Make Desktop IT Outsourcing More Efficient and Safer

White Paper

Selecting Professional Service

Make Desktop IT Outsourcing More Efficient and Safer

Sponsored by: Lenovo

Ting Yang Joy Xing

Richard Zhao

June 2011

IDC Opinion

Increasing government support for IT outsourcing industry, favorable government policies and Chinese companies’ growing awareness of outsourcing provide the China IT outsourcing service market with an unprecedented development opportunity. According to IDC, the China IT outsourcing service market size reached RMB 13.58 billion in 2010. IDC predicts that the market size will reach RMB 31.03 billion by 2015 at a 2010-2015 compound annual growth rate (CAGR) of 18.0%.

Accounting for the largest share of China IT outsourcing service market, desktop IT outsourcing service grows rapidly, playing an extremely important role. According to IDC, the desktop IT outsourcing service market size reached RMB 3.62 billion in 2010. IDC predicts that the market size will reach RMB 8.45 billion by 2015 at a growth rate beyond the average level.

Desktop IT systems refer to discretely deployed desktop IT systems in huge presence that most employees have to deal with in person, such as PCs, printers, copying machines, office software, application systems, etc. With the increasing number and scale of desktop IT systems, many enterprises find their IT departments facing great challenges in terms of management, operation and maintenance (O&M). Due to high CPI (consumer price index) and soaring labor cost, cost-sensitive companies cannot but shelve their IT plans to invest in new equipment or application, refocusing on the rudimentary cost management. On one hand, enterprises become more tempted to cut back capital expenditure (CAPEX) and increase operational expenditure (OPEX) to prolong the life cycle of IT infrastructure. On the other hand, the increasing urgency of redefining the role of IT system in enterprises makes inevitable the shift from the traditional cost center to quasi-profit center, or even innovation center. Against this backdrop, outsourcing the O&M of desktop IT systems to professional service providers has become the best choice for many enterprises to achieve the targets.

Key findings from this IDC White Paper are as follows:

y Chinese enterprises are confronted with many challenges in terms of the management and O&M of desktop IT systems: limited IT personnel to handle business demands; the huge presence of branches that hinders timely response and solution to problems; great pressure of O&M cost; lack of a uniform security module to address security loopholes in IT systems. Therefore, IDC believes that a professional, safe, efficient desktop IT outsourcing service is badly wanted to solve the last-mile problem in the use of IT infrastructure.

y Desktop IT sourcing service is the most convincing indicator of how a service provider performs and approaches. In it also lies a major opportunity to gain customer satisfaction. Consequently, desktop IT sourcing service becomes the entry point for service providers to cooperate with their customers on IT outsourcing services. The most significant benefit is that desktop IT outsourcing service allows IT departments to concentrate on core business areas. It also helps enterprises reduce O&M cost and makes a quick response to new business and application.

y In China, only a small part of enterprise budget goes to desktop IT outsourcing. Chinese enterprises still consider O&M of desktop hardware as the top priority on their desktop IT outsourcing agenda. However, among many of them, the demand for outsourcing O&M of application systems emerges. IDC believes that desktop IT outsourcing service providers that are able to spot this niche and offer some cost-effective solutions will win more customers and opportunities.

y Three criteria a user is most concerned with when it comes to selecting a desktop IT outsourcing service provider include rapid and timely response, superior technical strength, and a stable, safe, long-term partnership. Moreover, reasonable pricing, scale and coverage are qualifications that a user may consider when selecting the desired service provider.

Table of Contents

Motivators for Chinese Enterprises to choose Desktop IT Outsourcing Service 1

Rocketing Labor Cost of China Enterprises 2

Enterprises ' Urgent Need for Desktop IT Outsourcing Service to Avoid Distractions 3

Adaptive Enterprise IT Investment 4

Selecting Professional Service 7

Make Desktop IT Outsourcing More Efficient and Safer 7

Professional Service Makes Desktop IT Support More Efficient 7

Security Service Makes Desktop IT Support More Reliable 7

Chinese enterprises’ expectations ON their desktop IT outsourcing partners 9

Selecting Trustworthy Strategic Partners 9

Desktop IT Outsourcing Provider Highlight 11

Addressing Challenges through Excellent Performance 13

Opportunities and Challenges in Desktop IT Outsourcing Market 13

Service Providers' Challenges and Countermeasures 16

Conclusion and suggestion 18

Methodology and framework 19

In This White Paper 21

Definitions 21

List of Figures

1 Desktop IT Equipments that Enterprise Need to O&M 1

2 Major Challenges Facing Enterprises in Managing, Operating and Maintaining Desktop IT systems 3

3 The Benefits Enterprises could Get from Desktop IT Outsourcing Service 4

4 Enterprises’ Optimization of Existing IT Investment 5

5 Major Criteria in Selecting Desktop IT Outsourcing Service Providers 9

6 Three Types of Desktop IT Outsourcing Service Providers and Their Major Characteristics 11

7 Advantages of Lenovo Desktop IT Outsourcing Service Solution 12

8 Key Motivators for the Development of China Desktop IT Outsourcing Market 14

9 Framework 20

Motivators for Chinese Enterprises to choose Desktop IT Outsourcing Service

Factors such as policy support, external changes and internal needs set the stage for the China IT outsourcing service market to anticipate sound development. The noteworthy beneficiary is desktop IT outsourcing service which has already become an important means among many Chinese enterprises of saving cost and boosting operational efficiency. A booming China desktop IT outsourcing market is looming.

After years of development, Chinese enterprises have almost established relatively sound infrastructure and applications. As enterprises constantly expand, the quantity and scale of enterprise desktop IT equipment are also on the rise. In recent years, many enterprises have been slowing down their infrastructure construction, at the same time, the problems of IT system O&M ensuing. Meanwhile, problems inherited from previous system construction have begun to bite: compatibility, isolated information island, etc.

For enterprise IT departments, management and O&M of desktop IT equipment is becoming their great challenge. According to an IDC research, 1,767 units out of desktop IT equipment per large & medium size Chinese enterprise requires O&M, and enterprises with 2,001-5,000 units of equipment to be operated and maintained account for the largest share of the surveyed enterprises (See Figure 1). At present, the division of labor based on specialization becomes an increasingly explicit social trend. For the majority of Chinese enterprises represented by manufacturers and franchises, the O&M of desktop IT equipment neither is their core business, nor has anything to do with their core secret. Outsourcing it to professional desktop IT outsourcing service providers helps enterprises concentrate savings from capital, workforce and time on their core business areas.

Figure 1

Desktop IT Equipments that Enterprise Need to O&M

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Source: China Enterprise Desktop IT Outsourcing Application Survey, IDC 2011

Besides, overall economic environment and changing external factors also trigger enterprise demands for IT outsourcing service. Since many CIOs focus on deriving greater business value from increasingly important IT departments, desktop IT outsourcing becomes a pragmatic choice among many enterprises.

Rocketing Labor Cost of China Enterprises

Mounting inflation pressure and rocketing labor cost are encroaching on business profits. According to data published by the National Bureau of Statistics of China, the CPI went up by 5.4% on a year-on-year basis in March 2011, a new high for 32 months; in April 2011, this figure went up by 5.3% over the same period in the previous year. This situation is expected to remain a space of time. Against this context, enterprise IT departments are facing an unprecedented pressure.

Huge Cost Pressure and Multiple Challenges in Enterprises' Desktop IT O&M

Chinese enterprises are facing multiple challenges in terms of O&M of IT systems. Limited IT personnel, huge presence of branches that hinders timely response to problems and huge pressure of O&M costs are three major challenges facing many Chinese enterprises when it comes to desktop IT management and O&M:

y Limited IT personnel to handle business demands. It is common among many Chinese enterprises that IT department accounts for a limited share of total workforce which lags far behind the enterprise requirement for rapid growth. You will never fail to see IT personnel busy managing dozens of, even hundreds of equipment in average. Whether in quantity or expertise and skill, the current enterprise IT personnel configuration is far from satisfying enterprise requirements for rapid development.

y Increasing presence of branches that hinders timely response to problems. As many Chinese enterprises accelerate their expansion for greater prosperity, a large number of branches and offices come into existence, pushing the geographic boundary of business further and further. Some remote branches find that the distance between them and their parent companies often hinders timely response to the failure of their desktop IT equipment or systems. If this problem remains unsolved, business operation is doomed to suffer.

y Huge pressure of O&M cost. Accelerated enterprise expansion requires an increasing number of desktop IT equipment. How to control O&M costs becomes a conundrum among many enterprises.

Besides, the lack of a uniform security module to address security loopholes in IT systems, and the complex structure of enterprise IT system that makes it difficult to manage, are challenges facing many enterprises in operating and maintaining desktop IT systems (See Figure 2).

Figure 2

Major Challenges Facing Enterprises in Managing, Operating and Maintaining Desktop IT systems

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Source: China Enterprise Desktop IT Outsourcing Application Survey, IDC 2011

In a word, the current problem in O&M of IT systems is nearly about what a service entails: personnel, technology, organizational structure, security and response speed. IT department, which would have prevented enterprises from distractions, now becomes a distraction. However, in this information age, enterprises are becoming increasingly dependent on the O&M of IT systems. IT system O&M has already become a double-edge sword whose performance determines whether an enterprise makes or breaks.

Enterprises ' Urgent Need for Desktop IT Outsourcing Service to Avoid Distractions

After years of IT infrastructure construction, domestic leading enterprises have established relatively sound IT systems. Managers start to focus on creating more benefits through excellent operation and management. However, what IT departments have encountered in adapting to their shifting roles in enterprises are more than the above-mentioned problems. Increasingly extensive and complex O&M of IT systems imposes higher expectations on IT departments and personnel in terms of management, expertise and skill. At the same time, enterprises require their IT personnel to be savvier about business. IT departments find these two tasks difficult to handle at the same time.

Enterprises have benefited from the desktop IT outsourcing service to varying degrees. When asked how desktop IT outsourcing benefits their enterprises, 68.9% of the respondents said that it helps IT departments concentrate on core business areas. Moreover, other benefits that the desktop IT outsourcing service contributes to them, according to respondents, more or less pertain to cost, efficiency, resource integration, data sharing and security, issues that managers are concerned with (See Figure 3).

“Desktop IT outsourcing is a significant development trend. In my company, desktop support satisfaction is a performance indicator for our IT department. However, application system construction matters more. Due to the shortage of IT personnel, we cannot but choose professional desktop IT outsourcing service, if we would concentrate more on the application system construction to support top management’s decision-making. For doing so can avoid distractions,” said Mr. Wen, the information center manager of a domestic well-known communication equipment manufacturer.

Figure 3

The Benefits Enterprises could Get from Desktop IT Outsourcing Service

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Source: China Enterprise Desktop IT Outsourcing Application Survey, IDC 2011

Adaptive Enterprise IT Investment

Adaptive enterprise IT investment refers to enterprise investment in service process, automation, manageability and security for the purpose of operating IT infrastructure at a low cost, providing high quality services, minimizing risks and delivering greater business flexibility. Being able to rapidly adapt to changes has become a major key to competitive advantage. As the foundation of the business operation, IT needs to be quickly geared to business changes, so as to equip enterprises with a timely response to new opportunities and demands. The content and process of IT service is the primary priority.

Though Chinese enterprises’ investment in software and hardware products is tremendous, there still remains a large gap in IT service expenditure between them and their counterparts in mature markets of developed countries. According to an IDC research, the annual average expenditure of Chinese enterprises in outsourcing desktop IT O&M in whole is estimated at around RMB 500,000. At present, desktop IT outsourcing service accounts for a relatively small share of the total enterprise IT expenditure (See Figure 4). According to the CIO of a domestic mobile communication equipment manufacture company, desktop outsourcing only accounts for a small share of his company’s total IT investment. He said that his company spends above RMB 200 million on IT annually, while the annual expenditure in desktop IT outsourcing is only averaged at no more than RMB 1 million.

Figure 4

Enterprises’ Optimization of Existing IT Investment

Source: IDC, 2011

This situation attributes to the following reasons on the part of customers:

y Firstly, some enterprises are still accustomed to operating their IT departments by themselves. There is still a large room for desktop IT outsourcing, since some Chinese enterprises still cling to the habit of addressing IT problems on their own, despite the fact that some problems are often beyond their capabilities;