STUDY ON THE USE OF PUBLIC DATA CENTERS FOR IT INFRASTRUCTURE OUTSOURCING IN SRI LANKA

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1 'LIBRARY SlIJVfcRSlTY Of MORATUWA. SRI IAMIU UORATUWA jlhl»o»{!9cko t l STUDY ON THE USE OF PUBLIC DATA CENTERS FOR IT INFRASTRUCTURE OUTSOURCING IN SRI LANKA THE CASE OFSUNTEL LTD By G.A.A.D. KARAUNARATNE Supervised by Eng. Kithsiri Samarasinghe The Dissertation was submitted to the Department of Management of Technology of the University of Moratuwa in partial fulfillment of the requirement for the Degree of Master of Business Administration Department of Management of Technology University of Moratuwa December 2010 foob3f

2 DECLARATION "I hereby certify that this dissertation does not incorporate, without acknowledgement, any material previously submitted for a Degree or Diploma in any University and to the best of my knowledge and belief, it does not contain any material previously published or written by another person or myself except where due reference is made in the text. I also hereby give consent for my dissertation, if accepted, to be made available for photocopying and for interlibrary loans, and for the title and summary to be made available to outside organizations." Date To the best of my knowledge, the above particulars are correct. Signature of the Supervisor Date ii

3 ABSTRACT In many developed countries public Data Centers are considered as a successful way of IT facility outsourcing, especially when managing IT infrastructure is not the core business of that firm. IT facility outsourcing or hosting service can be considered as the main product in Data Center service portfolio. Even though the Data Center is a much discussed topic in many forums and conferences, no study has been carried out for the last five years to investigate the actual situation in the industry in line with the Sri Lankan context. Sri Lankan corporate firms are using IT extensively to achieve the current competitive level in the market. So the amount of electronic data involving the corporate industry is deemed enormous. But these firms' tendency to subscribe for Data Center services is very low. Main objective of this research study is to analyze the factors which affect the demand for Data Center IT facility out sourcing among the corporate firms. To find out Suntel internal factors, an exploratory study was carried out by interviewing officials of Suntel ltd. These officials represent Sales, Finance, Technology, IT (Information Technology), Strategy and HR (Human Resources) departments. To find out external factors, first literature survey was done and then the industry experts were interviewed to identify the common external factors that affect the demand for Data Centers. Then actual situation of the corporate firms was captured using a questionnaire targeting the fifty main customers of Suntel. IT professionals who can influence the decision to subscribe for Data Center services who are working for the corporate sector in Sri Lanka were considered as the target population. Thus both quantitative and qualitative methodology.has been employed for this study. Research findings revealed that there are internal factors causing the current situation. Those are high cost of operation, slowness in company learning curve and unavailability of proper 'financial business case'. Among the external factors, it is concluded that sufficient awareness prevails about the existence and benefits that can be obtained through Data Centers. Further it revealed that the IT professional see information security as a main factor which is evaluated carefully when considering the Data Centers for their firms. Research findings shows that level of convenience can be added by Data Centers is very high. Cost and service quality also is seen as important factors which can affect the demand. There is a concern of changing of job function

4 is also observed. This study concludes with a derived frame work with factors those affect the demand and necessary recommendations for Data Center service providers to address those identified factors to improve the business. iv

5 ACKNOWLEDGEMENT Firstly I like to express my sincere gratitude to my supervisor Eng. Kithsiri Samarasinghe, Department of Electronic and Telecommunication Engineering, University of Moratuwa, for his continuous support and guidance throughout the research. Further, I would like to thank the members of the Department of MOT, University of Moratuwa for supporting me in every possible way. At the stage of the exploratory study my view of the subject area was greatly influenced by the industry experts who extended their fullest support by offering me interviews amid their busy schedules. My research would not be complete if they did not shower me with their experience and knowledge on the subject. My two good friends, Wajira and Harsha deserve a special mentioning here. If not for their assistance & motivation, I could have been one of those hundreds of 'drop outs' of the MBA by just ending up as diploma holders due to toughness of the nature of the research project itself. I take this opportunity to convey my honest gratitude to my family, colleagues and friends for bearing with me the hardships that I encountered during the past two years, for their patience, kindness and encouragement, which kept me going till I see the end of the course. Finally I would like to thank the IT professionals of the corporate firms in Sri Lanka who participated in my survey for sparing their valuable time to provide information to make this research a success.

6 TABLE OF CONTENTS PAGE DECLARATION ABSTRACT ACKNOWLEDGEMENT LIST OF TABLES LIST OF FIGURES ABBREVIATIONS 11 iii v ix xi xii 1 CHAPTER: INTRODUCTION 1.1 Background 1.2 Problem Statement 1.3 Research Objectives 1.4 Importance/Benefits of the Study 1.5 Research Design 1.6 Expected Results 1.7 Thesis Organization CHAPTER : LITERATURE SURVEY 2.1 Introduction 2.2 Outsourcing Defined 2.3 Business Value of IT Outsourcing 2.4 Information Security and IOS 2.5 Business Continuity Management Business Continuity Planning (BCP) 2.6 Data Centers Internet Data Centers Achieving Business continuity using Data Centers Data Center Classification VI

7 0 2.7 Internet Data Centers and IT Infrastructure Outsourcing Sri Lankan Apparel Firms and Data Centers 24 s 3 DATA CENTER INDUSTRY IN SRI LANKA 3.1 Introduction History of Data Center Industry in Sri Lanka The Case of Suntel Ltd History of Suntel Ltd Market Segments in Suntel Data Center Business 28 4 CHAPTER: RESEARCH DESIGN AND METHODOLOGY 4.1 Introduction Conceptual Frame Work for External Factors Definition of Variables Sample Design Target Population Sampling Method Sample Size Operational Measures Scale of Measurements Reliability Analysis 38 # 4.8 Statistical Analysis Research Design for Internal Factors 39 * 4.10 Summary 39 5 CHAPTER: DATA COLLECTION AND ANALYSIS 5.1 Introduction Data Collection Interviews 41 4 vii

8 Interviews for Studying Internal Factors Interviews for Studying External Factors Research Questionnaire 5.3 Data Analysis Reliability Analysis 5.4 Descriptive Analysis Frequency Analysis 5.5 Measures of Central Tendency and Dispersion 5.6 Summary 6 CHAPTER: DATA INTERPRETATION AND CONCLUSION 6.1 Introduction 6.2 Data Interpretation Interpretation of Descriptive Analysis 6.3 Recommendations 6.4 Future Studies 6.5 Limitations of the Study 6.6 Conclusion 6.7 Summary REFFERENCES APPENDIX A APPENDIX B APPENDIX C

9 LIST OF TABLES Table 2.1 ISO and Table 2.2 Tiers of Data Centers Table 2.3 Types of Data Centers Table 3.1 Differentiation of Customer Types Table 4.1 Number of Subjects per Category Table 4.2 Number of Subjects for the Sample Table 4.3 Operationalization of Variables Table 4.4 Scale of Measurements Table 4.5 Likert Scale Table 4.6 Cronbach's Alpha values Table 4.7 Statistical Analysis Techniques Table 5.1 Survey Statistics Table 5.2 Cronbach's Alpha Table 5.3 Frequency of Respondents Table 5.4 Measures of Central Tendency Table 5.5 Means per sector per factor Table 6.1 Means for Awareness Questions Table 6.2 Means of Security Concerns Table 6.3 Means for Convenience Questions Table 6.4 Means of Service Quality Expectations Table 6.5 Means to Response for Cost

10 Table 6.6 Means of Cultural Questions

11 LIST OF FIGURES Figure 2.1 Key Drivers of IT Outsourcing Figure 2.2 PDCA Cycle Figure 2.2 Frame Work for Operational Elements Figure 2.3 Model Define by Gunasekara Figure 4.1 Conceptual Frame Work for the Research Figure 5.1 Frequency Analysis Figure 5.2 Means of Factors as Graph Figure 5.3 Means of factors as Web Figure 5.4 Each Sector against Deferent Factors Figure 6.1 Derived Model from the Research

12 ABBREVIATIONS BS CA CFO CIO idc IS ISO IS Policy ISP IT SLT TRCSL WWW : British Standards : Chief Accountants : Chief Finance Officer : Chief Information Officer : Internet Data Center : Information Security : International Organization of Standardization : Information Security Policy : Internet Service Provider : Information Technology : Sri Lanka Telecom Limited. : Telecommunication Regulatory Commission of Sri Lanka : World Wide Web xii 4