Out of sight, Out of mind

Spiralling costs and complex IT infrastructures combined with a deficit of skilled workers are driving the Middle East’s enterprises to outsourcing. Those that pursue the managed services model are discovering that superior data centre resources allow them to focus on their core business

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By  Zoe Moleshead Published  June 16, 2002

Removing the management headaches|~||~||~|Enterprises are increasingly operating in 24x7 e-business environments and with skilled IT labour at a premium within the region, the costs of deploying and maintaining IT infrastructures are beginning to distract organisations from their core businesses. As such, Middle East enterprises are beginning to explore the economies of scale, cost savings and resources that third party management can offer.

In response to this market interest, the Middle East has seen a growing number of IT vendors and service providers, such as Etisalat, HP, IBM and Dubai Internet City (DIC) rolling out facilities to provide hosting, co-location and managed services.

“Largely, the Middle East is still a DIY (do-it-yourself) market and it has been a very sound strategy up until now,” explains Charles Ashman, solutions business development manager, HP, Middle East. “[But] we are beginning to see two moves right across the Middle East; one is the upskilling of the local [providers] to offer managed services and the other move is IT managers saying ‘are their better companies that can run my data centres for me?’”

Enterprises are beginning to realise that while the DIY model may help them construct an IT environment, it does little to help the 24x7 maintenance of it.

For those organisations that have already travelled down the outsourcing route, disposing of their IT management headaches has enabled them to focus on their core business.

Gulf Air has proved a pioneer in the regional market, beginning a project back in 1998 to outsource its entire IT infrastructure to Sabre, and later EDS.

“Outsourcing is like a marriage. Its definitely not trouble free, its not always perfect, there are the good elements and there are the bad elements — you have to work on it,” says Tariq Hatim Sultan, chief information officer (CIO), Gulf Air.

Gulf Air’s Sultan advises companies that are looking to outsource to maintain an internal IT team, which is responsible for setting service level agreements and ensuring that the outsourcing partner fulfils the conditions of these agreements.
As part of its outsourcing project, over 100 Gulf Air staff transferred to Sabre, the airline’s the initial outsourcing partner. While Sutlan retained a team of 12 staff to help him manage the outsourcing initiative.

“You cannot just wash your hands of your own IT, that’s why myself with a core of IT staff were here to manage the outsourcing deal, manage the IT strategy for the company and do the planning,” Sultan says.

“We control investment priorities and IT costs, we establish policies and procedures, we cover the IT awareness and the relationships with all the vendors not just the outsourcer, we set the architectures and standards and we ensure timely implementation of systems that are in line with the agreements,” the CIO explains.

Sultan names service level agreements (SLAs), cost and staff welfare as the three critical factors in outsourcing projects. For the airline, service level agreements formed the basis for the move towards outsourcing, setting the roles, responsibilities, accountabilities and penalties for its partner.

“When you talk about managed services, first the processes get developed, ownership gets assigned and SLAs between all concerned parties are established. Everybody knows where their responsibility begins and ends, how to interface to the next entity in the process and what to do if something goes wrong,” concurs Fadi Moubarak, sales manager, e-business infrastructure services, Middle East, Eastern Europe & Africa, NCR, which has transitioned from its traditional role of maintenance partner to management provider.

To monitor the performance of its outsourcing partner EDS, Gulf Air’s IT team receives monthly service level reports and statistics. From these they, “establish a trend for what values are acceptable and any deviation from the trend would be noticed on a monthly basis and the necessary action taken,” comments Sultan.

Vertscape is another regional vendor that has entered the hosting market, developing a DIC-based data centre under HP’s accelerator programme to offer its eXtended enterprise relationship management e-business suite (XeEM) as a managed service. The vendor’s managing director, Meghna Rao, also believes that service level agreements offer the enterprise a leash to pull the service providers up with.

“There is a greater degree of accountability from the [service] provider because if we aren’t providing them the service, the solution and the kind of quality that they want, it’s easy for them to say at the end of this contract I’m leaving you,” she explains.

||**||Core business focus|~||~||~|For Gulf Air, outsourcing enabled the airline to gain a tighter control on its overall IT costs and to plot its future investment strategically.

Sultan also explains that initial employee fears were overcome by the transferral of staff to Sabre.

“Staff will initially look at this negatively… and this is a very critical area, which can make or break the deal. [In our case] the staff benefited more than anybody else, in terms of remuneration, joining bigger companies and getting additional training,” he states.

And, according to Sultan, the benefits in moving to an outsourced model has been twofold, as it has removed the complexity of juggling disparate IT systems and enabled the airline to concentrate on its bread & butter business.

“We had multiple industry-built applications in the past. We thought the company was at a competitive disadvantage because we were operating a large number of systems at the same time,” says Sultan.

“[Outsourcing] frees Gulf Air from the day-to-day IT headaches so that we can focus on strategy, vision, costs and the future, and leave the day-to-day management of people and issues to somebody else,” he adds.

Other organisations are finding similar benefits from outsourcing just one aspect of their IT infrastructure. The Rotana Hotel Group recently announced plans to hand over its e-mail server to Etisalat subsidiary, Comtrust, freeing up both costs, human resources and improving the efficiencies of its e-mail campaigns.

“The Microsoft Exchange server, which runs our e-mail system requires constant support and was often down due to heavy usage. Also with the rising tide of Internet attacks, the management needs added security measures to ensure the protection of the company’s growing e-mail communication,” says Atef Elias, general manager & chairman of Rotana’s IT Committee.

“With Comtrust hosting our e-mail server we can take advantage of 24x7 support, tape backup management, remote and system monitoring. This not only frees up our IT resources to focus on improving our internal systems, but also means we have no need to increase headcount to deal with day-to-day issues,” he explains.

“A lack of technical expertise in-house is also a driver for these enterprises,” says Siamak Kia, business development manager, IBM Global Services, Middle East, Egypt & Pakistan. “With an Internet application you need a database administrator, a systems manager, and a network administrator. Multiply that by the three shifts you need for 24x7 covergae and you are talking about a lot of people.”

Although the Rotana Group may only be housing a small element of their IT infrastructure with Comtrust, the technological capabilities of Etisalat’s hosting centre is far more extensive.

Etisalat is using its infrastructure advantages to drive its data centres in Dubai and Abu Dhabi and working in conjunction with its subsidiaries Comtrust and Emirates Internet and Multimedia (EIM) to market and sell services. HP made its initial play in the region last year with a US$25 million deal to design, configure and deliver a data centre to Egypt’s EgyNET in just three months.

IBM also joined the fray following the recent opening of its joint venture eHosting centre with Dubai Internet City (DIC). The region’s centres provide a similar mix of storage, security, networking and application support.

The DIC/IBM eHosting centre administers everything, “from systems, networks, operating systems, databases, backup, recovery, problem management, change management, incident management to capacity planning,” says Kia.

Enterprises can also take advantage of the superior IT infrastructures that data centres or outsourcing partners can provide.

“In terms of security and Internet bandwidth [in-house] infrastructures can’t deliver what major infrastructures like our data centres can,” states Farooq Hasan, marketing manager, Comtrust.

The technology architecture of such data centres is comprehensive, providing redundancy and failover for everything from the air conditioning systems to the power supplies. Cabling solutions also have to be designed to provide dual redundancy to the data centres.

“Our facilities are identical so if customers are taking services at one data centre they can have a redundant set up at both sites,” says Ansar Al Kayani, solutions architect, Etisalat Data Centre.

IBM is leveraging its global network of data centres to provide redundancy support and services to its customers. The DIC data centre is based on IBM’s Universal Server Farm (USF) Version 5 model. The hub for the Dubai USF actually sits in the UK where security aspects of the centre are also monitored.

“The DIC centre is networked to about 40 or 50 other IBM centres. We are constantly monitoring the centre from the UK. If there is anything that may happen to the network or the centre in the UK it would automatically switch over to the US, so the centre would be monitored by the US command centre,” explains Kia.

||**||Infrastructure benefits|~||~||~|Fundamental to the outsourcing model is Internet access and bandwidth. As such, Etisalat’s investment in fibre optic cabling and links to the US, Europe and other parts of the region provides it with a key advantage over competitors.

“The major investment in infrastructure is actually the bandwidth, putting the fibre in place. We already have an infrastructure within the region so we can leverage on that to extend our services,” explains Al Kayani.

With a more advanced cabling infrastructure in place, the local outsourcing providers are looking to entice regional enterprises that have been hosting web sites or applications in the US or Europe.

According to Nasser Salim, senior manager, Internet & E-solutions, Etisalat Data Centre, enterprises that move their sites back from outside of the region will see both cost and performance benefits.

“A customer [hosting in the US] has a degraded performance or service because he has to go through our network then over the pipes all the way to the US. They find it really difficult to have dynamic home pages because of the bandwidth constraints and the customer has to be charged at a higher rate because the cost has to be recovered from the back end connections,” he says.

“Etisalat can guarantee a maximum bandwidth delivered all the way to the customer because we have control over our network and we can design it the way we want. The customer will feel the difference — the cost will go down because it is locally hosted, the customer will get the highest performance, and have an enriched web site,” adds Salim.

Vertscape’s Rao also suggests that because many enterprises have been hosting in centres outside of the region already they are more receptive to the ideas of outsourcing, especially if the data centres are closer to home.

“Whether its your web site or a catalogue, any application to do with a web has always been hosted in a data centre, and most people have used a third party hosting company to do that,” she explains.

||**||Security|~||~||~|Security and management systems are also key parts of the data centre set up. As such, Etisalat has established a network operation centre (NOC) and a security operations centre (SOC) within each of its data centres to provide 24x7 cover and address any security problems, such as denial-of-service attacks or network outages that may occur.

To run the NOC Etisalat has customised a range of applications including HP’s OpenView to provide a solution that meets its extensive requirements.

“At the back end we have put together a comprehensive set of tools to manage and monitor our networks on a 24x7 basis. Our objective is that we want to automate any network force as much as is feasible,” says Al Kayani.

“We have a number of tools which are in-house developed because you can’t really rely on a single vendor to provide you with a comprehensive set of tools,” he adds.

Security is dealt with as a twofold strategy within data centres; physical security involves a mix of movement sensitive cameras, swipe cards, and security guards, while a variety of firewalls provide cover from the IT angle.

“We have a demilitarised zone where the web server would sit and your database server and transaction system would be behind another firewall, and demilitarised zone, meaning that no traffic from the web could get to the data,” comments Kia.

Regardless of the upfront investment made by vendors and service providers, they are recommending that enterprises begin by hosting a only small part of their infrastructure in the data centre, evaluate the success or problems of the initiative and then decide whether to continue along the outsourcing route or maintain their systems in-house.

“The outsourcing concept is still not mature enough for the customer to start immediately asking a third party to manage their infrastructure,” says Salim.

Moubarak adds: “NCR is now developing a full portfolio of managed services for the market, but we are taking a realistic approach, step by step, starting from the consultancy and analysing where the customer is today, where they want to be and what is the best way of getting there — is outsourcing and managed services really the best way?”

Although Gulf Air is in the fourth year of its 10 year outsourcing deal, the managed services or outsourcing model still remains relatively new to the Middle East region. However, the service providers believe the market is set to grow with small-to-medium businesses (SMBs) and business-to-business (B2B) marketplaces two of the areas that will afford the greatest growth potential.

“With B2B, if everybody starts hosting in the data centre it becomes like a village for these companies where they can start exchanging data locally. It also becomes more private for them — its like a private network on somebody else’s premises,” comments Etisalat’s Salim.

HP’s Ashman also suggests that Etisalat and the region’s other Internet service providers (ISPs) could cash in on the SMB market as they look for a trusted third party to host e-business applications and web sites.

“The SMB market is possibly where the most growth will occur. Largely they need to have a commodity service that they can trust. This trust element will lead them to the organisation that has implemented their IT system or it will lead them to companies like Etisalat or other ISPs,” he explains.

Etisalat and DIC seem to have stolen the lead in the region’s managed services market, however, EgyNET has its initial data centre up and running in Egypt and further centres planned with its partner HP. Ashman also reports that “Oman is investing heavily and has announced an IT park for which it is looking for investment from companies such as HP. We are also seeing the first signs of companies making positive moves towards outsourcing in Saudi Arabia,” he says.

Gulf Air’s CIO Sultan also recommends enterprises give the outsourcing model a try, even if it is only on a limited scale. “I would definitely recommend that they try it, even if they don’t go for full outsourcing they have to try out certain different pieces of it,” he says.

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