Brennan Mid-Market Insight Series - Spotlight Virtualisation

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BRENNAN MID-MARKET INSIGHT SERIES

Spotlight: VirtualisationIssue 3 | June 2008 Research and Content Contributed by IDC Australia

Brennan Mid-Market Insight Series: Virtualisation 2 June 2008 © Brennan Pty Ltd © IDC Australia

Table of Contents

Introduction 3

Key Findings 4

State-of-Play 5

Perceptions of IT, challenges and priorities 9

Outsourcing 20

Virtualisation 29

Research Methodology 38

Glossary 39

About Us 40

The content and graphs contained within this report may be cited in media and communications provided that all portions of

text and graphics are referenced: "Source: Brennan Mid-Market Insight Series May 2008.”


Welcome to the third edition of the 2008 Brennan Mid-Market Insight Series - a unique bi-annual report into the technology state-of-play of the Australian Mid-Market, with content contributed by IDC Australia.

The Mid-Market sector, which refers to companies employing between 50 and 499 staff, is a substantial segment of the Australian economy, representing 27,100 businesses across the country. Mid-Market companies are a link between small businesses and the corporate sector and often have to deal with constraints from both sides. Their IT&T needs are not very different from enterprises but often their budgets look more like those of small businesses.

This report in the Brennan Mid-Market Insight Series explores the impact which virtualisation has on both operations and performance of Mid Market companies.

We look forward to releasing our fourth report in the fourth quarter 2008.

About this report

The 2008 Brennan Mid Market Insight Series is based on seven market surveys conducted by IDC Australia. Respondents employing between 50 and 499 staff have been selected for the results, and this range will define the Mid-Market for the purposes of this report.

About Brennan

Brennan is a leading provider of IT services and Telecommunications to the Mid-Market. Since 1997 we have been partnering with our clients to deliver a range of IT&T solutions to improve productivity, enhance performance and achieve organisational transformation. Our solutions include technology sourcing, infrastructure integration, software development, fully managed and secure IT&T solutions and consulting services.

For more information: www.brennanit.com.au

About IDC

IDC is the premier global market intelligence and advisory firm in both the information technology and telecommunications industries. IDC analyses and predicts technology trends so decision makers can make strategic, fact-based decisions on IT purchases and business strategy.

For more information: www.idc.com

Introduction


Key Findings

Highlights:

According to the Australian Bureau of Statistics, there are around 27,100 Mid-Market companies in Australia. These companies will spend on average A$220,000 in IT and A$128,000 in telecommunications per year, equating to around 3.0% of their revenue.

The role of CIO is changing, 78% of Mid-Market IT Managers/CIOs are reporting to the CEO in 2008 against only 55% in 2006, illustrating the increase of IT in the business strategy.

The IT Information Library (ITIL) is the most widely accepted approach to IT service management in the world. However this impressive framework of best practices is not strongly recognised in the Australian Mid-Market as 70% of IT managers do not know what ITIL is and only 20% have already implemented ITIL in their company.

The coming years will see a strong activity from IT vendors, the problem for most IT managers will not to decide if they will outsource but when and to who? Selecting an outsourcer for the long term will be high on the agenda.

The majority of Mid-Market businesses associate outsourcing with cost reduction. These savings are usually achieved through higher productivity of skilled staffed working for the outsourcer, more efficient IT management processes, economies of scale resulting of share use of systems management tools and lower cost of sourcing equipment through bargaining power.

When it comes to selecting an IT services provider, Mid-Market companies rank quality of professional staff the highest, they are also looking for a provider who is financially solid and who will be able to understand their industry.

Mid-Market companies are in majority interested in using a one stop shop for their IT products and services. Often the single provider will also be used as a trusted advisor when it comes to making major investment decisions..

Mid Market companies are starting to experience challenges in the management of the data centre. Increasing power, cooling and space requirements as well as rising administration costs are driving them to invest in consolidation and virtualisation as well as in better administration tools

Virtualisation is here to stay. Data centres can be better managed using virtualisation: utilisation ratios increase, power and cooling requirements decrease as well as administration costs. The recent availability of comprehensive desktop virtualisation suites will change the the IT is delivered to the desktop.

There is still a lot education to be done regarding virtualisation. Businesses that have not deployed virtualisation yet often do not fully understand the benefits of the technology, or are worried about reliability or costs. It is up to the virtualisation vendors and partners to develop education in the mid-market to overcome these worries.


Mid-Market: State of Play



Spending on IT and Telecommunications by Australian Mid-Market companies (A$ million)

0

2,000

4,000

6,000

8,000

10,000

12,000

2007 2008 2009 2010 2011 2012

Telecom.

Software

Services

Hardware

Source: IDC, ICT Market Model, 4Q07

Estimates based on data from the Australian Bureau of Statistics show that there are around 27,100 businesses in Australia employing between 50 and 499 staff, which defines the Australian Mid-Market for the purpose of this study.

In 2008, Mid-Market companies spend on average A$220,000 on IT and A$128,000 on telecommunications, representing around 3.0% of their annual revenue.

Hardware represents 30% of ICT spending, this amount is set to increase on average by only 1% every year till 2012 due to constant decline of hardware prices. Hardware investments will essentially be driven by the replacement of desktop PCs by laptop computers, and by printing and imaging.

Services represent 21% of the ICT spending and will grow at a solid 4.7% per year, essentially driven by outsourcing and systems integration.

Software represents only 14% of ICT spending, but will experience the strongest growth with 8.1% due to the accelerating adoption of Enterprise Applications, Business Intelligence and Security software.

Telecommunications represent 37% third of ICT spending and will increase at 3.6% per year, the growth will be mostly driven by fixed and mobile IP data, and mobile voice.

Mid-Market companies spend $350,000 per year on IT&T



Breakdown of IT expenditure in Australian Mid-Market companies (%)

Computer hardware and software represent 42% of the overall IT expenditure of mid-market companies.

Internal and external staff represent 22% where external IT services (including outsourcing) represent only 6%.

0% 5% 10% 15% 20% 25% 30%

Other

Education/Training

Networking hardware and software

External Staff (contractors)

External IT services

Maintenance (hardware andsoftware)

Data communication costs

Internal staff

Software

Computer Hardware

Source: IDC, Forecast For Management Survey 2008



Business outlook now and in 6 months

0%

10%

20%

30%

40%

50%

60%

70%

VeryPositive

Positive SomewhatPositive

Neutral

Today

6 Months


Economic performance in Australia in the past five years has been strong and has put Mid-Market companies in a solid financial position to prepare for the future.

The business outlook continues to be favourable, 80% of Mid-Market companies have a positive to very positive view of their business outlook now and in six months time.

The current favourable economic conditions constitute an ideal time for cashed up Mid-Market companies to seriously consider investing in modern information systems and services that will help them run their business more efficiently by increasing productivity, lowering costs, and deploying ecommerce-oriented solutions.

The long term economic outlook remains quite positive: unemployment is at an all-time low, and the resources boom continues to wonder economic observers and fill the coffers of the Treasurer and the wallet of shareholders.

The credit crunch is affecting financial markets but effects on the real economy remain to be seen. Inflation might the main worry and we might see another increase of interest rate before the end of 2008 following tax cuts in the 2008-2009 budget.

Private and public investments will remain strong due to a deficit in capacity of production and the creation of the “Building Australia” fund.

Outlook is positive for 80% of businesses


Perceptions of IT, challenges and priorities



Impact of IT on business in Mid-Market

Source: IDC, Forecast for Management Surveys 1996-2008

Mid-Market companies continue to see IT primarily as a factor of operational capability, as stated by 60% of IT managers. Yet, IT as a strategic tool is also high on the radar.

The focus on the role of IT in the business depends on where the company is located on the maturity curve: the majority of Mid-Market companies are still using IT purely for an operational purpose and thus have not reached the point where they need to radically change the way they do business in order to gain a competitive advantage. Once they reach this point, management’s perception of IT starts to change as they realise that IT has to be a central component in the business transformation process.

Mid-Market companies should start thinking about where they are located on the maturity curve: how long have they been in business? Can the business grow substantially in its current model? What adjacent markets could be entered and how could technology help penetrate these new markets?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

IT is contributing to operational capability

IT is a source of competitive advantage

40% of businesses now see IT as strategic



Role of the CIO/IT Manager in Mid-Market: who does he or she report to?

Source: IDC, Forecast for Management Surveys 1996-2008

The trend towards a more strategic role of IT in Mid-Market companies is better illustrated by the change in the role of the CIO in the recent past.

The late nineties saw the rise of the CIO in the boardroom as IT was supposed to revolutionise the way business was done. Then followed the dot com crash of 2001-2003 and CIOs were relegated to the cost centre and more of them reported to the CFO.

This trend started to reverse from 2004 and the last three years have seen the status of CIOs increase sharply. In 2008, 78% of CIOs were in the management team, obviously at the expense of the CFO who is losing control of IT budgets.

0%

10%

20%

30%

40%

50%

60%

70%

80%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Chief Executive Officer Chief Financial Officer

The role of the CIO/IT manager is again strategic


0% 5% 10% 15% 20% 25%

Integrate more closely with businesspartners

Move into new regions and / orcountries

Controlling / reducing costs

Support competitive opportunities

Exploit our existing markets moreefficiently

Expand into new industry sectors

Gain a better understanding of ourcustomers' requirements

Introduce new products & services

Improve customer service

Improve infrastructure


Top Business Priorities in Mid-Market

Mid-Market companies have their business priorities focused on two themes:

Increase operational capabilities: this is achieved by delivering more efficient customer service and improving the infrastructure (as defined by hardware and infrastructure related software). This is where technology can directly help raise the ratio of capital to labour.

The challenge for IT managers is to determine which IT investments will impact most favourably on the productivity of the business. Improving customer service is a very efficient way of increasing productivity: not only are customers serviced faster with less staff, but their satisfaction also increases and with it their loyalty.

Improve go to market strategies: this involves faster product development, better market coverage and expansion into new markets. E-commerce is obviously a central element in this strategy, but technology can also allow the development of completely new products.

Productivity gains are high priority objectives




Top IT Priorities in Mid-Market

0% 5% 10% 15% 20% 25% 30%

Service-Oriented Architecture

IP Telephony

Wireless and Mobility

eBusiness

Customer Relationship Management

Supply Chain Management

Business Intelligence

Enterprise Resource Management

Systems Infrastructure

Collaborative Technologies andKnowledge Management

There is today a growing necessity for businesses to work more efficiently and be able to intelligently share information, the vendor community has responded to this demand by developing tools specifically dedicated to collaborative technologies and knowledge management. These types of solutions are expected to grow strongly in the coming years, at a rate of around 20% per year.

Collaborative technologies encompass a number of products:

- Integrated collaborative environments (or groupware, the dominant form of corporate email)

- Messaging applications, which breaks down further into: - Standalone email applications - Enterprise instant messaging (EIM) applications - Unified messaging applications

- Conferencing applications

- Team collaborative applications

Knowledge management tools are designed to gather, organise, maintain and secure information. A typical example of a knowledge management product would be Microsoft Sharepoint server.

Collaborative technologies and knowledge management high on the list




0% 10% 20% 30% 40% 50% 60% 70% 80%

Have not implemented an Intranet

Sales

Marketing

Finance

Operations

Human Resources

Information Systems

Executive Management

Mid-Market companies are heavily using Intranets for operations and management. However effective use of an intranet goes beyond just deploying a web server within the company and requires a substantial amount of business processes to keep it alive, up-to-date and useful.

The use of intranets are beneficial for streamlining repeatable processes and administrative tasks such as booking leave, paying cheques, downloading departmental reports, knowledge sharing.

The immediate benefits of organisations are easily identified and justified hence only 15% of businesses have not implemented an intranet.

Industries that are very business process oriented such as banking and finance are more likely to have deployed in intranet and be actively using it. The intranet is a great way to rationalise business processes.

Areas of business using an Intranet



0% 10% 20% 30% 40% 50% 60% 70% 80%

Telecommunications and IT convergence

Data w arehousing / business intelligence

Managing the netw ork

Ensuring data security and integrity

Systems development quality

Reskilling your IT staff

Aligning IT/IS w ith the business direction

Management of change/migration

Recruiting and retaining skilled staff

Keeping abreast of new technologies

Migrating to new hardw are/softw are

Meeting users' expectations

Developing effective business cases

Reducing costs


Major IT Challenges in Mid-Market


Reducing costs is an ongoing headache for IT managers: they must provide improvements in performance and functionality while keeping costs low. This can be very challenging in the current context of the skills shortage, which is driving IT salaries up.

The challenges experienced by IT managers are multiple and sometimes irresolvable without external help. Often, solutions that could improve business processes while increasing security and data management are identified but then implementation cannot go ahead due to lack of in-house expertise. The best approach in this situation is to use the services of an IT company familiar not only with the solution selected but also with the specific customer’s business and technical requirements.

Migrating to new hardware and software platforms is a necessary requirement of business to keep up with technology and allow the deployment of new solutions. However, migration is often a complex operation that must be carefully prepared and tested because of its potential to disrupt the business. IT managers are expected to align IT with the business direction and meet users expectations. To do so they must find the best trade-off between ensuring systems stability by using proven solutions and help business expansion and rationalisation through innovation.

Operational issues top the list of IT challenges



Type of financing in Mid-Market


Lease or rent19%

Purchase outright

81%

Although Mid-Market companies still show a preference for owning their IT equipment, a significant proportion of businesses prefer to lease or rent their equipment.

The implications of leasing or renting are complex and usually provide a number of benefits to the business:

Different accounting of cost. Lease or renting is an operational expense as opposed to a capital expenditure. This has benefits from a tax perspective as OPEX are deductible in the year of purchase whereas CAPEX must be amortised.

Greater flexibility for hardware upgrades. Not owning the equipment makes it easier to move to the most recent equipment at the end of the lease period, as it is only a matter of returning the old devices and renting new ones. There is no need to write off assets and to physically dispose of them as this is taken care of by the rental company.

Potential savings while combined with a managed services contract. Using the services of an outsourcing company to manage infrastructure can present substantial savings if the outsourcer can also take care of the asset management, specifically the sourcing of new rented equipment and the negotiation of volume discounts with the hardware vendor.

Need for risk mitigation. Obviously not owning the equipment presents the risk of losing control of this equipment. This is why is it essential to have a risk mitigation strategy in place: What should be rented and what should not? What is the contingency plan if the rental company goes into receivership?

A significant proportion of businesses lease or rent their equipment



Awareness and adoption of ITIL in Mid-Market


0%

10%

20%

30%

40%

50%

60%

70%

Already Dec-08 Dec-09 No plan Don'tknow/NA

The IT Information Library (ITIL) is the most widely accepted approach to IT service management in the world. ITIL provides a cohesive set of best practices, drawn from public and private sectors internationally. It is supported by a comprehensive qualifications scheme, accredited training organisations, and implementation and assessment tools.

However, this impressive framework of best practices is not strongly recognised in the Australian Mid-Market – 70% of IT managers are not aware of ITIL, or have no plan to implement it, and only 20% have implemented ITIL in their company.

IT services companies should educate the Mid-Market on the advantages of ITIL so it can be of benefit to a larger part of the business community. It is the role of the vendor community to include in their marketing strategy a strong emphasis on ITIL and allocate the necessary budgets to fund this effort.

On the other side of the fence, IT managers should keep in mind that the implementation of ITIL is a very complex task and the safest way is to use the services of a company that has extensive ITIL experience.

ITIL? 65% of businesses don’t want it!



0%

5%

10%

15%

20%

25%

30%

Under 12months

12-24 months 24-36 months 36-48 months Don't know

IT managers are under pressure to show a Return On Investment (ROI). IT projects can be of varied nature, the ROI on those related to the deployment of applications can be more easily measured than those related to pure infrastructure as the productivity gain can be measured at the application level and there is a direct impact on the output of the business unit.

Half of Mid-Market companies expect a positive ROI under two years, split between 22% for less than 12 months and 28% for 12 to 24 months.

Around 17% of Mid-Market companies do not know what ROI to expect. This illustrates the ad hoc approach that is often adopted in the deployment of new applications.

Expectation on IT projects to show a positive ROI


ROI is king …



0%

5%

10%

15%

20%

25%

30%

35%

40%

IT & BusinessLeaders shareaccountability

IT Leaders Business Leaders Don't know

The responsibility for achieving an ROI on IT project only lies solely with the IT Managers in 34% of the cases.

Business leaders are fully responsible in 33% of the cases and share responsibility with the IT leaders in 31% of the cases.

This clearly demonstrates that business leaders are strongly involved in IT projects and that they must be consulted at all stages of design and rollouts.

The increase in joint accountability is testimony to the advancement in the way that business leaders and IT leaders approach IT projects; also that IT projects are no longer seen as separate from the business and in fact a recognition that IT projects in reality are there to support the needs of businesses to lead and support it strategically and operationally.

The recognition of joint accountability highlights that everyone in the organisation has a stake in the success of such projects and proving ROI is not just the onus for IT. Joint accountability means joint ownership so that all parts of the organisation are pulling in the same direction

Accountability for ROI of IT projects


ROI is everyone’s problem


Outsourcing in Mid-Market



Usage of outsourcing in Mid-Market

Yes40%

No60%

Around 40% of Australian Mid-Market companies are using some sort of outsourcing in 2008. This includes elements such as end-user computers, servers, network devices, web hosting and application management.

Outsourcing has come a long way in the recent years. Large services companies have focused first on the enterprise space and have gained significant experience in managing IT systems on behalf of their customers. They are now looking at the Mid-Market as the next segment to enter but they will need to learn how to design products and services adapted to the Mid-Market with a reasonable price tag.

In the meantime, mid-size IT services companies have taken the time to study the needs of Mid-Market businesses and have designed their services around these specific requirements. Large services companies will have to compete with these well established smaller players and it will take some time and effort before they will be able to do so efficiently.

The convergence of IT services and Telecom is the third variable to consider in this equation: the mergers of Telstra and KAZ, Optus and Alphawest, and a few others, are symptomatic of the changes happening in the market.

The end result for the Mid-Market is strong activity from more IT vendors. The problem for most IT managers will be not to decide if they will outsource, but when and to whom? Selecting an outsourcer for the long term will be high on the agenda.

Outsourcing: it’s a matter of when, not if




IT areas outsourced in Mid-Market

0% 10% 20% 30% 40% 50% 60%

Call centre operations

Help desk

IT/IS strategy development

Disaster recovery

Desktop management

Network management via a telco

Application development

System technical support and operations

System/network design and integration

Application maintenance

Network technical support and operations

Some Most

Amongst those Mid-Market businesses who are using outsourcing, technical support and design/integration are the areas that are likely to be outsourced entirely, or at least for the most part.

This highlights the need for Mid-Market businesses to rely on a highly competent systems integrator who will be able to design new systems and implement them into the customer’s existing infrastructure.

On the other hand, in the areas of strategy, help desk, and call centre operations, businesses tend to keep a certain level of control and outsource only some of the functions to external parties. This is where IT services companies need to work in close collaboration with their customers to provide as much help as possible while respecting the level of control that these customers wish to retain on their operations.

Technical support and systems integration are most outsourced




Top perceived benefits of outsourcing in Mid-Market

Source: IDC, Outsourcing Survey 2008

0% 10% 20% 30% 40% 50% 60% 70%

Other

Enhancedbusiness model

Access to state ofthe art technology

Strategic ITdirection

Reduced risk

Focus on corebusiness

Access toskills/resources

Cost savings

When it comes to perceived benefits from outsourcing, Mid-Market businesses clearly associate outsourcing with cost reduction. These savings are usually achieved through the higher productivity of skilled staff working for the outsourcer, more efficient IT management processes, economies of scale resulting from the shared use of systems management tools and a lower cost of sourcing equipment through bargaining power.

The full realisation of the cost savings can only occur if they can be measured. Many Mid-Market companies are in the uncomfortable position of not being able to estimate accurately the cost of their IT for multiple reasons, the main one being a lack of a central IT sourcing function associated with inadequate accounting practices. IT companies looking at providing outsourcing services should be in a position to help IT managers determine the cost of their IT before potential savings can be estimated.

In the current shortage of IT skills, using an outsourcer allows access to qualified personnel that Mid-Market businesses would not be able to afford otherwise. Using these skills as well as sound management processes reduces overall risk and generates higher system uptime.

While systems are better taken care of for a lower cost, IT managers can concentrate more on the core business and start thinking about using IT strategically and prepare long term plans that will enhance the way the business operates.

Cost savings is the prime expected benefit from outsourcing



Realisation of benefits from outsourcing in Mid-Market


0% 10% 20% 30% 40% 50% 60% 70% 80%

Implementationsuccess

SLAs

Governance

Value-addcomponents

Technicalinput/direction

Relationship

Flexibility

Cost savings

For those Mid-Market companies who have chosen to use outsourcing, expectations are usually met with a high degree of satisfaction. The highly expected cost savings of outsourcing are generally realised. This is now a common and widely accepted fact: outsourcing does deliver cost reduction.

The perceived risks of loss of control, security of processes and relationship are alleviated by the fact that a large proportion of IT managers have benefited from a strong relationship with their outsourcer that has allowed their IT to be more flexible and more aligned to the business by taking advantage of the value-add brought by the outsourcer.

It does pay to use outsourcing



Top perceived risks of outsourcing in Mid-Market


0% 10% 20% 30% 40% 50% 60%

Other

Maintenance of third partyrelationships

Lack of intellectual property

Organisational deskilling

Potential loss or reduction of servicelevels

Security issues with revealing internalprocesses

Unrealised cost savings

Loss of control

Deciding to outsource part or all of a business’s IT is not exempt from risk. The majority of Mid-Market businesses associate outsourcing with a loss of control, and many IT managers are deterred from using outsourcing in fear that the outsourcer will take over systems while internal IT staff and managers who have had a long experience in running these systems will not be able to have their say.

To overcome this perception, outsourcing companies should place an emphasis on partnering with the customer above all else. IT managers remain the final decision maker and it is essential that the outsourcer acts as a trusted advisor to the IT manager. The notion of trust is paramount to the success of this partnership, and most of the effort should come from the outsourcer who must demonstrate that all decisions and plans will benefit the customer first.

Once this trust is established and maintained, issues around security of internal processes and third party relationships will simply be resolved.

Despite the fact that cost savings represent the greatest benefit of outsourcing, there is still a perception in the overall Mid Market that these savings might not realised. It will be up to the service providers to demonstrate how and where cost savings will be generated through outsourcing.

Loss of control is the main concern associated with outsourcing


Attitudes towards outsourcers

Criteria for selection of an IT services provider in Mid-Market


3.6 3.7 3.8 3.9 4.0 4.1 4.2

Cultural Fit

Service LevelAgreements

Relationship

Infrastructurestrength

Financial stability

Skills ofprofessional staff

Industryknowledge

When it comes to selecting an IT services provider, Mid-Market companies rank the skills of professional staff very high. This is particularly true in the current context of skills shortage. They are also looking for a provider who is financially sound and who will be able to understand their industry and thus design and deliver solutions well suited to the requirements of the customer’s business.

Industry knowledge is particularly important as businesses need to be sure that the investment recommendations from the IT company will fit not only their needs but also the constraints of the particular industry they operate in.

Mid-Market IT managers are more interested in quantifiable criteria that can be demonstrated early in the sales cycle than in elements such as service level agreements, relationship and cultural fit that are usually delivered and managed during the execution of the contract.

Looking for: professional, financially independent, and hands-on



Sourcing of technology products and services in Mid-Market

Source: IDC, Infrastructure Survey 2008

Mid-Market companies are in majority interested in using a one stop shop for their IT products and services. Using a single provider presents multiple advantages. The main benefit is being able to use someone who has a sound understanding of the customer’s business and requirements. Thus, well suited solutions can be designed and delivered with a minimum of lead time. Cost savings are also an important benefit as the customer is in a position to negotiate lower prices based on the volume of business with the single provider.

Often, the single provider will also be used as a trusted advisor when it comes to making major investment decisions – the customer can rely on the technical and industry knowledge of its provider to formulate long term investment plans.

Establishing this trust between customer and provider is a long process and should be seen as a long term engagement. Most of the responsibility lies with the provider as trust can easily be damaged. The IT company will not only need to meet expectations every single time but also be responsive to its customer’s queries while acting behind the scenes to ensure that technical and industry knowledge is maintained and updated.

One stop shop is the way to go, someone who does it all, and advises me

58%

42%

One-stop shop (a single IT vendor for allcompany's IT needs)

Best of Breed (multiple vendors)


Challenges in attracting/retaining IT staff

Source: IDC, Infrastructure Survey 2008

The shortage of IT skills can be seen across all areas. The majority of Mid Market companies find attracting and retaining staff to be very challenging to extremely challenging.

The impact of the skills shortage is particularly felt in the areas of implementation and analysis, enterprise applications, networking, integration, security, and systems/storage personnel.

Outsourcing is one way of alleviating this problem as IT services companies can provide IT talents to their clients that they couldn’t afford otherwise.

There is a skills shortage across all disciplines of IT

0% 20% 40% 60% 80% 100%

EnterpriseApplications

Database/Dataintegration

Systems/Storage

Security

Networking

Project/ProgrammeManagers

BusinessAnalysts/Architects

Not at all challenging Somewhat challenging Challenging

Very Challenging Extremely Challenging



Virtualisation


Virtualisation

Current priorities with respect to the data centre

Source: IDC, Continuum Survey 2008

Data centres are overburdened with a record number of servers, storage and systems, network, power and cooling equipment. IT managers are often faced with the complex task of managing multiple servers in the data centre. Typically these servers would have a low CPU utilisation and would consume unnecessary amounts of power and cooling, while taking up valuable rack space.

Additionally better automation and management tools can help keep administration costs under control. There have been significant improvements in blade servers, which are being sold with complementary management tools and virtualisation capabilities.

Businesses have the difficult challenge of balancing costs with increasing revenue whilst providing a streamlined and efficient service to customers. In the drive to stay ahead of the competition and meet the demands of the market, the data centres being built today for the future need to be more flexible, adaptable and energy efficient.

virtualisation is a key technology that will drive the capabilities of meeting the needs of the business and is fast becoming a mainstream management tool for data centres. Substantial increase in capacity and reduction of power consumptions can be achieved through server virtualisation.

Server virtualisation is high on the priority list

0% 5% 10% 15% 20% 25% 30% 35% 40%

Other

Deploy ing solutions to

better measure power

consumption

Reducing the operating

temperature of our

serv ers

Better understanding of

what a "next generation"

data center

Deploy ing solutions to

reduce power consumption

Re-design our data center

to increasing the capacity

Serv er Virtualisation - to

increase the utilisation

rate

Better management and/or

automation tools


Virtualisation

Data centre can accommodate increased demands for power and cooling over next 2 to 3 years

Data centres are currently going through through a process of consolidation with a greater emphasis on energy efficiency.

Around 19% of Mid Market will be faced with insufficient power and cooling in their data centre in the next 2 to 3 years.

Often moving or extending the data centre is not really an option due to cost considerations and the need to demonstrate an ROI for the investment. IT managers then need to find ways to increase server capacity with no increase in power and cooling. Server consolidation and virtualisation can be two efficient ways of achieving this objective.

Yes76%

No19%

Do not know5%


Existing data centres must be able to do more with less


Virtualisation

Who pays for the power and cooling costs associated with the data centre?


0% 5% 10% 15% 20% 25% 30% 35% 40%

Other

Don't know

Costs are part ofBuilding Lease/Rent

Facilities Budget

IT Organization Budget

Administrative/CorporateBudget

Power and cooling costs will become another IT problemThe effects of server energy costs associated with the cost of power and cooling have an impact on both IT and business operations. Organisations are pushed to seek solutions that curtail energy consumption of data centres as the power and cooling thresholds of data centres are being hit. This would undoubtedly constrain the IT departments ability to expand and match business requirements.

So far, power and cooling costs are directly attributable to the IT budget in 19% of the cases. These costs are more usually charged against the administrative budget (36%) or the facilities budget (14%).

With the growing cost of power, IT managers can expect power and cooling costs to be increasingly charged against the IT budget and kept under control by the IT department.


Virtualisation

Is the administration cost of the data centre a significant challenge?


0% 10% 20% 30% 40% 50% 60%

Don't know

Yes, it is a significant challenge - andwe are taking steps to address it (e.g.,

consolidation, investing in bettermanagement tools, virtualization, etc…)

Yes, it is a significant challenge - but wehave not yet taken steps to address it

No, it is not a significant challenge forus at this time

The rapid increase in number of physical devices are reaching a critical point. The physical layout of data centres are being challenged where floor space is running out as well as rack space. The administration costs of running data centres, with the physical constraints as well as the battle to keep systems powered and cooled are pushing customers to look for alternative more viable solutions to their current problems.

More than 30% of Mid Market companies feel that the cost of administering and managing the data centre has been rising, and is now a significant challenge for your organization. These companies have invested in better management tools and virtualisation to address this problem.

Data centre administration costs are becoming a challenge


Virtualisation

What proportion of servers is virtualised?


0% 10% 20% 30% 40% 50% 60%

None - we don'thave virtualised

servers

Less than 10% ofservers

10% to less than25% of servers

25% to less than50% of servers

50% or more of ourservers

Business are increasingly concerned with improving the operational management of distributed environments and the costs and inefficiencies that go hand in hand with this.

The adoption of server virtualisation is being driven by the demands and the needs of business. It is fast becoming an undisputed trend that is here to stay. We see that around 20% of Mid Market companies have virtualised more than a quarter of their servers, whilst 13% have more than 50% of their servers virtualised.

Virtualisation does not only help with power and cooling concerns, there is the reduced cost in server hardware, improved levels of management, improved availability and increased flexibility in supporting business needs.

Virtualisation is one trend that is not going to disappear, furthermore as this solution is increasingly adopted, it will have an impact on other adjacent technologies such as storage.

Virtualisation is here to stay


Virtualisation

Why have you decided not to deploy virtualised servers thus far?


0% 5% 10% 15% 20% 25%

Not sure whether itcan be deployed in

environment

We are consideringor testing

Virtualization is tooexpensive

Don't think it isreliable enough

Don’t fullyunderstand the

benefits

Even though virtualisation has been around for a while, the technology is constantly improving and still evolving to include wider applications which will go beyond server consolidation.

It takes a while for business owners to invest in trends that may initially seem like fads. From this survey it is apparent that companies that haven’t deployed virtualisation as yet, mostly demonstrate a lack in understanding of the benefits that virtualisation can bring to them, as well as showing an anxiety over the reliability of the technology. It is up to the vendor community to continue to educate the market on the tangible benefits and its concerns

A strong ROI case needs to be built and “sold” to senior executives, especially as the initial investment in virtualisation can be costly.

Is virtualisation for me?


Virtualisation

Reasons to deploy virtualisation


0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

To drive serverconsolidation efforts

Helps in buildingredundancy therebyimproving availability

To ease testing anddevelopment of

applications

Improve energy efficiency

Reduce the time it takes tobuy and install a server

Reduce Costs

SimplifyManagement/Maintenance

Virtualisation is an exciting technological trend that is seen to have multiple advantages, that are considered both hard and soft. Virtualisation is a process whereby virtual servers are able to coexist on a single physical server, thereby reducing the number of servers that take up space in the data centre. Virtualisation enables better management of systems and processes with improved availability, as well reducing costs associated with sever hardware investments.

The challenges of managing a multitude of physical servers has greater hidden cost implications for IT personnel. Virtualisation is clearly viewed as a mainstream management tool to address this operational challenge.

Those who have decided to go down the path of virtualisation have benefited not only from cost reduction through decreased hardware and power requirements, but also from increased productivity through reduction of time to provision a new server and easier testing and development process.

What are the benefits of virtualisation?


Virtualisation

Please indicate your usage of virtualised desktops

Source: IDC, Verticals Survey 2008

Virtualised desktops consist of Windows user desktop sessions running in the data centre and displayed to the user using a thin client device in the most typical case.

Only screen updates, mouse and keyboard actions travel over the network. All the processing happens in the data centre. Thin clients are usually locked down devices with no hard disk and little processing power. They present the advantage of being very resilient, low maintenance and manageable through a single console.

On the server side, three architectures are competing:

• Citrix server based computing is the most established technology with 15% of businesses using it as a desktop replacement. Citrix desktops are best suited to task workers such as call centres or data entry.

• Virtualised desktop infrastructure consists of multiple virtual PCs running on servers in the data centre. This technology is currently attracting a lot of attention as it alleviates some of the problems of server based computing and allows virtualised desktops to be delivered to knowledge workers who require more complex tools than task workers. Around 28% of businesses are piloting or evaluating this technology.

• Blade PCs are “PCs on a card” mounted in a rack enclosure in the data centre. Blade PCs provide the same power as a full desktop PCs while being easier to manage in the data centre. Blade PCs are designed for users requiring full PC performance.

0% 20% 40% 60% 80% 100%

Consolidated ClientInfrastructure

(blade PC)

Virtualised DesktopInfrastructure

(virtual PC)

Server BasedComputing (Citrix)

In production Pilot phase Evaluation phase No plan/Not Aware

Desktop virtualisation will profoundly change the way IT is delivered


58%26%

16%

50-99 100-199 200-499

This research findings of this report were based on four market surveys conducted by IDC Australia in 2008. Respondents employing between 50 and 499 staff have been selected for the results, this range defines the Mid-Market for the purpose of this report.

These surveys were:

Forecast For Management Survey 2008, N = 193 Outsourcing Survey 2008, N = 84 Infrastructure Survey 2008, N = 79 Continuum Survey 2008, N = 42 Vertical Industries Survey 2008, N = 193

For example, a sample size of N=105 provides overall results with a confidence interval of +/-9.6% at 95% confidence level, which IDC considers robust.

IDC surveys Mid-Market employee size segmentation (N = 27,100, source ABS)

Mid-Market employee size segmentation (N = 27,100, source ABS)

0

1,00

0

2,00

0

3,00

0

4,00

0

5,00

0

6,00

0

7,00

0

8,00

0

9,00

0

Utilities

Government

Telecommunication and Media

Education

Banking, Finance and Insurance

Health

Transportation

Resource Industries

Construction

Manufacturing

Retail and Wholesale

Business Services

Research Methodology


This page describes some of the terms used throughout the document.

Systems infrastructure: this term covers all the hardware composing the IT systems (PCs, Laptops, printers, servers, backup devices, network devices) and also the associated software that is typically deployed company wide (operating systems, system management software, email software, database software, office applications).

Services Oriented Architecture: SOA is a software architecture where functionality is grouped around business processes and packaged as interoperable services. SOA also describes IT infrastructure which allows different applications to exchange data with one another as they participate in business processes. The aim is a loose coupling of services with operating systems, programming languages and other technologies underlying applications. SOA separates functions into distinct units, or services, which are made accessible over a network so they can be combined and reused in the production of business applications.

Application Maintenance: AM services are designed to provide for the day-to-day operations, support, and maintenance of enterprise applications. AM services contain a number of discrete components, including but not limited to end-user support, reactive application maintenance, proactive application enhancements, and remote or onsite application monitoring. Various project-based activities can also occur within an AM contract, including but not limited to application development, package customization, implementation and integration, portfolio optimization, and legacy modernization.

ITIL: The Information Technology Infrastructure Library (ITIL®) is a framework of best practice approaches intended to facilitate the delivery of high quality information technology (IT) services. ITIL outlines an extensive set of management procedures that are intended to support businesses in achieving both quality and value for money in IT operations. These procedures are supplier independent and have been developed to provide guidance across the breadth of IT infrastructure, development, and operations.

Systems Integration: systems integration (SI) is a process that includes the planning, design, implementation, and project management of a solution that addresses a customer’s specific technical or business needs. It involves systems and custom application development as well as implementation and integration of enterprise packaged software.

Network management services. Network management services are the activities, skills, facilities, and network infrastructure captured within a contract associated with outsourcing the operations of a specific segment or entire network communication system of a company. The scope of work includes the installation and management of network tools that automatically monitor active nodes, traffic, revision management, and security.

Glossary


About Brennan

Founded in 1997, the Brennan Group comprises a number of technology and technology-related businesses built around the needs of the mid-market (50-500 seats).

The company, through its various lines of businesses and partnership approach, is uniquely poised to offer its clients the convenience, cost effectiveness and peace of mind of dealing with one provider for all their IT and Telecommunications needs.

Brennan’s solutions include a complete range of fully managed and secure IT and Telecommunication solutions, consulting and project services, technology sourcing, infrastructure integration, software development and tailored financing packages.

Brennan is also the largest national reseller of NEC telephony solutions.

To learn more about Brennan visit us at: www.brennanit.com.au

Contact details

Brennan Media enquiries

Tara Cullen Melissa Shawyer

Level 14, 45 Clarence Street The PR Group

Sydney NSW 2000 T: (03) 9662 2022

T: 02 8235 9595 M: 0412 066 048

E: [email protected]

About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy.

More than 1000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends covering over 110 countries worldwide. For more than 44 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company.

Learn more about IDC by visiting www.idc.com

About us

Documents

Brennan Mid-Market Insight Series - Spotlight Virtualisation