IT Automation Reduces Technical Services Revenue for the Channel
Filed under: Cloud Computing
New generation of servers are a lot less costly to deploy and manage
Major advances in IT automation hold both great promise and significant amounts of peril for solution providers in the channel.
Both IBM and Hewlett-Packard have moved to significantly reduce the total cost of IT by introducing new system architectures that make extensive use of IT automation. In the case of IBM, the PureSystems the company announced today immediately recognize classes of application workloads, which they then learn about in more detail the longer the application workload runs on an particular system.
That information not only reduces the amount of time it takes to deploy an application, it can also be used to dynamically adjust system settings with no human intervention required.
Similarly, HP recently launched unveiled Proliant Gen 8 servers that also take advantage of IT automation to automate many routine systems management tasks. And arguably, Cisco started the whole shift towards increased reliance on IT automation with the introduction of the Cisco Unified Computing System (UCS).
With the unveiling a PureSystems that not only automate systems management but also dynamically adjust to meet the needs of different classes of application workloads, IBM is obviously trying to take IT automation to a much higher level.
Theoretically, these and other IT automation advances are good thing for the channel in that it should free up dollars within IT budgets that are dedicated to IT operations. Specifically, customers are typically spending as much as 50 to 70 percent of their IT budgets on keeping existing systems running. In theory, a new generation of system that lowers the cost of operating the IT environment would mean that customers would have more money to spend on additional IT projects. However, it’s also just as likely that more customers may simply decide to reduce the amount of money they spend on IT by simply dropping the savings on IT operation expenses to their bottom lines.
The other big threat these systems bring to the channel is the probability that the amount of money spent on technical services associated with configuring systems is going to drop substantially. It can take as long as 11 months to deploy some enterprise-class applications on systems today. If that gets reduced to a matter of weeks, the number of billable hours that a solution provider can charge customers for will also drop substantially.
The good news is that for solution providers that have become providers of cloud servers these new generations of systems are a major boon. The cost of labor associated with scaling their data center environment should drop significantly, which means they will be able to more profitably scale their operations.
In short, the rise of IT automation has some significant implications for business models in the channel. Solution providers that are still very dependent on technical services revenue will soon be in for a shock, while those that have moves to embrace the delivery of IT services will be pleasantly surprised.
That doesn’t necessarily mean that technical services are going away as a revenue stream, but it does mean that whether the system is deployed on the customer’s premise or in the cloud the amount of time and money associated with managing it will be much lower than before.