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A Fresh Wind For Offshoring Infrastructure Management
A laggard so far, it may be about to take off.
Also See:
China's Opportunity In Offshore Services
Getting More Out Of Offshoring The Finance Function
By Vivek Pandit and Rajesh Srinivasaraghavan
This article was originally published by The McKinsey Quarterly, October 2008.
Businesses have begun tapping offshore companies to monitor, maintain, and fix their IT infrastructures. Revenues from remote infrastructure management, as these services are called, have grown by 80 percent a year since 2005 and are expected to reach $6 billion to $7 billion this year. But our research shows that the possibilities for managing servers and other IT hardware from afar are largely untapped. Changes in the business environment could let loose a sudden rush to adopt this approach.
While customers have enthusiastically offshored application development and business processes, remote infrastructure management has languished by comparison. Our estimates suggest that at the end of 2007, such revenues accounted for less than 7 percent of an addressable market of $96 billion to $104 billion, despite a steady increase in recent years. But within half a decade, those revenues could grow fourfold, reaching $26 billion to $28 billion annually.
The benefits of remote infrastructure management can be considerable-Fortune 50 companies, with budgets of $2 billion, can save as much as $500 million of their IT infrastructure budgets, mostly from labor savings. Yet there are also risks. Disruptions in core IT systems during the transition or ongoing operations have real financial and security costs, including possible data loss and the interruption of operations. Other concerns include regulatory problems, such as the possibility of giving third parties inadvertent access to confidential medical records, and of financial fraud or intellectual-property (IP) theft when vendors gain full access to corporate systems.
Next: What's Behind The Growth?
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