The Promise of IaaS

The Offshore Analytics Landscape Pg 10
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Making Sense of Data to Make Money Pg 19

Cloud IaaS: How secure is the user? Pg 24

May 2011

The gateway to the global sourcing of IT and BPO services

The Promise
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Software Paradise, �Hangzhou Sourcing

Demonstration City of Chinasourcing Hangzhou
Hangzhou was defined as the “China Service Outsourcing Demonstration City” in February 2009. Hangzhou is also the one of eleven software industry base cities in mainland China. It has currently formed the several industries including telecommunication, software, integrated circuit, digital TV, animation games and E-commerce. The revenue of software business in Hangzhou was achieved at 47 billion RMB in 2009, the software export revenue reached at 460million USD. There were total 112 enterprises passed CMMCMI, ISO27001 certification. There were 20 IT software enterprises have list on public market, two companies ranked at Top 10 of self-brand software products, total 15 enterprises have list at the key software enterprises name list of the national strategic planning. In order to accelerate the development of outsourcing industry, Hangzhou Municipal Government set up the leading team to draw up the development plan, issue the supporting policy to make the rapid development of outsourcing industry in Hangzhou. The total delivered amount of offshore outsourcing business reached at 919mllion US Dollars, risen to 352% compared to the same period of last year (2008). Hangzhou government has put more focus on the financial service outsourcing that is considered as the medium and high end outsourcing industry, Hangzhou now is creating to become the financial delivery center.

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April 2011

features

12
THE PrOMISE OF IaaS by Smita Vasudevan and Sourabh C. Pushp
Enterprises find building new data centers expensive, emerging SMBs need to scale up infrastructure fast.

12

AnAlytiCS OutSOurCinG: MAkinG SenSe Of DAtA tO MAke MOney 19 by Smriti Sharma
Analytics outsourcing has crossed the chasm from being a nice-tohave proposition to a need-to-have practice.

10
“THE OFFSHOrE ANALyTICS LANDSCAPE IS STrENGTHENED By AN ENTIrE ECOSySTEM” by Smriti Sharma
Excerpts of an interview with reetika Joshi, Senior research Analyst at ValueNotes Sourcing Practice and co-author of the HFS analytics report titled ‘Where offshore analytics is heading in 2011.’

xperts
ClOuD iaaS: HOw SeCure iS tHe uSer? 24 by kumar Parakala, kPMG PlAtfOrM BPO: tHe GrOwtH trAjeCtOry fOr tHe BPO inDuStry 26 by jui narendran, Head - Valuenotes Sourcing Practice
uSAGe-BASeD PriCinG: tHe PrOMiSe AnD tHe reAlity 28 By nigel Hughes, Global Services Director, Compass Management Consulting

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2011 GS100
2011 GS100 research by Global Services & Neo Group recognizes and celebrates service provider excellence.

COMING SOON

Editor’s NotE

New Opportunities in Global Sourcing: IaaS and Analytics
o
ne of the biggest changes in the services industry is dictated by how enterprise applications ISVs predict and present the roadmaps for their products. I was hosted by SAP at its annual Sapphire Now event at Orlando this month. Attended by a record 6600 people and over 200 partner companies, the opportunity for services this year seemed robust. Companies such as SAP, Oracle, and Microsoft are hugely reliant on a partner ecosystem largely comprising services companies. My conversations with companies such as Accenture, Capgemini, HCL Axon, HP, TCS, CTS, CSC, Infosys, Neoris all point towards increased services work in areas such as analytics, enterprise management, mobility, and cloud-based applications. Cloud-based computing is no doubt the flavor of conversations at all technology gatherings. In the enterprise applications area, the prospect of on-demand applications delivered on SaaS platforms is now mainstream. But using cloud to deliver infrastructure services has been at the door for quite a while. It is now being explored with great interest by organizations both large and mid-sized. Our cover story this issue is on exploring the potential and possibilities of infrastructure-as-a-service (IaaS). It is very clear that enterprise IT infrastructure sourcing would be majorly disrupted by IaaS in the next few years, but there are many caveats too. The story gives a bird’s eye view on the area and some decision pointers for organizations pondering over new infrastructure decisions. Analytics is to business as diagnostics is to healthcare. And analytics is eminently suited to being delivered offshore. The special report on analytics outsourcing scopes out the potential in this area and offers perspectives on the drivers of the growing trend. Together, IaaS and analytics outsourcing, present new opportunities to organizations in terms of both global sourcing and business value. As a companion resource to our coverage on infrastructure services, our May webinar titled ‘Understanding Emerging Models on Infrastructure Management’, with Amit Singh, Partner, Avasant, covers the area in detail and provides thorough insight into sourcing paradigms thereof. Do register on our site for the webinar or download the webinar recording. GS

Ed Nair
Editor
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Together, IaaS and analytics outsourcing, present new opportunities to organizations in terms of both global sourcing and business value.

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Analytics Outsourcing

“the offshore Analytics Landscape is strengthened by an Entire Ecosystem”
Excerpts of an interview with reetika Joshi, senior research Analyst at ValueNotes sourcing Practice and co-author of the HFs analytics report titled ‘Where offshore analytics is heading in 2011.’ by Smriti Sharma

GS: What are the key catalysts for Ao? rJ: The case for global delivery of analytics is gaining momentum. There are two primary reasons for this: enhanced efficiency and relatively lower costs. However, business value plays a far greater role in analytics delivery than pure cost arbitrage and efficiency. Thus, a third emerging aspect is the strengthening reetika Joshi of an entire ecosystem of offshored business intelligence, market research, IT and BPO services in tandem with analytics. For many less complex offshoring activities, the cost of labor is the most compelling driver for offshore outsourcing. In more specialized areas such as analytics offshoring, cost is a driver, though it is not the most important one. The availability of highly qualified professionals, contextual domain expertise, operational risk, the reliability of critical infrastructure and market integrity are instead pivotal. l Leveraging IT and BPO offshoring experience and ecosystem Companies with existing outsourcing relationships are looking to leverage their IT-BPO offshoring experience to source analytics solutions, preferably from the same service provider. In most cases, the third-party service providers developed analytics solutions in a bid to move up the value chain.
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l Availability of cross-functional, multi-skilled talent As the scale and scope of analytics expanded to accommodate several core functions, the delivery of analytics called for maintaining highly specialized manpower across more diverse domain areas. This manpower often remained under-utilized. Given their high cost, companies increasingly started looking at third-party service providers to help. Increasing demand for analytics also led to the emergence of pure play analytics service providers. These providers have teams with deep domain knowledge, technology and statistical expertise. l Cost arbitrage for low-end analytics. According to HfS research, for a typical analytics project, talent costs constitute approximately 60% to 70% of the total costs. With other costs (infrastructure, etc.) significantly lower than in onshore locations, cost arbitrage can range up to 50% for offshore locations. l reduced time to market With increasing competition and the urgency to obtain first mover advantages, it has become imperative for firms globally to access talent to provide pertinent data supported by thorough analysis at a faster and more efficient pace. Offshore delivery centers are attractive as they come with faster time to market and also provide accompanying support services on a 24x7 basis.

GS What exactly does the offshore analytics area cover in terms of scope? rJ: With greater usage of analytics and increasing complexity, there is a tendency to break analytics projects
May 2011

www.globalservicesmedia.com

Analytics Outsourcing

into distinctly executable parts and outsource to different specialized teams. Accordingly, there are four levels in the analytics services mix, in ascending order of complexity: 1. Data entry/de-duplication: This includes everything from cleaning to maintenance and actual. It is a lowend service and offers low revenues to service providers. A large chunk of KPO-centric analytics work (almost half ) is dedicated to data preparation. 2. Intuitive analytics: This entails running the models and generating new insights on a continuous basis. The outputs for these services may be in the form of dashboards, reports (of different frequencies), alerts, etc. 3. Model building: This is an advanced level of analytics, where models are designed to predict various business outcomes. Statisticians and econometricians build models focusing on business problems/opportunities at hand. In terms of offshoring, modeling is done by captives as well as third-party vendors depending on the maturity of the clients’ in-house teams. 4. Solutions: Solutions generally entail “bundled” analytics components, delivered to clients to address their needs. Providers take a consultative approach and leverage technology to deliver value. The aim is to render the client self-sustaining and create a unified analytics delivery mechanism. This may be done by deploying an analytics platform or other tools. These constitute the main standalone analytics offerings prevalent today. Beyond this, there are a variety of embedded or value-enhancing analytics components that are offered by IT/BPO providers. These include analytics to improve the efficiency of processes, identify problem areas or sub-processes with cost-saving potential, and provide reporting and MIS for existing processes. These services often are embedded as part of the solution to the client (as value-adds) without additional cost.

GS: Who are the key service providers and how are they evolving? rJ: The offshore analytics landscape has changed over the last decade from one dominated by captives of large companies, primarily in India. Today, the industry features a large number of vendors offering end-to-end specialized analytics solutions to specific verticals. High-value thirdparty analytics solution providers are focused on providing value beyond cost arbitrage by leveraging a combination of onshore-offshore delivery models and the use of technology. Third-party offshore analytics service providers can be broadly classified into four categories. The grouping is primarily based on company origin, affecting the strategic intent and objectives behind offering analytics services. The strategic intent of service providers in various groups differs, depending on their overall business focus and aspiration. A strong desire to move up the value chain in order to improve profitability and boost the top line is common across all service providers. GS: Expand on the issue of data security in Ao. rJ: There are workarounds for companies that are hesitant about outsourcing analytics due to data security issues. Several vendors offer onsite delivery teams (at client premises, client country, etc.) when data cannot reach offshore. Companies also may want to look at creating captive centers offshore that specialize in analytics, to maintain better control of company or customer data. GS: What are the new areas and adjacencies for Ao? rJ: The opportunities for service providers may be looked at in terms of horizontals and verticals. Verticalwise, retail and CPG, banking and financial services, healthcare insurance and telecom look to be the strongest. Horizontal opportunities include sales and marketing analytics, followed by supply chain management, logistics, operations and web analytics. GS

11 Globalservices

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May 2011

Tools & Technologies

The Promise of IaaS

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February 2011

Tools & Technologies

“Enterprises have been moving high-value application workloads to the cloud, as vendors prove their availability, security and monitoring solutions.”
tim Beerman, Vice President, Managed Hosting Product Management and engineering for Savvis

“While cloud computing has its share of issues, when properly setup and utilized provides tremendous value. It lets a product company like July Systems focus on the product building and less on the infrastructure.”
Vikas Murthy, CtO, july Systems.

“There are three broad future trends to expect in IaaS-buyers to become more educated, industry specific segmentation to take place and a fair amount of hybrid cloud models to come up.”
Chirajeet Sengupta, research Director, everest Group
13 Globalservices www.globalservicesmedia.com February 2011

Special Report

the Promise of infrastructure as a service
Enterprises find building new data centers expensive, emerging sMBs need to scale up infrastructure fast. the answer seemingly lies in infrastructure as a service (iaas), a model of cloud-based delivery. Where do we go with iaas? by Smita Vasudevan and Sourabh C. Pushp

M

ounting demand for computing resources by enterprises around the world, rapidly changing technology needs and complex business environments have all acted as catalysts for the growth of Infrastructure as a Service (IaaS). In the face of new challenges, businesses are moving away from the traditional model of procuring and owning IT infrastructure to a model in which infrastructure is sourced as a service. This external services-based approach to delivering IT services is termed as Infrastructure as a Service or IaaS. The shift is a manifestation of cloud-based delivery in a utility computing model. “The shift is because these new environments offer an almost immediate fix to some of the most significant hurdles that drive escalating IT costs,” according to Steve Garrou, Vice President, Global Solutions Management at Savvis. Enterprises are seeing benefits in outsourcing their infrastructure needs over making huge capital investments on buying the resources physically. IaaS enables them to procure the necessary IT resources from a service provider on an on-demand, pay-as-you-use basis. This difference in the functioning and pricing model of IaaS promises to significantly cut down costs, support scaling up, and bring efficiencies that may not have been possible otherwise. The evolution of IaaS is the result of advancements in the world of technology. rooted in the erstwhile web hosting model, the pervasiveness of virtualization and maturity of utility computing coupled with cloud-based access has made IaaS a clear possibility.

Bright prospects Positive demand and supply side factors indicate that adoption levels for IaaS will be on the rise in the near future. Increasing data center expenditure by enterprises and emerging SMEs (small and medium enterprises) eying significant investments in IT infrastructure are fueling demand in this space. At the other end, a competitive IT market is driving the supply of IaaS. Gartner’s Cloud Computing Special report on IaaS suggests that the segment is set to grow nearly threefolds from $ 3.7 B in 2011 to a whopping $ 10.5 B in 2014. There is currently a lot of hype going around IaaS and an increasing number of enterprises are showing interest in this area. Gartner estimates that over the course of the next five years, enterprises will be spending $112 B cumulatively on SaaS (Software as a Service), PaaS (Platform as a Service) and IaaS. United States, Western Europe and Japan will be holding a major share of the global cloud market.

Source: IDC June, 2010

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May 2011

The Promise of Infrastructure as a Service

Comparison of some Leading iaas providers
Providers Rackspace GoGrid Amazon Savvis

What does it offer ?

The rackspace cloud consists of three major services: Cloud sites, Cloud Files and Cloud Servers. rackspace Servers provide unlimited online storage and CDN. In addition to the online control panel the service can be accessed through API.

GoGrid is a small, independent service provider. Its primary focus is its Xen-based cloud IaaS. It's service is managed by a multiserver control panel operated by ServePath and features an API.

One of the pioneers of cloud computing, Amazon offers cloud services such as Amazon S3 or eC2. Amazon's Auto Scaling feature of eC2 allows it to automatically adapt computing capacity to site traffic.

Savvis is one of the broadest and deepest in the industry. It has an above-average customer portal and strong history of delivering utility offerings. Savvis has vMware based IaaS (Symphony).

Free Support Security Features

Yes bootable Mode Critical Data Privacy Data Protection Persistency backup Storage Snapshot backup

Yes Failover Features Persistency backup Storage Critical Data Privacy Data Protection Snapshot backup Yes, Free of cost Yes, with a charge Use based and Subscription Plans

No backup Storage Persistency Snapshot backup

Yes Critical Data Privacy Data Protection Failover Features

Load balancing virtual Private Servers Subscription Type

Yes, Free of cost Yes, Free Use based

Yes, with a charge Yes, with a charge Use based and Subscription Plans

Yes, Free of cost Yes, with a charge Use based and Subscription Plans

Inbound bandwidth Price Outound bandwidth Price

8.00¢/Gb

0.00¢/Gb 10.00¢/Gb

22.00¢/Gb

29.00¢/Gb

11.00¢/Gb

base Plan Cost base Plan Details

1.50¢/h 256 Mb rAM,10Gb local storage,10 Mbps Network Throughput

8.00¢/h 0.5 Gb rAM,10 Gb local storage,Free inbound traffic.

8.50¢/h 1.7Gb rAM,160Gb local storage,1 eC2 Compute Unit Flexible month-tomonth plan

Additional IP Cost

2.00$/month

Source: http://cloud-computing.findthebest.com

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May 2011

Special Report

Evolving, not yet mainstream The market for IaaS shows huge potential but is still immature and in an evolving phase. There are numerous providers in this space and many more are coming up foreseeing the opportunities. But there is lack of appropriate benchmark or standards to compare the services offered by different providers. These services generally follow a consumption model that is based on pay-as-you-use, on-demand and self-service strategies. yet there are lots of underlying differences. IaaS has still not found a place as a mainstream offering, though industry players believe that this is soon going to change. “Adoption of IaaS solutions primarily includes test and development workloads. While this has been the major adoption model for IaaS, we are seeing production workloads moving to the cloud. Enterprises have been moving high-value application workloads as vendors prove their availability, security and monitoring solutions,” according to Tim Beerman, Vice President, Managed Hosting Product Management and Engineering for Savvis. More often, business specific areas are maintained and controlled in house, while common IT requirements like storage, hardware, operating system and so on are outsourced. A deciding factor in this case is usually what areas does the business find critical and does not want to be controlled by an external organization. Another factor is how efficient is the internal IT system in handling complex situations. Services offered There are different types of providers in the IaaS space. Some of them are offering this service as an extension to their traditional line of web hosting services, while there are many new players who are purely focused on IaaS. Providers also differ significantly in terms of their size of operation. There are large-sized providers who offer a comprehensive portfolio of services as well as niche players with few selective offerings. “Starting at a high level, IaaS services come in both public (multi-tenant, shared infrastructure) and private (dedicated infrastructure for single client). Differences between providers include the underlying hardware class, the virtualization solution, network connectivity options, security implementation, monitoring capabilities and performance, to name a few,” says Beerman. Other than public and private, there are community and hybrid models as well. The cost, level of privacy and so on usually varies for all these models. For instance, a community cloud has lesser users than a public cloud and so the cost per user tends to be higher, while the level of privacy is better than in the case of a public cloud. According to Gartner’s Magic Quadrant for Cloud Infrastructure as a Service and Web Hosting, 2010 report, there are again three different ways in which IaaS is used by customers. This includes Self-managed, Lightly-managed and complex-managed IaaS. The level of control and management
16 Globalservices

and the objective varies in all these cases. Self-managed IaaS is normally used by customers with basic IT needs such as test and development and in this case all the operational control is retained in-house . In Lightly-managed IaaS, a part of the operational control is retained by customers while there is some intervention by the providers. Complex-managed IaaS are used by customers who have very complex and fast changing IT systems that need to be fully operated and controlled by service providers. Along with cloud services, providers may also offer a set of optional managed and professional services. Management of the server, infrastructure software, storage, security and other network devices is what providers usually offer as part of their managed services. Professional services would include services related to hosting like capacity planning, security auditing, performance testing and so on. IaaS customers are more often served on a pay-as-you-use basis, though providers may at times also give the option of multi year agreements on which enterprises can avail discounts. As the the market is in an evolving phase, providers continue to change and upgrade their services frequently. Amazon, Savvis, rackspace and Gogrid are the leading global providers of IaaS. Here is a quick comparison between their services and cost and pricing structures. Buyer expectations There are different types of buyers in the IaaS space and accordingly their needs vary. Primarily, there are enterprises that were using the web hosting model and are moving towards cloud IaaS and then there are others that are new and are trying to test and experiment to see if it can be beneficial to them. Another differentiating factor is the size of these enterprises. Large enterprises already have significant investments in IT infrastructure, so their objective is mainly to cut down costs and bring efficiencies through IaaS. Whereas small and medium enterprises look for growth and also aim to avoid huge capital investments on purchasing IT infrastructure. Real benefits : July Systems, a mobile media company uses Amazon’s cloud computing services to cost-effectively scale its business. “At July we have seen flexibility and cost savings as key benefits to an IaaS cloud based infrastructure. It has helped July Systems achieve unprecedented scale to meet the demands of the millions of users that access our platform each day. With the support of our IaaS service provider we are constantly growing our footprint and crossing major milestones like our recent announcement during Cricket World Cup,” says Vikas Murthy , CTO, July Systems. “While cloud computing has its share of issues, when properly setup and utilized provides tremendous value. It lets a product company like July Systems focus on the product building and less on the infrastructure,” adds Murthy.
May 2011

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The Promise of Infrastructure as a Service

Issues involved : Most enterprises, though ready to adopt IaaS, are not really aware of the numerous services available in the market. Also, there are security and privacy related issues that influence buyers. According to a report by Ernst & young on IaaS Trends and Perceptions in India, 72 per cent of the respondents pointed out that data privacy and security issues are the most significant concerns in the adoption of IaaS. When asked what elements were essential to moving more critical applications to the cloud, in Savvis’ March 2011 research study with Vanson Bourne, 64 percent responded with full security implementation, followed by high availability (54 percent). Enterprise-level performance was also required by 47 percent of respondents.
Data security and privacy 88% 4% 8% 75% SLA compliance 4% 21%

The third party’s access to company data should be secured as all the data hosted on the cloud are not protected under intellectual property rights. The way ahead Choosing the best service provider is one of the most significant decisions companies face when venturing into the IaaS space. Not all service providers have the appropriate industry and technology experience to replace the in-house IT infrastructure for a company. So, the choice is not risk free. It necessitates any company to assess IaaS providers carefully. Buyers should understand their needs well and opt for a provider that is best suited for their requirements. Some other key questions to consider here are- Is the hosting provider able to understand your business and the overall needs of your company? Is the provider flexible in its service-delivery approach? Is the provider having adequate expertise, scale and geographical coverage and using technology that is not only up to date, but also stable and widely compatible with other technology standards? Service providers must understand specific needs of each buyer segment and be able to offer services accordingly. The objective of different enterprises for adopting IaaS will be different. Providers should offer support and services that are in line with their customer requirements. They should also be able to show their customers how by cutting down their IT cost they can save resources for growth and expansion. According to Chirajeet Sengupta, research Director, Everest Group, “There are broadly three things to expect in IaaS in the future-buyers to become more educated, understanding when, where and how to go about implementing IaaS. Secondly, industry specific segmentation to take place in terms of services and lastly, a fair amount of hybrid cloud models to come up.” As enterprises become more aware of the opportunities and benefits, there will be a great difference in the way they approach and adopt IaaS. “Clients want capacity when they need it and want to only purchase it when they want it. IaaS approaches offer this flexibility and in the years to come will no longer be considered an alternate delivery model, but a strategic choice for some critical solutions as companies seek greater flexibility and the need to satisfy a diverse end-user base,” says Garrou, about the future trends and opportunities in IaaS.” GS

58% Cost competitiveness 13% 29%

58% Portability and interperability 4% vendor support network 13% Pricing models 13% 13% 25%

46% 42%

42% 46%

Past track record 4% 21%

38% 38%

Source: ernst & Young – Cloud adoption in India

Legal issues involved According to Nixon Peabody LLP’s report ( Laurin H. Mills, May 13, 2009 ) the most prime legal issues are: • Location: where’s the data ? your data could be stored in any country and you may not even know where the data center is situated. The location factor thus raises the question of legal governance over the data. For instance, if there is a conflict between the cloud vendor and the customer, issues may arise regarding which country’s jurisdiction will be followed. • Security: who has the access ? The strongest security threats to cloud computing include insecure application interfaces, malicious insider threats and traffic hijacking. Cloud computing facilitates the storage of data at a remote site, so it is critical for the data to be protected.

17 Globalservices

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May 2011

COUNTRY-IN-FOCUS
A special feature for countries to showcase their uniqueness

Ensuring Global Visibility
Inviting Countries to showcase capabilities that accentuate their uniqueness.

There are numerous outsourcing destinations that exist as great alternatives to India and China.

Examples of Country-in-focus feature
Egypt Philippines Jordan

JORDAN

For more information write to [email protected]

Special Report

Analytics outsourcing: Making sense of data to Make Money
Analytics outsourcing has crossed the chasm from being a nice-tohave proposition to a need-to-have practice. by Smriti Sharma

I

n a globalized economy, information and data are the backbone of a business. However, merely having access to numbers is not of much use. rather, it is analytics—the interpretation and application of data —that makes businesses thrive. Analytics has been titled as the smartest weapon in the corporate quiver. This credential can be attributed to the fact that sans analytics it is difficult to sustain competitiveness. Data analytics arm an organization with significant analyses - that highlight upcoming business roadblocks, hidden trends and key insights- on which management can base strategic plans and operational policies. With ever growing competition and globalization, analytics has become critical for all businesses to support tactical and strategic decision making. Today, companies can choose from a host of platforms and services-based tools that can be deployed to make intelligent use of information enabling business decisions that impact both top line and bottom line. Analytics is basically the application of computing resources, operational research, and statistics to solve business and industry problems. It covers areas like- marketing analytics, predictive and strategy science, credit risk analysis and fraud analytics. Viral Thakker, executive director, Performance and Technology services, KPMG stated segments that this service encompasses: 1. Marketing & Customer Analytics: Data mining and management to understand consumer behavior. Example: Telecom and internet companies generate a large amount of customer data during their

interactions. By analyzing these, they understand customer buying patterns that helps identify potential cross-selling opportunities, improve marketing efficiency and rOI from campaign strategies (e.g. direct mail campaigns). Similar analytics is performed for credit card companies, retail, and many other businesses. 2. Risk Management Analytics: Analytics for high risk businesses. In such businesses, profitability depends on the ability to increase profits by retaining low risk customers and at the same time reducing losses. Example: In the insurance industry predictive models are developed that predict expected claim amount depending on past data. This data analysis also helps in detecting fraud, predicting defaults and bankruptcy. 3. operations Analytics: It includes IVr analytics, demand forecasting and demand management, performance and productivity, customer satisfaction analysis, collections efficiency, etc. Example: Analytics is used to analyze IVr data to identify user segments based on usage preference and redesign the IVr strategy accordingly. 4. Finance & Investment Analytics: It includes equity research, investment analysis for PE-VC funds, investment banks, etc. This is perhaps one of the leading segments of analytics usage. Example: Organizations make use of financial analytics in market-size estimation, competitive analysis and intelligence, apart from identifying investment opportunities, due diligence or during M&A analysis and strategy.
May 2011

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Analytics Outsourcing: Making Sense of Data to Make Money

This extremely essential ‘game-changer’ does not naturally plug into the outsourcing model. The reason being level of data sensitivity is very high. Due to this, some clients set up captive units to deliver analytics, instead of outsourcing. However, the last decade has witnessed third-party providers gain significant expertise in analytics. The offshore analytics market US, UK and to some degree, the rest of Europe are major markets served by analytics service provider. Since these mature markets embrace experience in offshoring business processes they are now moving up the value chain and are willing to outsource knowledge services. Some providers are also focusing on Australia and Japan. Main contenders in terms of delivery destinations are India, China and Eastern Europe. Others include nearshore countries to the US such as Mexico and Costa rica, and offshore destinations such as Singapore and Sri Lanka. Vendors may be from these or other destinations, but they need to have delivery capabilities in at least one of these destinations. Genpact’s Analytics and research department has a large concentration in America and a large portion of their current revenue comes from this region. It has footprints in Europe, China, India and Australia. In the coming years, it is expecting to grow significantly in Europe and Asia-Pacific region. Most of WNS clients are based in the United States and European Union region. It is also expanding its client base in the Asia-Pacific region. As their practice is a horizontal offering within WNS, most of their clients are spread across several industry verticals, including financial services and insurance, retail, CPG, healthcare, professional services, travel and leisure. WNS provides analytics services from five offshore delivery locations in India, and one nearshore location

in Bucharest, romania. Amongst the India locations, Gurgaon has the largest employee strength in research & analytics division, with over 800 people, followed by Mumbai, Bangalore, Pune, and Chennai. Activecubes, a global firm providing Analytics Services with associated Technology Solutions, focuses on US, Australia and India from the geographical perspective. From an Industry angle our focus markets are Pharmaceuticals, Financial services and retail-CPG industries. As of now, its main offshore location is Bangalore and it plans to expand to more locations in India as well as international locations. According to HfS research titled ‘Where Offshore Analytics is Heading in 2011’, Fortune 500 companies are the big-league clients for this knowledge service. Enterprise from verticals such as FMCG, BFSI, and telecom are significant buyers for offshore analytics service providers. Service providers are also targeting mid-sized clients to move up the value chain. Some providers are also looking at tapping the rapidly growing domestic and regional markets. Large IT-BPOs and KPOs are trying to cross sell analytics services to their existing clients. KPOs and BPOs need to create specialized capabilities to service parts of analytics projects and eventually take a vertical approach to growth in their chosen area to move up the value chain. Key drivers Leveraging specialized skill sets, access to affordable resources and better utilization of resources, achieve scale across geographies and business units, overcome corporate silos, establish and industrialize best practices, standardization of the disparate analytical processes, establish a well-defined delivery model...are some of the key drivers. Thakker pointed out drivers on the demand as well as supply side. The demand drivers of analytics outsourcing include: • nalytics significantly enhances the client service A organization’s ability to generate top-line revenue. However, a significant shortage of highly-skilled knowledge professionals in the developed nations is making recruiting of such professionals very difficult. • o remain competitive, organizations have realized T the need to use analytics to reduce time to market for their services and products in areas such as marketing, product development, product launches, strategic decision making, etc. • us, offshoring high-end services not only ensure Th access to professionals at a significantly lower cost, but also ensure a gain in competitive advantage for the customers.
May 2011

Source: HfS research, 2011

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Special Report

Some of the drivers of analytics outsourcing from the supply side are: • lobal as well as Indian vendors have demonstrated G their capabilities to execute high end knowledge work efficiently. Vendors are moving up the value chain and are using high-end analytics as a differentiating factor for their service offering. • ue to the high availability of skilled labor espeD cially in countries such as India, vendors are able to provide the clients with contextual domain expertise which is an important driver for analytics outsourcing. Moreover, due to the relatively standardized nature of analytics and a growing awareness of the increasing quality of education systems in favored offshore locations, this segment has seen a spurt in terms of supply. • e technology and telecommunication developTh ments have also helped the Analytics Outsourcing/ offshoring industry to grow, by making real-time data available and rapid data processing and analysis.

• endors would need to have stringent internal measV ures to prevent any IP data infringement. Formal qualification assessments, certifications (such as ISO 27001 certification in data security) and periodic competency reviews would become essential.

Future aspects In this space there are many captives, people who still want it to be an in-house activity as they consider it to be their core capability or core differentiator. But then, there are significant sizable integrated players that are now developing in the market. Kulshreshtha spoke about where this whole discipline is going, “I think there will be a little bit of convergence of the whole software and business intelligence side; whereby you do things like setting up data warehouses and then setting up analytical process on top of them. IT companies always did data warehousing type of work they did not do so much of analytics type of work on top of that, Where else, we worked the other way, we used to do more of analytics services kind of work and we have not done much of data warehousing side. All these Are concerns over security justified? areas will emerge.” Management of intellectual property (IP) and conflictSecond thing, he pointed, that is already happening of interest issues are more demanding in analytics out- is people are going to drive their solutions to the market sourcing and KPO than in BPO, where data protection with tag such as the one IBM uses. Genpact also use that and privacy concerns dominate. tag, which was launched as smart enterprise processes. Pankaj Kulshreshtha, senior vice president - Analytics Genpact is addressing this business along with some other & research articulated, “I’ve been doing this for 13 years parts of their business as smart decision services. Other now and I have seen companies evolve to a level where they folks are going to use words such as analytics, intelligence. do not worry much about security. We work with 12 out Increasingly lot of third party players will go to the market of 15 pharma companies so obviously we have a very legiti- with solutions that are woven around smart intelligent mate way of addressing their concerns around data security type of theme. and intellectual property protection. This is the case across Third thing, from Kulshreshtha’s viewpoint, is that financial services and majorly other areas too.” social media explosion that is going on will transform the From infrastructure prospects, Kulshreshtha added, base of how analytics is done. right now a lot of analytics “We make sure that we create a completely secure environ- is done that analyzes the data companies produce around ment that is as secure as our customers would like. We buying behavior. However, there is very little that is done have situations where a part of dedicated team is placed in this space in terms of understanding what people in an enclosure, that even I as a business leader require are saying about certain brands, what people are saying written permission to enter. People inside that enclosure about experience with certain products and services. As do not have access to any other mail apart from customers text mining and knowledge discovery type of technolomail. They work directly on customers systems and have gies evolve to next level what will happen is we will find the same data security systems applied as would be applied completely different ways of solving the problems that to any analyst sitting in the customers own facility.” we currently solve using the hard data that is currently Some significant issues that could emerge are: used. • s ownership rights between service providers and A Some of the emerging areas highlighted by Thakker v Customer analytics for the energy and utilities sector receivers become blurred, debate over intellectual property ownership and management of statistical (smart metering) v Fraud analytics in retail banking analysis models are likely to increase. v Cyber-analytics to detect cyber crime and acts of ter• hen the same regulatory restrictions vary by counW try, conflict-of-interest management issues concern- rorism, cyber risk management, foreign espionage, intellectual capital theft, etc. ing violations of insider trading rules may increase.
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Analytics Outsourcing: Making Sense of Data to Make Money

v Learning analytics to assess students’ academic and extra-curricular progress, predict future performance, and identify potential issues v Cloud based BI tools could see proliferation v Social network data mining for customer analytics v ‘Big data analytics’ – Big data refers to the tools, processes and procedures allowing an organization to create, manipulate, and manage very large data sets and storage facilities Arun Kharbanda, business unit head- research & Analytics, WNS Global Services opined, “The next decade will be very different from the last one, with structural shifts in demographics that will reflect more prominently in the international trade and economics, where outsourcing will no longer be a choice. The KPO industry in India has gone through a “concept selling” phase in the last few years for a majority of clients who have so far utilized BPO services. At the same time, some clients have been able to create a competitive advantage for themselves through establishing Analytics Centers of Excellence programs that have resulted in improved decision making across multiple business groups, markets and geographies.” “Some of the new opportunities we see are from industry verticals that were hitherto not very active in AO, such as Shipping & Logistics, Manufacturing and Supply Chain. From an offering standpoint, web and web related services are very much in demand from the market, as are

KEY SERVICE PRoVIDERS BPos- Genpact, Evalueserve, WNS, EXL Services It companies- Wipro, Infosys, TCS, HCL, HP Specialized MR firms- Ugam, Marketics, eClerx, Annik Systems High-end analytics- Aranca, Copal Partners traditional MR companies- AC Nielsen, CrISIL Boutique R&A firms- ValueNotes, SG Analytics, Netscribes Financial services- JP Morgan packaged solutions that combine consulting services with delivery”, added Kharbanda. Analytics Outsourcing started with financial and marketing functions. Some of the first companies to take advantage of this were the MNC’s when they set up captives in India. Initially the heavy lifting in terms of data analysis was being outsourced. Then came the higher end statistical modeling. ramachandran K, Executive Director & Head – Healthcare, Activecubes articulated, “Nowadays, high end business consulting (based on the data) is also being outsourced. Next will come a time when companies in India will start services where they will own data and provide consulting / analytics based on the owned data as well as customer data.” GS

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May 2011

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by Kumar parakala, Kpmg

Cloud iaas: How secure is the user?
All eyes towards the ‘Cloud’

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Did the ‘Cloud’ burst? recently, during a routine scaling activity at a leading Statement : cloud computing is the future model of IT Cloud service provider in the US the traffic shift was executed incorrectly causing a domino effect of failures that led to website crashes at its clients’ end. This is not actually the first time that a cloud service went haywire. The media has earlier Source: From Hype to Future: KPMG’s 2010 Cloud Computing Survey reported minor cases
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loud computing is a promising IT services’ delivery model and today’s economic situation continues to favor the cloud. This model requires a limited amount of investment on the customer’s side. The adoption of cloud will be driven by businesses that are reshaping themselves, as it enables the creation of more efficient business models and ecosystems. While Technology has often been a savior during the downward economic cycles, it has also been dominated by concepts and trends that are several times like fads which come and go. By now it is a well established fact globally that cloud computing is here to stay. According to a 2010 survey conducted by KPMG, 59 percent of the participants believed that cloud computing is the way forward.

KPMG Cloud survey results The cloud service models Infrastructure as a Service (IaaS), Platform as a Service (PaaS), Software as a Service (SaaS) - will drive increasing business and IT activity, resulting in hybrid architectures to manage and a new cloud IT mission. In another KPMG survey on Cloud adoption patterns, we found that planned adoption for IaaS and SaaS service models is the highest. Sixty-eight percent of the initial respondents indicated that they largely plan to adopt either the SaaS or IaaS service models. Even though IaaS benefits* have been enjoyed by its users even before PaaS and SaaS gained acceptance, with penetration across industries, there still is a caveat: Is the cloud IaaS really that reliable and safe?

of temporary failure during the testing phase of the cloud services provided by their vendors. This leading provider later apologized and promised to compensate every affected customer using this service even if their sites were not down by offering a 10 day free credit. One such incident will not bring the world to a stand-still. However, users have started asking the question of the Cloud’s reliability and other service providers have learnt the lesson without burning their fingers. Large enterprises could possibly recover from such a mishap in the future but the real impact could be for the Small and Medium Enterprises (SMEs) who might not able to bear the cost of recovery. SMEs are moving up the value-chain of their cloud service requirement. According to independent research firms, the worldwide SME spend on the Cloud is expected to reach USD 100 billion by 2014 with business applications, application development/deployment, system infrastructure software, storage and servers, being some of the key areas of spending. Hence cloud’s outage could be catastrophic on them. On a whole every user will get adversely affected if the cloud fails to serve the purpose for which it was built in the first place- reliable, on-demand and cheap computing resources with a pay-as-you-go pricing model.
May 2011

Infrastructure Management

How to save yourself in a ‘hailstorm’? Cloud’s failure can happen; this would occur regardless of the provider’s size or brand. The impact will be felt by all: the user, the provider and the end customer. Some of the important suggestions that could help prepare the user from facing a cloud mishap or outages are highlighted below: Developing infrastructure redundancy : Cloud is not a magic wand to deliver the best and like any other service which is critical it is typically relied upon multi-vendor support system. Spreading the risk across several servers on multiple Availability Zones across geographic regions and possibly multiple vendors could be one such solution. Companies can have multiple sets of infrastructure hosting their backend including one of their own and others from the service providers. Seamless integration between the user’s and the service provider’s infrastructure will become essential in this case. However, all this comes at a cost. So there is trade-off between data security and opportunity cost. Establishing the ‘purpose’ of cloud usage : Organizations that can afford infrastructure redundancy by having their own infrastructure could have their mission critical business in

benefits of using iaaS for data center requirements • A cost effective model. • Business are able to focus on core activities. • Management of peak loads. • Incorporates concepts related to green computing.
Source: KPMG’s The Cloud: Changing the business ecosystem, 2011

the cloud. For the more conservative users, it is advisable not to have mission critical systems or processes in the cloud and initially test it with simpler processes or services getting delivered. Alternatively, it will be a good decision to take expert advice from cloud advisors before internally deciding on the adoption of cloud. Developing the ‘right’ architecture : One of the key characteristics of a website that could be hosted on the cloud and still manage the risk of outage is the underlying architecture that can make it capable of operating in a risk prone zone. Without elaborating on the technical aspects which are many and rather complex involving single vs. multi-host dependencies, time-outs and retries, partitioning read and write data, etc., let me just say that one needs to architect one’s app to suit the inherent cloud

fault tolerance and elastic characteristics. For example, deploying loosely coupled apps into the cloud instead on migrating tightly coupled ones. SlAs - Reading between the lines: Typically, the SLA could include an ‘availability clause’ of anywhere around 99.95% availability or an unavailability of around 4 hours 23 minutes in one year. Additionally, the SLA could define ‘unavailability’ as the unavailability of one particular service which is probably loosely dependent on other service that failed and has no SLA but causes an overall failure at the users end. Users mostly remain unaware of the nittygritty of the SLAs before opting for cloud services. Again, cloud advisors come into picture to assist the users and guide them. However, it will be unrealistic to have 100% availability SLAs from most of the vendors existing in the market. Even market leaders are offering 99.95% availability. A better option is to be prepared with a back-up plan. The verdict! Coming back to our story, the US based cloud service provider regained stability within five days time and its business as usual again. What the whole episode actually makes clear of is the near omnipresence of the ‘Cloud’ and the tools and facilities that are actually available to handle any cloud mishap. On a final note, I would say ‘expect the worst and plan for it’. Infrastructure failure at times is inevitable, be it your own or provided by the vendor. The best way to tackle this issue is to be prepared before it’s too late as the ‘Cloud’ is here to stay. The verdict is “Cloud IaaS is as secure as the user wants it to be”.GS
kumar Parakala is Head of it Advisory, kPMG eMA & india and Chief Operating Officer, Advisory in kPMG in india. He is also a global head for Sourcing advisory.
May 2011

Source: KPMG’s The Cloud: Changing the business ecosystem, 2011

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by Jui narendran, Head - valuenotes sourcing practice

Platform BPo: the Growth trajectory for the BPo industry
the current phase in outsourcing is about getting the right partners to transform your business.

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he outsourcing of business processes has gone well beyond the labour and cost arbitrage and is not discussed as key drivers any more. The current phase in outsourcing is about getting the right partners to transform your business. Service providers are intricately linking their performance to that of their clients. Discussions are now around transformation and outcomes, not just about cost savings. Services also evolved accordingly - from purely voice and back office support to multifunctional, multihorizontal. Delivery of these services

of platform based BPO solutions. Analysts believe this is also a natural progression for the IT service providers that ventured into BPO services in the last decade. Platform solutions gave them an opportunity to increase Marrying technology to the their footprint among clients of both services. services The diagram below depicts the The introduction and inclusion growth and evolution of BPO servof technology in service delivery has been the biggest game changer. The ices over the years. The trend has outsourcing industry has been all clearly been to include technology about technology and it was only a into service delivery and now, it matter of time before the delivery of seems like technology plays a major business services would be so integral- part. Today, the platform BPO servly linked to it. This was the beginning ices straddle both horizontal services (F&A, Hr etc.) as well as verticalised industry offerings, such as procurement. Infosys, which is aggressively developing its offerings, is concentrating on the horizontal as well as the vertical offerings in Hr and procurement. Infosys’ Source to Pay is a procurement platform solution and one such example. Source: valueNotes research Caliber Point, the has moved beyond the hourly or FTE (full time equivalent) based engagements. The BPO industry is now on a growth trajectory rather than merely survival.
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Infrastructure Management

don’t have to invest in an ErP platform and then outsource some of the business processes as well. This works out for the service providers as well, who are looking to expand beyond the Fortune 500 companies. This does not mean that larger clients or existing clients will not benefit. Platform solutions will offer easier and cheaper ways to explore newer avenues of business. It presents service providers the opportunity to help their clients deliver their business efficiently and perhaps even cheaper. Is Platform BPO everyone’s cup of tea? Not all service providers have the capabilities to develop platform solutions. Currently, we see that the larger players have created platform offerings. This is because developing a platform based offering needs high investments in infrastructure as well. Moreover, since this model relies on transaction pricing, mature relationships with clients would be needed. For the mid-sized service providers, this may well be an opportunity to develop platform based solutions on a select area of expertise. What is the future of platform BPO? The evolution of platform BPO is actually a gradual shift from the earlier models of BPO. However, platform is in a way BPO on a cloud model and since this is the way of the future, it is also most likely to succeed. Another reason why platform BPO will succeed is the inherent benefit to the clients – in terms of low capital expenditure as well as transparency in pricing. Therefore, whether platform BPO is a win-win solution for all is yet to be seen but surely a model that will see exponential growth in the next few years. GS
jui narendran is head at Valuenotes Sourcing Practice
May 2011

BPO arm of Hexaware launched republic in 2010, a multi-tenant Hr services delivery solution based on Oracle E-Business Suite release 12. According to the company, republic is hosted and maintained by Caliber Point and interfaces through a userfriendly and secure Hr portal. Tata Consultancy Services (TCS) offers platform solutions in multiple service lines such as F&A, Hr, analytics and procurement. EXL, with its recent acquisition of OPI, is likely to benefit from OPI’s platform based solutions in the F&A space. Addressing the smaller clients Platform BPO solutions took momentum with the recession a couple of years ago. Cost pressures on the clients and the need to engage on a long term basis with the clients have fuelled investments by some of the large service providers. Platform based solutions will probably be a boon to mid to small size clients, where they
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analysts believe this is also a natural progression for the it service providers that ventured into bPo services in the last decade. Platform solutions gave them an opportunity to increase their footprint among clients of both services.
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By nigel Hughes, global services director, Compass management Consulting

Usage-Based Pricing: the Promise and the reality
the idea of pay-as-you-go consumption of it resources via utility models and cloud platforms promises to transform it service delivery and the nature of sourcing relationships. But the transformation doesn’t happen overnight or by magic, and achieving the benefits requires understanding and addressing significant organizational and technological obstacles.

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he holy grail of utility computing lies in the idea of dynamic, usagebased pricing, whereby IT resources are flexibly delivered on-demand in response to business requirements. In principle, under a utility model customers pay only for what they consume, and don’t have to worry about idle or insufficient capacity. Service providers, meanwhile, benefit because they are able to leverage their expertise across multiple customers. It sounds simple and appealing, and indeed, many organizations are benefitting from utility-based models. But in reality a variety of factors must be considered and addressed before true utility computing can be achieved. These factors include organizational obstacles on both the client and vendor side, as well as complexities around how IT usage is measured, reported, and priced. In other words, while the “pay by the drink” analogy is useful in understanding the concept of utility computing, it’s a bit more complicated than that.

At a basic level, utility computing, or standard services delivery, is characterized by clearly defined and standardized service levels and units of IT functionality based on industry standards. These allow service providers – internal or external – to drive significant economies of scale. Standardization, meanwhile, enables the development

and implementation of “tensioned” pricing mechanisms that create incentives to drive more efficient delivery and consumption of IT. For example, in a traditional environment, a client pays a service provider a specified amount per server. The service provider seeks to install additional servers, as that generates additional revenue.

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Infrastructure Management

Clients, meanwhile, have little visibility into how business uses IT. In a standardized utility environment, tensioned pricing mechanisms are applied so that the client organization pays a specified amount for a CPU minute. This creates an incentive for the service provider to drive efficiency in the delivery of that CPU resource, as greater efficiency equals higher margin. The customer organization, meanwhile, has an incentive to utilize CPU resources more wisely, as every CPU minute consumed has a cost attached to it. This visibility into IT delivery and consumption, coupled with usage-based pricing and incentives to deliver and consume efficiently, underlies the potential of utility computing and its longstanding appeal. However, traditional business organizations are in many respects not quite ready for true utility computing. While paying only for resources consumed is appealing in theory, in practice it means less control over expenditure and income – a scary prospect for both clients and service providers. Under a strictly defined utility model, a customer that dramatically reduced consumption would receive a dramatically smaller bill. That prospect gives pause to service providers who need to demonstrate a predictable quarterly revenue stream to shareholders. Put differently, a vendor who will gladly implement a “pay as you go” strategy will hesitate to support a “save as you shrink” approach. By the same token, businesses like to predict expenditures, and the prospect of unanticipated spikes in IT costs can be unsettling. Dr. Gregory Smith, Head of Cloud Services Delivery & Technical Solutions for T-Systems North America, acknowledges that a predictable revenue stream is a
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challenge, particularly with regard to revenue recognition. However, he adds, “Most customers achieve substantial savings once they have fully transformed into the utility model and are then able to align and show a direct relationship between business demand and IT usage.” At present, most “utility” solutions are based on some type of allocation scheme. Here, the resource that a client is to be billed for has to be allocated first, thus allowing for predictability and preapproval of the expenditure. While perhaps not true “utility” computing, this approach does offer the benefit of flexibility and a more streamlined process for growing IT infrastructure, as the provisioning of new servers can be done in a matter of hours or days, instead of weeks or months. For example, T-Systems charges a fixed monthly rate for a fractional compute measure called a “compute slice” based on industry standards. The allocation of memory is another important aspect of utility computing. “Many applications are memory-driven rather than compute driven,” says Smith. “Because the underlying infrastructure for computing resources is ultimately a physical server, the ratio of compute capacity to memory is fixed. This presents challenges from a service provider perspective, particularly if oversubscription of actual resources is not allowed.”
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These challenges notwithstanding, allocation models have the practical impact of driving standardization across multiple customer environments and making services more utility-like. This allows vendors to leverage economies of scale and deliver significant savings to customers. Organizations that will drive the utility model to further maturity will be those that are willing to give up predictability for overall savings, and are willing to work with cloud providers that are hungry for market share. Such customers – Amazon, for example – include businesses with revenuegenerating applications that need to scale rapidly. For them, scalability trumps predictability, and growing revenues can cover higher costs. Another example: parallel processing applications that need burst access to large resource pools. T-Systems’ Smith adds that customer maturity in working with one or multiple service providers to manage ITIL processes – such as request, order, change, incident, problem management, and others –is essential to effectively managing demand. As client and service provider organizations actively pursue transformation initiatives based on utility models, both parties need to temper their expectations against the realities of the existing environment. This requires a detailed understanding of current operations and constraints, in order to quantify the size of the potential opportunity, identify the obstacles to achieving it, and charting the optimal way forward. GS
nigel Hughes is Director of Global Service Development at Compass Management Consulting. Bill Huber is Partner and Director of CPO Services at tPi.

February 2011 May