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On August 26, 2007 Intel® announced the second generation of its new microprocessor platform: vPro^TM. The majority of reviews and media attention focused on the security features of the new platform.

However, there is another implication of the new platform that largely escaped market news. vPro is likely to affect desktop outsourcing in a major way: it gives a a boost to the Remote Infrastructure Management Outsourcing (RIMO) model by better equipping suppliers and giving buyers incentives to outsource.

Buyers typically outsource enterprise desktop environments to traditional ITO suppliers for two reasons: they require a relatively high component of on-site service support and buyers often prefer a "one throat to choke" policy, which prevents them from choosing different suppliers for on-site and offshore service delivery. While RIMO suppliers have tried to address this segment through a combination of remote delivery and on-site partnerships, they have met with limited success.

Intel's second-generation vPro technology introduction promises to change this status quo. With the ability to deliver an ever-expanding range of services remotely (even while the desktop is switched off), vPro offers additional incentives to buyers to consider a RIMO supplier for outsourcing their desktop environment. At the same time, it becomes easier for suppliers to:

1. Offer more services remotely
2. Offer services during night-time hours when systems are typically switched off or not in use

While vPro can significantly change the desktop outsourcing picture for RIMO suppliers, the latter have been slow to adopt the platform, even as traditional suppliers like Atos Origin and EDS have gone ahead and incorporated vPro in their mainstream service offerings. Even though vPro desktops will take a long time to attain critical mass and Intel is known for its massive delays in introducing new platforms (Exhibit 1), traditional and RIMO suppliers alike should be thinking about positioning vPro-based offerings as a key component around which to build their desktop outsourcing capability.

Background on vPro

vPro is the latest Intel platform initiative, similar to that of Centrino and Viiv. It is targeted at business customers and provides increased level of support for software and hardware inventory management, the ability to cut off OS-level network access remotely, remote diagnostics, and remote file access.

vPro claims advanced features like Active Management Technology (AMT), which can help isolate infected PCs before they spread across the network; and Virtualization Technology (VT), which creates service environments without affecting the user experience and which allows routine maintenance tasks to become non-disruptive. With these advanced capabilities vPro 2007 promises to have far-reaching implications for the desktop management market.

Evolution of RIMO

RIMO is the fastest-growing segment (about 60 percent compound annual growth rate) of the infrastructure outsourcing (IO) market and is slated to reach US$ 8 billion by 2010. The RIMO model transfers the responsibility for delivery of Remote Infrastructure Management (RIM) tasks to an external supplier. This is different from the traditional approach to IO, where the buyer transfers the management of the entire infrastructure tower (e.g. datacenter--including tasks which are primarily on-site driven)--to the external supplier.

RIMO deals are also "asset-light" because transfer of the ownership for IT assets (e.g., servers, network) to supplier, which is a common feature of the traditional IO deals, usually is not a part of the typical RIMO engagement.

RIMO adoption has been driven primarily by buyers' desire to have an alternative "lighter" approach to end-to-end outsourcing. RIMO contracts are structured smaller in deal value and have much shorter durations than traditional IO outsourcing deals. They also afford the buyer a greater degree of control over their IT assets and the delivery process.

Why is vPro an Incentive for Buyers to Outsource IT?

As end users, we are all too familiar with the "scheduled maintenance" announcements coming from IT or annoying patch installations that slow down PCs in the most inconvenient moment. Thus, the concept of doing work on a PC independently of the operating system and even while PC is switched off is likely to excite end users as this is the most non-disruptive way of conducting all maintenance, prevention, and repair activities.

Furthermore, most repairs, even if done remotely, mean downtime for the end-user. Hence, business users will be very happy to shift all these activities to off-hours resulting in additional complexity for IT support. This is likely to provide incentives to shift this complex and inconvenient task to the outsourcing supplier.

How Does vPro Make It Easier for Suppliers?

Desktop services is the least-served tower by RIMO suppliers. While data center today is at about 50-60 percent in terms of offshore content, desktop support is at less than 30 percent¹. New vPro capabilities are likely to change this (see Exhibit 1).

Firstly, vPro will probably enable delivery of additional services , e.g., repairs, remote asset discovery, and compliance with corporate security policies, to name a few. Suppliers will do this by leveraging additional AMT and VT capabilities implemented in vPro, which can isolate infected PCs before they spread across the network and create service environments without affecting the user experience. Apart from allowing routine maintenance tasks to become non-disruptive, they will also spur the "remote-ization" of these services.

Secondly, new capabilities of the vPro platform will prompt more overnight service and maintenance, which is very beneficial for offshore suppliers that do not share the same time zone (e.g., India) and are often forced to charge premium for night shifts of their offshore employees.

Exhibit 1: Impact of vPro on IT outsourcing suppliers

Source: Everest Research Institute, Intel vPro announcement

Initial Reaction of the Outsourcing Suppliers

Large IT outsourcers like EDS have gone on record saying that vPro 2007 will help them minimize the impact of desktop management processes on users and improve user experience. From a corporate perspective, they voice the need for consistent device management and want to start moving away from desk-side visits.

Through collaboration with Intel, Atos Origin is offering "Remote Management with Intel vPro" as a part of its mainstream outsourcing services. Even smaller, regional, and SMB players like Evesham (UK) and Ness Technologies are already planning full-scale pilots at customer sites to test the increased efficiency and productivity gains they can realize from deploying vPro-enabled desktop management.

Nonetheless, RIMO players like TCS, Wipro, et al. are notably absent from the list and appear tight-lipped with regard to their investments in either joint development or testing of the technology and associated capabilities. This silence is perplexing especially since, in our opinion, RIMO suppliers stand to benefit from this technology if it ends up being as widely successful as Intel predicts.

Reality Check

Notably, there is also skepticism in the industry around the new platform. There are three concerns:

• Network vendors (e.g., CISCO Network Admission Control), software vendors (e.g., Microsoft Network Access Protection), and even industry consortiums (e.g., Trusted Computing Group) have promised similar solutions.
• Intel is known for major delays in delivering new generations of products (see Exhibit 2 for examples of recent delays in Intel's plans). The time aspect of this platform is critical.
• Intel rightfully positioned it as a longer term trend, e.g, enterprises can start replacing PCs gradually and "switch on" the vPro functionality once they achieve a critical mass of vPro-enabled PCs on the network. Given that desktop refreshes typically happen every three years, it could take quite a while before they achieve this critical mass.

Exhibit 2: Delays in launch of recent Intel technology products

Source: Literature search

Nonetheless, we believe that Intel is more likely to make real progress in the area of remote desktop services and the vPro solution has a good chance of becoming an industry standard. We believe it because:

1. It is strategically important for Intel to protect its core business, so it is likely to invest in a major way.
2. As opposed to CISCO or Trusted Computing Group, Intel is basically everywhere (80 percent of all PCs run Intel²), so it is more likely to become a standard.
3. Multiple software companies (e.g. Symantec) have come forward to declare their intent to leverage AMT/VT in their upcoming software solutions. There is a business opportunity for everybody.

Lessons from the Outsourcing Journal:

• The second-generation vPro platform can become a game changer for the desktop outsourcing and give a fillip to RIMO suppliers as they look to gain a foothold in this on-site dominated service cluster. It can incentivize buyers to outsource their IT organizations as the increasing sophistication of technology and process drives them to hand over the complexity to ITO suppliers.
• The caution around vPro is that it needs to attain critical mass before buyers can realize the much-touted remote-ability and productivity gains on a large scale.
• There is no question we will see suppliers building their desktop outsourcing offerings around vPro to position themselves for the future.

  ¹Source: Everest Research Institute analysis and independent supplier experience
  ²Source: IDC

  Publish Date: October 2007

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  Copyright © 2007 - Everest Partners, L.P.

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