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Managing change with managed services

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By Stephen Chin with Rachel Chin

When a massive meteor struck Earth 65.5 million years ago, it changed the climate and killed off the dinosaurs. Cloud computing may be spelling an end to the days when system integrators (SI) could get by with just pushing hardware boxes and setting up PC networks for their customers.

A large part of this is due to the allure of the cloud. Articles in the media, reports by analysts and “success stories” of companies that adopted cloud computing are beginning to have an impact on customers.

“Up to five years ago, customers were asking ‘What is the cloud?’ Today, they are saying ‘I want the cloud, tell me how to get it!’” said Jarom Britton, Microsoft corporate attorney, Malaysia & SEA new markets.

This was the situation I-Tech Network Solutions Sdn Bhd found itself in when it started Safehouse, its co-location services in 2012. Having just invested in expensive hardware for disaster recovery and co-location – where companies suffering a major catastrophe in their data centres can continue operations by running on a backup installation located off-site – they saw the cloud offering a cheaper and better alternative.

“Rather than compete against the cloud, we decided to join it,” said I-Tech chief operating officer K.B. Yap.

The company started out as the technology arm of Ireka Bhd, a major construction and development company. It was the SI that installed IT systems for the group’s projects such as the RuMa Hotel and Residences, Aloft Kuala Lumpur Sentral Hotel and The Westin Kuala Lumpur. In 2003, I-Tech branched out to offer its services to
companies outside the Ireka Group.

I-Tech’s transition to the cloud was quite smooth. “We offered the same kinds of services as we did for co-location with one difference: the data now resides in the cloud instead of on-premise servers,” said Eric Cheong, vice president, data centre services, I-Tech.

“Previously, we would be moving boxes and boxes of hardware and setting them up. And then we provided managed services for their servers, virtual machines, backups and disaster recovery. Our clients could then concentrate on their business rather than their IT systems. The same applies with the cloud: a lot of our customers are unsure of how to handle the cloud. We offer to manage this for them.

“Today, we still provide managed services not just in the data centre but on the cloud as well. We no longer have to deal with hardware – we used to help our customers change hard disks, upgrade RAM and so on but now we manage it virtually via the Microsoft Azure console or Amazon Web Services (AWS) console. We don’t worry about hardware replacement anymore,” Cheong said.

I-Tech intends to leverage its expertise in co-location services and experience with the cloud to convert co-location customers. “Cloud is the way to go,” said Yap. “It is much cheaper and the room for future expansion is practically limitless. Whatever can be put in a data centre can be put in the cloud. It’s a no-brainer. Many companies know what the cloud is but don’t know how to move over. We can offer our advice and services.

“The hardware market is shrinking and the margins are not there anymore. That is why we see hardware vendors merging, like Dell EMC,” Yap said.

I-Tech’s story is not rare or unusual. The promise of the cloud is very alluring. End users do not require large capital expenses to set up data centres as they needed to in days of old. “Previously, for a customer to set up an off-site disaster recovery system, they need to host a separate data centre, usually with the same hardware configurations, and replicate their data. In the event of a disaster, the staff can work from the off-site installation without any interruption to their business.

“Today, with data backup and recovery situated on the cloud, they can just log in and work from virtually anywhere,” Cheong said.

Infrastructure, network, storage, backup, security, computing power, customer relationship management and other applications and services are offered as a service and made available as a subscription. Customers pay for what they require and use, like electricity or water. IT becomes an operating expenditure instead of capital expenditure which is often seen as a depreciating asset.

Customers can scale their consumption up and down according to their needs. There is no need to worry about hardware refreshes, being stuck with obsolete technology or maintaining regular security updates, all of which are done by the service providers.

This cloud advantage is what fuels brand new start-ups. “They go to the cloud immediately without a large initial hardware investment and can adapt quickly to trends in the market,” Yap said.

Traditional SIs, such as I-Tech, are already reinventing themselves into MSPs. ACA Pacific CEO Craig Gledhill expressed amusement when he noticed changes in business cards: “I would joke with them about it at reseller events. ‘Just a month ago you were an SI and now, it says MSP. What happened?’”

Gledhill agreed that the market is increasingly shifting to cloud computing. “Customers are now asking for the cloud and looking for MSPs. When they see an SI, they’ll say, I’m looking for an MSP, I don’t want an SI,” he said. ACA Pacific is also reinventing itself to support the cloud model, among other things.

According to I-Tech’s Yap, IT managers have accepted that cloud is the future “but it is usually the board of directors holding them back. Their main concern is security: they are not comfortable putting their assets –
data – on someone else’s hardware in the cloud.

Usually, the breakthrough comes not from the IT managers or the vendors’ sales pitch. “The top executives tend to change their minds when they learn from their peers how they did it with their companies. They could be chatting about it over a game of golf and when one boss talks about the success they are having, the others will instruct their IT managers to find out more,” Yap observed.

For I-Tech, the transition to cloud also opened new opportunities. “Apart from persuading customers to go to the cloud, we can also help existing cloud customers to optimise their usage and reduce costs,” explained Cheong. “We can monitor their usage and suggest ways to adjust their subscriptions.

“Apart from that, we are also very interested in the cloud’s capability for big data analytics and artificial intelligence. We want to help our customers derive business intelligence from their data to help their business goals,” Cheong added.

Bombarded with countless survey findings and analysis and vendor hype about digital transformation, enterprises cannot help but realise that the cloud is the way of the future. Their old legacy systems served their purpose well but require a lot of expensive maintenance and skilled staff. These systems are not as nimble and agile to adapt to rapidly changing market demands compared to how new cloud-native start-ups enter and disrupt their industry.

Yet moving to the cloud does have its own complexities as the various as-a-service components need to work well together. Rather than setting up or maintaining a large IT department, enterprises may likely engage MSPs as-a-service to handle the task, leaving them free to concentrate on their actual business. It is like engaging a building manager to ensure everything is working – lights, water, air-conditioning, elevators and so forth.

This is a window of opportunity for SIs facing a shrinking hardware market with shrinking margins. They can leverage their expertise into managed services.

In its latest ICT Job Market Outlook, the ICT Association of Malaysia (PIKOM) projected ICT services to be the main driver of the overall ICT industry’s growth. It made the highest contribution to ICT-GDP at RM61.5bn or 40.4% share in 2015 (a 10.3% increase from the previous year).

Compared to the 2000s, spending on computer services tripled in the 2010s. ICT services – telecommunications, computer programming, consultancy, information and relative activities – grew 9.1% year-on-year in 2015 to RM13.38bn, according to the Malaysian Department of Statistics.

However, it is not just a matter of getting onto the cloud. ACA Pacific’s Gledhill warned that customers should still have a strategy for cloud computing. “Previously with the Internet, many companies made the same
mistake. ‘I’ve got to have a website, I’ve got to have a website.’ Once they got there, they wondered, ‘What do I do with it now?’” he said.

Unlike the dinosaurs of the Cretaceous period, SIs can reinvent themselves with the tools and skills they already have to survive in the Digital Age. Therefore, rather than facing an age of extinction, we may be looking at the age of evolution.

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