve real problems, including business problems. To do that, IBM needs Watson to be able to work its magic using commodity components.

Already IBM has targeted its first commercial application for Watson—medical diagnosis. In this case Watson replaces Dr. House, the scruffy, gruff curmudgeon genius from the popular TV show. Watson may lack the sex appeal of actor Hugh Laurie, but its boasts impressive technology specs.

The plan is to optimize a version of Watson for various industries. For the medical industry that means loading Watson with vast and comprehensive medical knowledge from books, archives of medical journals, and the very latest research to respond to queries from doctors. This actually is tame compared to Jeopardy, which required IBM to load up Watson with information on a seemingly endless array of subjects. The medical queries, presumably, will consist of lists of complicated symptoms, conditions, test results, and monitor readings that Watson will analyze and correlate to its medical knowledge and return an ordered list of the best diagnoses.

Another slam dunk for Watson should be customer support. Watson could be optimized and configured to respond to questions from a company’s existing and prospective customers or from its support agents, maybe assisted with speech-to-text translation if necessary. Watson certainly couldn’t do worse than some of the offshore support agents today. Of course, Watson would have to be loaded with customer, product, and company data and maybe industry and regulatory data. Compared to Jeopardy that should be trivial.

Other business areas also are promising:  Procurement and global supply and logistics come to mind. IBM already has targeted fraud prevention and the parsing vast tracts of legal documents as key opportunities. Litigation can involve massive amounts of documents, often as email; put Watson to work on ediscovery too

IBM has been selling some of the commodity technology that makes up Watson for a few years. For example, the New York State Department of Taxation and Finance is using Watson-like analytics to transform its approach to refunds from pay-and-chase to next-best-case. In its five years of operation, the system has preserved more than $889 million against fraudulent requests through Watson-like analytics.

The version of Watson that won Jeopardy was far bigger and more expensive than any single organization probably needs. Scaled back to the size of your organization, Watson might be a downright bargain.


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