Managed IT infrastructure a trend to watch during 2020

According to statistics from International Data Corporation (IDC), a global market intelligence firm, total information technology (IT) spending in Kenya stood at $2 billion (Sh200 billion) in 2018.

Out of the amount, hardware purchases accounted for 64 percent followed by services at 24 percent and software at 12 percent.

An interesting trend is the fact that the share of infrastructure spending has plunged from 78.5 percent in 2010, losing most of its spending on IT services, whose percentage has doubled since 2010. This perhaps reflects the fact that the enterprise IT has moved away from in-house infrastructure.

The share of spending on enterprise software, on the other hand, has not grown fast. However, this is forecast to print the highest compounded growth of 8.2 percent between 2017 and 2022 to $317 million (from $69 million in 2010). At the same time, IT infrastructure spending will hit $1.5 billion while services spending will hit $590 million.

The top three spending sectors are communications, financial services and government entities (the trio accounts for half of IT spend).

With a staggering $1.5 billion in infrastructure spending by enterprises, is there a strong proposition for them to opt for managed equipment services (MES) and save on costs?

Indeed, emerging evidence suggests that third-party iinformation technology enterprise infrastructure management, if perfectly executed, could save enterprises from the heavy annual infrastructure spends, especially among financial service companies as well as public sector entities.

Letting third-party specialist companies manage IT infrastructure, allows an enterprise to release the pent-up cash, which it can deploy in other areas of critical operations. Furthermore, it allows an enterprise to focus on its core business without having to worry about the daily performance and maintenance of a vast and, in some cases, sensitive infrastructure.

Of course, an enterprise still retains the right to operate certain aspects of its infrastructure that it deems to be overly sensitive and mission-critical to be left in the hands of third-party entities.

Callstreet Research and Analytics estimates that enterprises could save as much as $500 million annually in infrastructure spend if they could allow third-party management of their enterprise IT infrastructure.

One of the key areas is data storage. With cloud technology, for instance, enterprises no longer have to worry about purchasing expensive high processing capacity servers and having to think of secure hosting locations. Instead, they only need to buy cloud storage space from impartial hosting companies.

And with such a move, data storage becomes an operating expense for enterprises, instead of a capital expenditure (often widely referred to as capex).

In banking, for instance, commercial entities have virtually stopped investing in individual mobile and card payment switches.

Instead, they have plugged into third party platforms which offer the same switching services but with realised cost savings. By definition, a switch is basically a computer software that facilitates communication between two or more payment providers (mostly commercial banks) while processing payments.

By way of platforms, the communication can either be facilitated between mobile or card payment platforms (such as transactions over the ATM or Point-of-Sale terminals).

In Kenya, commercial banks came together and formed a joint-venture entity, known as Integrated Payment Services (IPS) Ltd, to offer mobile payment switching services.

In some other jurisdictions, most notably Zambia and Ghana, the payment systems regulator, which is the respective central banks, has implemented a national switch.

Nonetheless, whichever implementation model, whether regulatory-driven or private sector-driven, this remains a classical example of third-party infrastructure management, which goes a long way in enterprise infrastructure cost savings for banks.

In Kenya, the concept of managed enterprise information technology infrastructure is gaining traction and is expected to be one of the top IT trends in the current year.