The Hindu Business Line : Way to go… Outsource to the US and cut cost

Computing and power supplies are more reliable, and cheaper, in the US. Mr Shiva Ramani, Co-Founder and CEO, Cybernet-SlashSupport (CSS), which is into technology and operations management, puts it succinctly: “We are keeping the people in India but moving computers back to the US, for, computing power and bandwidth are cheaper there.”

“Take my payroll application. It is power-intensive and hardware-intensive.” So, instead of spending on computing power and air-conditioning to maintain those servers, Mr Ramani outsources those requirements to Amazon’s S3 service that is available online. For the data his company sends and receives for nearly 5,000 employees, CSS spends a mere $10 a month for processing and storage.

“Compare that to nearly Rs 50,000 a month I would spend on purchasing and maintaining a couple of servers and on manpower deployed to run and maintain applications,” he says.

Cheaper options

The company recently closed down two data centres. It has also closed an annual maintenance contract for an expensive hardware machine, which was $15,000 a year. It has now opted for a $100-per-month model. Throughout the company, some 200 applications have gone out of company-owned servers and into online service provider machines. In other words, they have been ‘virtualised’. Over all, the company’s IT budgets have seen a 20 per cent slump in recent times.

On the power front, says Mr Ramani, consumption is down. “In five years, average power consumption on desktops is down to 40 milliwatts, one-fifth of what it was.” CSS has expanded its facilities in the last few years and yet it has saved significantly on power. “The difference in our annual power bills is about Rs 12 lakh,” he says.

Storage savings

Mr Ganesh Mandalam, CEO of Xerago, which offers Web site operation and analytics services, agrees. On storage services, he says the options, like Microsoft’s Skydrive, are myriad. Xerago uses such services to store processed data for its clients, including the world’s biggest software maker and one of the world’s largest banks.

While he doesn’t put a figure to the savings, Mr Mandalam says, “By outsourcing storage and processing services, you can save on more than half your network budget. But the true attraction is not in immediate savings. Amazon’s background network, for instance, is robust. This means a business’ requirements can grow but the expenses would only mount in linear fashion. Huge investments can be avoided,” he says.

Telecom costs

The telecom network is another area companies are looking at to cut costs. Mr Ramani is evaluating SIP (session initiation protocol) phones for his entire company. At $12 per phone, conversations inside a building can be free over the Wi-Fi network.

You can use it from home to office too, with a broadband facility, according to him. “Compare this with the $250 phones now in our offices. We have asked our existing US telephone service provider to support our SIP on their exchange” he says. Already, CSS’ telephone bills have gone down 80 per cent over time.

So, why the sharp focus on such measures? “For smaller companies, the trigger is the need to maintain or improve margins,” says Ramani.

Clearly, IT biggies in India have a brand that allows them to both get more deals while attracting talent at a lower cost. Smaller companies cut costs with such measures. Add to that the headache of the appreciating rupee, and you have a good case for outsourcing to the US.

Telecom, power and IT administration costs are about 10 per cent of total costs in an IT company, thumb-rule estimates say. So, if your focus is IT, start sharpening your scissors today!

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