Acceptance of Managed Services

Transcription

1 knowledge partner MARKET INSIGHT Acceptance of Managed Services Opportunities and Challenges I business.sales@mobily.com.sa

2 About Us Mobily; the official brand name of Etihad Etisalat Company, is the leading ICT solutions provider in the Kingdom of Saudi Arabia. Established in 2004, Mobily is the 2nd operator to launch mobile services in the Saudi telecommunication market and is publicly listed at Tadawul Stock Exchange in Riyadh. Today, it offers the largest and most advanced portfolio of ICT Solutions in the Kingdom; encompassing Datacenter, Business Cloud, Information Security, Business Continuity, Infrastructure and Unified Collaboration solutions. Mobily presents its ICT portfolio as the most reliable, diverse and cost effective option for Saudi businesses by leveraging its industry-leading data network, superior connectivity and world-class infrastructure; which includes: Tier-II, Tier-III and Tier-IV Uptime Institute certified datacenter facilities located across the Kingdom. Thus, promising the highest level of availability, geographic redundancy, and physical as well as network security. ISO/IEC 27001:2005 ISMS, SAP certified and Cisco powered enterprise-grade cloud infrastructure offering fully scalable cloud solutions while guaranteeing resiliency, efficiency and availability that matches global standards. A Security Operations Center (SOC) certified to ISO 9001:27001 standards plus Coalfire and SAS-70 Type-II accreditations. The SOC is located in Mobily s Tier-IV Certified Data Center in Riyadh which ensures your business critical data is highly secure and available around the clock. Mobily has secured its position as the ICT leader in the Kingdom by dynamically and continuously enhancing its capabilities. Consistent with this approach, it has established strategic alliances with key international ICT players such as Accenture, Cisco, EMC2, IBM, Intel, Microsoft, SAP and Virtustream. The global expertise of these partners empower Mobily to offer cutting edge technologies with top-class support to the local market. Mobily ICT solutions connect businesses of all types and sizes to limitless possibilities; offering them significant financial, operational and technological benefits. Meanwhile, the one-stop shop service model offered by Mobily helps to eliminate all hassles of managing multiple vendors and dealing with associated technology risks - giving businesses a complete peace of mind. Data Center Business Cloud Information Security Business Continuity & Risilliency Unified Collaboration Managed Infrastructure 1

3 Executive Summary The uptake of managed services has been slow in Saudi Arabia as organizations in the kingdom generally prefer to manage their IT operations internally due to security concerns. Nevertheless, the internal IT operations within organizations have grown remarkably complex as many large organizations have invested in complicated IT solutions in order to make their business processes more efficient. Coupled with a general lack of advanced IT skills, most of these organizations are now being challenged with IT operational issues. In addition, retaining key IT personnel is becoming expensive in Saudi Arabia given the limited availability of such skills. All these factors are forcing many CIOs to evaluate managed services as a viable option for IT operations management. Consequently, operational efficiency, cost savings, and internal IT skills challenges are primarily driving managed services adoption in Saudi Arabia. At the same time, most managed services contracts are annually based, and many include a clause to terminate the contract after giving an agreed-upon notice (which is usually 30 days). As a result, organizations in Saudi Arabia typically have an upper hand when entering into managed services contracts. In addition, the competitive landscape of managed services in the kingdom has evolved over the past few years as a number of local and international providers have launched such services. Telecom operators, backed by their extensive and stable network infrastructure, have similarly increased their managed services capabilities and launched series of new managed services in order to keep their revenues growing in the midst of stagnating income from their traditional voice business. This has contributed to the maturity of managed services in kingdom, particularly with respect to the provider community. Out of all the managed services delivered in Saudi Arabia, organizations mostly seek out infrastructure management services (e.g., managed desktop services, managed server and storage services, and managed network services) as they are much simpler to implement. At the same time, operating a secure and uninterrupted IT environment is a high priority for many organizations, especially given the series of high-profile IT security attacks seen in recent years. Consequently, many large organizations in the kingdom are also evaluating and consuming managed security services, as well as managed business continuity and disaster recovery services. In spite of this growing acceptance of managed services, organizations in the kingdom are not fully comfortable with remotely delivered managed services. While these organizations are able to manage their IT operations more efficiently by utilizing an onsite managed services delivery model, they have not been successful in benefiting from the cost advantages of managed services as the on-site delivery model comes at a premium. 2

4 Infographics Section Managed services form part of the combined outsourcing market, which also includes IS outsourcing, hosted, and cloud services. In 2014, managed services accounted for nearly half of the combined outsourcing opportunities in Saudi Arabia. Managed services are further broken down into network and desktop outsourcing services (NDOS) and application management outsourcing (AMO) services. Organizations in Saudi Arabia invested SAR million in managed services in 2014, equating to a year-on-year increase of 18.2% and accounting for 8.8% of the total IT services market. Demand for network and desktop outsourcing services are particularly strong in Saudi Arabia There is strong demand from the government, oil and gas, and banking and finance sectors. An increasing number of providers are offering managed services, which is resulting in heightened competition. Total Managed Services 2014 (E) = SAR M Total Managed Services 2018 (F) = SAR 1,787.4 M Source: Saudi Arabia IT Services Market Forecast and 2013 Analysis Total Managed Services Spending 2014 (E): SAR Million Managed services spending is expected to almost double over the period. IDC expects managed services to grow at a compound annual growth rate (CAGR) of 18.2% over the period. IDC also expects that network and desktop outsourcing services will grow at a faster rate than application management outsourcing services over the forecast period, and contribute over 80% to total managed services by 2018 growth rate (CAGR) of 18.2% over the period. 3

5 Infographics Section 21% CAGR : Network and Desktop Outsourcing Services ( ) Organizations in Saudi Arabia invested SAR million in network and desktop outsourcing services in 2014, constituting a year-on-year increase of 21.3% and accounting for 75.8% of the managed services market. Many IT services providers are expanding their managed services portfolios to include network and desktop outsourcing services. Firewall management, content and web filtering, policy management, and network monitoring are the workloads that are expected to generate greater demand in the short term. 7.7%CAGR : Application Management Outsourcing ( ) In 2014, spending on application management outsourcing increased 9.5% year on year in Saudi Arabia to total SAR million, representing 24.2% of the total managed services market. Organizations in Saudi Arabia are attempting to concentrate on their core processes, and hence are evaluating managed services providers as an option for managing non-critical applications. This will push the demand for application management outsourcing in coming years. As organizations also seek to address IT skills shortages in key application areas, they are likely to increase their reliance on application management services providers. Sadi Arabia Managed Services Spending, Source: Saudi Arabia IT Services Market Forecast and 2013 Analysis CAGR (Compounded Annual Growth Rate) The year-on-year growth rate of an investment over a specified period of time. It is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered 4

6 The Most Important Decision-Making Criteria for Selecting External Service Providers in the UAE and Saudi Arabia Which criteria are most important when selecting an external service provider? Source: Managed Services in the Gulf Cooperation Council: A 2013 Update According to an IDC survey of over 100 organizations in the UAE and Saudi Arabia, gaining access to the technical skills of professional staff and benefiting from deep industry knowledge are cited as the most important reasons why organizations prefer to engage with third-party managed services providers. Delivering high-quality services at lower cost is another factor taken into consideration when evaluating a managed services provider. 5

7 Summary Messages Demand for managed services is expected to rise significantly in Saudi Arabia in the years to come. Most of this demand is expected to come from organizations across the government, banking and finance, and, oil and gas sectors. Organizations across these sectors have invested significantly in IT solutions and many are facing several IT operational challenges. In addition, many of these organizations have outlined and or are executing massive IT projects which will further increase the complexity of managing IT operations. All of these factors will collectively push the demand for managed services in the kingdom. In the government sector, the Saudi national government is aggressively pushing the implementation of the second phase of Yesser, its egovernment initiative. Many ministries are planning to integrate their egovernment offerings with the Yesser program. In the financial services sector, banks are expanding their branch network coverage and looking to optimize their investments in IT infrastructure. However, staffing internal IT departments with trained and experienced IT personnel is likely to become all the more challenging for financial organizations as the Saudi government is aggressively implementing its nationalization policy (called Nitaqat). Oil and gas companies have wide spread operations that are required to be monitored on a regular basis. With the lack of professional in-house ICT employees at the different operational sites, oil and gas companies are increasingly relying on managed services providers that operate out of multiple locations to manage their ICT environments. Oil and gas companies are also evaluating creation of shared services center and standardizing the technologies that are deployed across different locations in order to have better and faster operational management. Companies operating in the retail sector are also increasingly gearing towards managed services. Large retailers that are operating multiple stores across several cities in Saudi Arabia have either invested or are investing in ICT technologies to optimize their supply chain to reduce cost. Such technological investments enable regular monitoring of stocks and information transmission between different stores and warehouse on a realtime basis. Engaging with managed services providers is helping these large retailers in keeping their ICT systems performing on a real-time basis, without having to deal with downtime issues. 6

8 In the government sector, the Saudi national government is aggressively pushing the implementation of the second phase of Yesser, its egovernment initiative. Many ministries are planning to integrate their egovernment offerings with the Yesser program. In the financial services sector, banks are expanding their branch network coverage and looking to optimize their investments in IT infrastructure. However, staffing internal IT departments with trained and experienced IT personnel is likely to become all the more challenging for financial organizations as the Saudi government is aggressively implementing its nationalization policy (called Nitaqat). Oil and gas companies have wide spread operations that are required to be monitored on a regular basis. With the lack of professional in-house ICT employees at the different operational sites, oil and gas companies are increasingly relying on managed services providers that operate out of multiple locations to manage their ICT environments. Oil and gas companies are also evaluating creation of shared services center and standardizing the technologies that are deployed across different locations in order to have better and faster operational management. Companies operating in the retail sector are also increasingly gearing towards managed services. Large retailers that are operating multiple stores across several cities in Saudi Arabia have either invested or are investing in ICT technologies to optimize their supply chain to reduce cost. Such technological investments enable regular monitoring of stocks and information transmission between different stores and warehouse on a real-time basis. Engaging with managed services providers is helping these large retailers in keeping their ICT systems performing on a real-time basis, without having to deal with downtime issues. Therefore, taking into consideration the IT investments and management challenges which organizations across these sectors are likely to face in future, the demand for managed services is likely to grow significantly in the coming years. As clients steadily mature with respect to managed services, they are likely to gradually transition from on-site managed services delivery models to remote managed services models that will provide them with added cost advantages. Organizations will also require engaged managed service providers to bring in global best practices and demonstrate greater understanding of their businesses while engaging in a managed services contact. Local service providers that operate out of multiple locations in Saudi Arabia and already have strong client testimonials will be well positioned to capitalize on managed services opportunity if they imbibe global best practices while expanding their ICT offerings portfolio to include managed services. 7

9 Forecast Public Sector 2 Government spending on outsourcing services, including managed services, is expected to be high in the coming years. Massive investments in infrastructure projects are underway, including the creation of six economic cities, numerous schools and hospitals, and transportation upgrades (e.g., the Riyadh Metro Rail System), all of which will require deployment of advanced IT solutions. A state-of-the art IT park is also being constructed in the King Abdullah Economic City, which is the biggest of all economic cities under construction in the kingdom. As a result, the complexity of IT operations will increase in the government sector, which will in turn drive demand for managed services and IT outsourcing services in the country. Like the private sector, the various IT departments operating in the government sector are not shielded from the advanced IT skills shortage problem. The implementation of Nitaqat is having a negative impact on public sector IT departments,which are generally unable toaccess advanced technical skills. Therefore, as these government departments make investments in advanced IT solutions with limited internal IT operational management capabilities, they are likely to rely on managed services providers to ensure IT operational efficiency. Banking, Financial services, and Insurance (BFSI) Financial services organizations have to contend with various issues. Ensuring 24x7 uptime of banking facilities is of prime importance to banks, as is guaranteeing a secure IT environment for customers to transact. In addition to facing IT staffing issues, banks are also being constrained while implementing new solutions to support their growing business requirements. Collectively, these factors are forcing banking and financial services companies to invest with managed services providers to handle their IT environments. Banks are also increasingly spending a great deal of effort to comply with Basel requirements, which are forcing them to invest in advanced IT solutions. With a lack of internal IT resources, banks and other institutions are likely to leverage the expertise of Public sector, as defined for Saudi Arabia, covers government agencies, the education sector (public schools and universities), as well as the healthcare industry financed and managed by the government (Ministry of Health and all armed forces healthcare providers and hospitals). Oil and gas Oil and gas sector companies are expected to increase their spending in managed services in the coming years as operational management to curtail costs in light of dropping oil prices become a priority for companies across this sector. They are likely to invest with managed services providers to monitor their operations that are wide spread across the country and take preventive measures to prevent shutdowns that arise owing to late maintenance efforts. Managing sophisticated and targeted security attacks on oil and gas companies is also posing a challenge for oil and gas companies. IT security attacks on oil and gas companies are more targeted along with an increase in the number. Oil and gas companies are likely to leverage the capabilities of managed services providers to protect their companies data assets from potential financial and reputational loss that may arise because of IT security threats. 2 Public sector, as defined for Saudi Arabia, covers government agencies, the education sector (public schools and universities), as well as the healthcare industry financed and managed by the government (Ministry of Health and all armed forces healthcare providers and hospitals). 8

10 Questions & Answers How can CIOs address the challenges that arise from advanced skills shortages and the rising cost of IT professionals? Attracting and retaining key IT skills has been a challenge for organizations in Saudi Arabia. With the government strictly enforcing Nitaqat, organizations face even greater obstacles in keeping their IT departments staffed with the right skill sets. In addition, organizations are being forced to pay higher remuneration to employees that have advanced IT skills in order to prevent poaching. Therefore, in order to address these concerns pertaining to the staffing of IT departments and rising IT professional costs, organizations can contract managed services providers to run their IT environments. This would allow organizations to operate much smaller IT departments that will be primarily engaged in new solutions implementations, and free them from the costly hassle of finding and retaining key IT professionals. How are third-party service providers addressing concerns relating to IT security? The concerns of CIOs around IT security have mainly been prompted by the series of highprofile IT security attacks seen in the kingdom over the past few years. In fact, security has proved to be the biggest inhibitor to managed services and outsourcing services demand in the kingdom. Services providers are aware of this customer concern, and many have taken initiatives to improve IT security while engaging in managed services and outsourcing services contracts. For example, the joint initiative taken by Mobily and IBM to co-create and operate a security operating center (SOC) in Riyadh is being viewed as a positive step that addresses the IT security concerns of organizations. Managed services providers are also conducting workshops to showcase their various security investments to clients and demonstrate how sensitive information can be secured at the highest levels. Initiatives such as these will help improve customers trust in managed services providers, and will help negate their concerns over IT security when engaging in a managed services contract. 9

11 Managed services are usually expensive in the market. What initiatives are the managed service providers taking to curb the cost of such services? Competitiveness in the managed services space has increased considerably in the past couple of years. This has put price pressure on various managed services, and has forced the providers of such services to standardize their offerings for ease of comparison and to highlight differentiation. As the managed services market matures in the kingdom, IDC expects such services to increasingly become commoditized and cheaper. There have been issues around consistency in service delivery. How are services providers addressing these concerns? Managed services providers have not been exempted from Nitaqat, the Saudi nationalization policy. Similar to customer organizations, these services providers have faced challenges in staffing their organizations with the right IT personnel. However, IDC believes that managed services providers will be more aggressive in getting their employees trained on various skills as compared to end-customer organizations, as delivering high-quality IT services consistently is central to their business, unlike end-customer organizations. As such, IDC is of the opinion that managed services providers will develop a formal in-house process to train their staff on various skills. This will address the services delivery concerns that organizations are currently raising with their engaged third-party service providers. SLA 10

12 Key Takeaways The Saudi Arabian managed services market will continue to grow at a fast pace in the near term, with government, banking and finance, and oil and gas companies being the main growth engines. While greater opportunities will exist for managed network and desktop services, as opposed to application management services, the banking and finance sector is expected to lead the demand for application management services in the coming years. The lack of advanced in-house IT skills, the rising complexity of IT operations, and pressure to lower IT operational costs will force CIOs across these organizations to assess the ability of managed services providers to run their IT operations. IDC expects that the organizational challenge related to acquiring and retaining key IT skills is only going to increase in the coming years with stricter implementation of the Nitaqat program. The cost of retaining IT professionals is also likely to drastically increase in the coming years as the demand for such advanced IT professionals is likely to surpass the supply. Therefore, in order to overcome their IT skills challenges, many CIOs are more likely to leverage the skills of managed services providers than operate large in-house IT teams. IT security has been a major concern for organizations. Given the high-profile IT security attacks in the kingdom in the recent past, many organizations and services providers have made investments to ensure such attacks do not happen in the future. However, IDC believes that the scale of investment in IT security infrastructure made by services providers will far exceed the investment done by organizations, as providing secure managed services is the core business of managed services providers. Consequently, many organizations will be able to operate more secure IT environments by engaging with a managed services provider rather than by maintaining an internal IT operational management team. 11

13 IDC Opinion Organizations in Saudi Arabia have expansive IT investment plans that are aimed at supporting their growing operations or improving customer satisfaction. Although most organizations have the capital to build IT infrastructure, they face challenges in keeping deployed IT solutions running at efficient levels. In addition, the lack of advanced IT skills has been one of the biggest hindrances facing most organizations. This impediment is only likely to worsen in the foreseeable future as the Saudi government strictly implements the Nitaqat policy. As such, many organizations in Saudi Arabia are likely to engage with managed services providers to gain easy access to advanced IT skills. This will allow them to efficiently manage their growing IT operations, which are increasing both in scale and complexity. IDC expects that IT operational cost reductions will gradually force organizations to transition from onsite managed services environments to remote managed services models. However, this will only happen once organizations have trust in the IT security measures implemented by managed services providers. 12

14 knowledge partner I business.sales@mobily.com.sa