W H I T E P A P E R

S e l e c t i n g P r o f e s s i o n a l S e r v i c e M a k e D e s k t o p I T O u t s o u r c i n g M o r e E f f i c i e n t a n d S a f e rSponsored by: Lenovo

Ting Yang Joy XingRichard ZhaoJune 2011

I D C O P I N I O N

Increasing government support for IT outsourcing industry, favorable government policies and Chinese companies’ growing awareness of outsourcing provide the China IT outsourcing service market with an unprecedented development opportunity. According to IDC, the China IT outsourcing service market size reached RMB 13.58 billion in 2010. IDC predicts that the market size will reach RMB 31.03 billion by 2015 at a 2010-2015 compound annual growth rate (CAGR) of 18.0%.

Accounting for the largest share of China IT outsourcing service market, desktop IT outsourcing service grows rapidly, playing an extremely important role. According to IDC, the desktop IT outsourcing service market size reached RMB 3.62 billion in 2010. IDC predicts that the market size will reach RMB 8.45 billion by 2015 at a growth rate beyond the average level.

Desktop IT systems refer to discretely deployed desktop IT systems in huge presence that most employees have to deal with in person, such as PCs, printers, copying machines, office software, application systems, etc. With the increasing number and scale of desktop IT systems, many enterprises find their IT departments facing great challenges in terms of management, operation and maintenance (O&M). Due to high CPI (consumer price index) and soaring labor cost, cost-sensitive companies cannot but shelve their IT plans to invest in new equipment or application, refocusing on the rudimentary cost management. On one hand, enterprises become more tempted to cut back capital expenditure (CAPEX) and increase operational expenditure (OPEX) to prolong the life cycle of IT infrastructure. On the other hand, the increasing urgency of redefining the role of IT system in enterprises makes inevitable the shift from the traditional cost center to quasi-profit center, or even innovation center. Against this backdrop, outsourcing the O&M of desktop IT systems to professional service providers has become the best choice for many enterprises to achieve the targets.

Key findings from this IDC White Paper are as follows:

Chinese enterprises are confronted with many challenges in terms of the management and O&M of desktop IT systems: limited IT personnel to handle business demands; the huge presence of branches that hinders timely response and solution to problems; great pressure of O&M cost; lack of a uniform security module to address security loopholes in IT systems. Therefore, IDC believes that a professional, safe, efficient desktop IT outsourcing service is badly wanted to solve the last-mile problem in the use of IT infrastructure.

Desktop IT sourcing service is the most convincing indicator of how a service provider performs and approaches. In it also lies a major opportunity to gain customer satisfaction. Consequently, desktop IT sourcing service becomes the entry point for service providers to cooperate with their customers on IT

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outsourcing services. The most significant benefit is that desktop IT outsourcing service allows IT departments to concentrate on core business areas. It also helps enterprises reduce O&M cost and makes a quick response to new business and application.

In China, only a small part of enterprise budget goes to desktop IT outsourcing. Chinese enterprises still consider O&M of desktop hardware as the top priority on their desktop IT outsourcing agenda. However, among many of them, the demand for outsourcing O&M of application systems emerges. IDC believes that desktop IT outsourcing service providers that are able to spot this niche and offer some cost-effective solutions will win more customers and opportunities.

Three criteria a user is most concerned with when it comes to selecting a desktop IT outsourcing service provider include rapid and timely response, superior technical strength, and a stable, safe, long-term partnership. Moreover, reasonable pricing, scale and coverage are qualifications that a user may consider when selecting the desired service provider.

T A B L E O F C O N T E N T S

P

Motivators for Chinese Enterprises to choose Desktop IT Outsourcing Service 1

Rocketing Labor Cost of China Enterprises...............................................................................................2Enterprises ' Urgent Need for Desktop IT Outsourcing Service to Avoid Distractions...............................3Adaptive Enterprise IT Investment.............................................................................................................4

Select ing Professional Serv ice 7

Make Desktop IT Outsourcing More Eff ic ient and Safer 7

Professional Service Makes Desktop IT Support More Efficient................................................................7Security Service Makes Desktop IT Support More Reliable.......................................................................7

Chinese enterprises’ expectat ions ON their desktop IT outsourcing partners 9

Selecting Trustworthy Strategic Partners...................................................................................................9Desktop IT Outsourcing Provider Highlight................................................................................................11Addressing Challenges through Excellent Performance............................................................................13

Opportunities and Challenges in Desktop IT Outsourcing Market......................................................13Service Providers' Challenges and Countermeasures........................................................................16

Conclusion and suggest ion 18

Methodology and framework 19

In This White Paper 21

Defini t ions 21

©2011 IDC #48476-0893

L I S T O F F I G U R E S

P1 Desktop IT Equipments that Enterprise Need to O&M..................................................................1

2 Major Challenges Facing Enterprises in Managing, Operating and Maintaining Desktop IT systems..........................................................................................................................................3

3 The Benefits Enterprises could Get from Desktop IT Outsourcing Service ..................................4

4 Enterprises’ Optimization of Existing IT Investment......................................................................5

5 Major Criteria in Selecting Desktop IT Outsourcing Service Providers..........................................9

6 Three Types of Desktop IT Outsourcing Service Providers and Their Major Characteristics.......11

7 Advantages of Lenovo Desktop IT Outsourcing Service Solution.................................................12

8 Key Motivators for the Development of China Desktop IT Outsourcing Market............................14

9 Framework.....................................................................................................................................20

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M O T I V A T O R S F O R C H I N E S E E N T E R P R I S E S T O C H O O S E D E S K T O P I T O U T S O U R C I N G S E R V I C E

Factors such as policy support, external changes and internal needs set the stage for the China IT outsourcing service market to anticipate sound development. The noteworthy beneficiary is desktop IT outsourcing service which has already become an important means among many Chinese enterprises of saving cost and boosting operational efficiency. A booming China desktop IT outsourcing market is looming.

After years of development, Chinese enterprises have almost established relatively sound infrastructure and applications. As enterprises constantly expand, the quantity and scale of enterprise desktop IT equipment are also on the rise. In recent years, many enterprises have been slowing down their infrastructure construction, at the same time, the problems of IT system O&M ensuing. Meanwhile, problems inherited from previous system construction have begun to bite: compatibility, isolated information island, etc.

For enterprise IT departments, management and O&M of desktop IT equipment is becoming their great challenge. According to an IDC research, 1,767 units out of desktop IT equipment per large & medium size Chinese enterprise requires O&M, and enterprises with 2,001-5,000 units of equipment to be operated and maintained account for the largest share of the surveyed enterprises (See Figure 1). At present, the division of labor based on specialization becomes an increasingly explicit social trend. For the majority of Chinese enterprises represented by manufacturers and franchises, the O&M of desktop IT equipment neither is their core business, nor has anything to do with their core secret. Outsourcing it to professional desktop IT outsourcing service providers helps enterprises concentrate savings from capital, workforce and time on their core business areas.

F I G U R E 1

D e s k t o p I T E q u i p m e n t s t h a t E n t e r p r i s e N e e d t o O & M

N=61

Source: China Enterprise Desktop IT Outsourcing Application Survey, IDC 2011

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Besides, overall economic environment and changing external factors also trigger enterprise demands for IT outsourcing service. Since many CIOs focus on deriving greater business value from increasingly important IT departments, desktop IT outsourcing becomes a pragmatic choice among many enterprises.

R o c k e t i n g L a b o r C o s t o f C h i n a E n t e r p r i s e s

Mounting inflation pressure and rocketing labor cost are encroaching on business profits. According to data published by the National Bureau of Statistics of China, the CPI went up by 5.4% on a year-on-year basis in March 2011, a new high for 32 months; in April 2011, this figure went up by 5.3% over the same period in the previous year. This situation is expected to remain a space of time. Against this context, enterprise IT departments are facing an unprecedented pressure.

Huge Cost Pressure and Multiple Challenges in Enterprises' Desktop IT O&M

Chinese enterprises are facing multiple challenges in terms of O&M of IT systems. Limited IT personnel, huge presence of branches that hinders timely response to problems and huge pressure of O&M costs are three major challenges facing many Chinese enterprises when it comes to desktop IT management and O&M:

Limited IT personnel to handle business demands. It is common among many Chinese enterprises that IT department accounts for a limited share of total workforce which lags far behind the enterprise requirement for rapid growth. You will never fail to see IT personnel busy managing dozens of, even hundreds of equipment in average. Whether in quantity or expertise and skill, the current enterprise IT personnel configuration is far from satisfying enterprise requirements for rapid development.

Increasing presence of branches that hinders timely response to problems. As many Chinese enterprises accelerate their expansion for greater prosperity, a large number of branches and offices come into existence, pushing the geographic boundary of business further and further. Some remote branches find that the distance between them and their parent companies often hinders timely response to the failure of their desktop IT equipment or systems. If this problem remains unsolved, business operation is doomed to suffer.

Huge pressure of O&M cost. Accelerated enterprise expansion requires an increasing number of desktop IT equipment. How to control O&M costs becomes a conundrum among many enterprises.

Besides, the lack of a uniform security module to address security loopholes in IT systems, and the complex structure of enterprise IT system that makes it difficult to manage, are challenges facing many enterprises in operating and maintaining desktop IT systems (See Figure 2).

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F I G U R E 2

M a j o r C h a l l e n g e s Fa c i n g E n t e r p r i s e s i n M a n a g i n g , O p e r a t i n g a n d M a i n t a i n i n g D e s k t o p I T s y s t e ms

N=61

Source: China Enterprise Desktop IT Outsourcing Application Survey, IDC 2011

In a word, the current problem in O&M of IT systems is nearly about what a service entails: personnel, technology, organizational structure, security and response speed. IT department, which would have prevented enterprises from distractions, now becomes a distraction. However, in this information age, enterprises are becoming increasingly dependent on the O&M of IT systems. IT system O&M has already become a double-edge sword whose performance determines whether an enterprise makes or breaks.

E n t e r p r i s e s ' U r g e n t N e e d f o r D e s k t o p I T O u t s o u r c i n g S e r v i c e t o A v o i d D i s t r a c t i o n s

After years of IT infrastructure construction, domestic leading enterprises have established relatively sound IT systems. Managers start to focus on creating more benefits through excellent operation and management. However, what IT departments have encountered in adapting to their shifting roles in enterprises are more than the above-mentioned problems. Increasingly extensive and complex O&M of IT systems imposes higher expectations on IT departments and personnel in terms of management, expertise and skill. At the same time, enterprises require their IT personnel to be savvier about business. IT departments find these two tasks difficult to handle at the same time.

Enterprises have benefited from the desktop IT outsourcing service to varying degrees. When asked how desktop IT outsourcing benefits their enterprises, 68.9% of

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the respondents said that it helps IT departments concentrate on core business areas. Moreover, other benefits that the desktop IT outsourcing service contributes to them, according to respondents, more or less pertain to cost, efficiency, resource integration, data sharing and security, issues that managers are concerned with (See Figure 3).

“Desktop IT outsourcing is a significant development trend. In my company, desktop support satisfaction is a performance indicator for our IT department. However, application system construction matters more. Due to the shortage of IT personnel, we cannot but choose professional desktop IT outsourcing service, if we would concentrate more on the application system construction to support top management’s decision-making. For doing so can avoid distractions,” said Mr. Wen, the information center manager of a domestic well-known communication equipment manufacturer.

F I G U R E 3

T h e Be n e fi t s En t e r p r i s e s c o u l d G e t f r o m D e s k t o p I T O u t s o u r c i n g S e r v i c e

N=61

Source: China Enterprise Desktop IT Outsourcing Application Survey, IDC 2011

A d a p t i v e E n t e r p r i s e I T I n v e s t m e n t

Adaptive enterprise IT investment refers to enterprise investment in service process, automation, manageability and security for the purpose of operating IT infrastructure at a low cost, providing high quality services, minimizing risks and delivering greater business flexibility. Being able to rapidly adapt to changes has become a major key to competitive advantage. As the foundation of the business operation, IT needs to be quickly geared to business changes, so as to equip enterprises with a timely response to new opportunities and demands. The content and process of IT service is the primary priority.

Though Chinese enterprises’ investment in software and hardware products is tremendous, there still remains a large gap in IT service expenditure between them and their counterparts in mature markets of developed countries. According to an IDC research, the annual average expenditure of Chinese enterprises in outsourcing

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desktop IT O&M in whole is estimated at around RMB 500,000. At present, desktop IT outsourcing service accounts for a relatively small share of the total enterprise IT expenditure (See Figure 4). According to the CIO of a domestic mobile communication equipment manufacture company, desktop outsourcing only accounts for a small share of his company’s total IT investment. He said that his company spends above RMB 200 million on IT annually, while the annual expenditure in desktop IT outsourcing is only averaged at no more than RMB 1 million.

F I G U R E 4

E n t e r p r i s e s ’ O p t i m i z a t i o n o f E x i s t i n g I T I n v e s t me n t

Source: IDC, 2011

This situation attributes to the following reasons on the part of customers:

Firstly, some enterprises are still accustomed to operating their IT departments by themselves. There is still a large room for desktop IT outsourcing, since some Chinese enterprises still cling to the habit of addressing IT problems on their own, despite the fact that some problems are often beyond their capabilities;

Secondly, service procurement has yet to be an enterprise instinct. Due to the lack of a pay-for-the-service instinct, some Chinese enterprises won’t turn to more professional services for solutions until they encounter a bottleneck. Their service procurement decisions are often emergency-oriented, rather than constructional and forward-looking.

Given that only a small number of vendors now have the ability to deliver complete service solutions, many customers have to outsource complete services in part. Even the desktop IT service is no exception. The separation of various desktop IT equipment services indirectly reduces the share of outsourced services. “Our desktop IT support as a whole is now in the charge of a domestic well-known desktop IT outsourcing service provider. We initially planned to outsource the maintenance of applications systems to it, but at last the plan was reversed for two reasons: Firstly, it is a hardware expert, but its performance in operating and maintaining application systems is unsatisfactory; Secondly, its pricing was far beyond our expectation,” said the IT manager of a domestic well-known food company.

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As the food company does, most enterprises rely on desktop IT outsourcing service providers for the O&M of their hardware equipment. As a matter of fact, many enterprises do have the need to outsource the O&M of application systems, but the prohibitive O&M cost matters more.

Therefore, IDC recommends that service providers should enhance service consciousness, improve services, expand service coverage, and provide customers with more cost-effective desktop IT outsourcing service solutions. Customers should make their service investment more constructional and forward-looking than emergency-oriented, leveraging the expertise and skills of service providers as a business booster.

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S E L E C T I N G P R O F E S S I O N A L S E R V I C E M A K E D E S K T O P I T O U T S O U R C I N G M O R E E F F I C I E N T A N D S A F E RRather than reduced cost, outsourcing desktop IT support services is targeted at concentrating more efforts on the construction of core systems, integrating IT and business and further supporting the top management’s decision-making. Only professional, efficient and safe desktop IT outsourcing service can ensure quick response. Powerful IT support makes business operation smoother.

P r o f e s s i o n a l S e r v i c e M a k e s D e s k t o p I T S u p p o r t M o r e E ffi c i e n t

As users become increasingly reliant on desktop IT systems, enterprises can by no means support their normal operation without powerful desktop IT support. Outsourcing the technical support, maintenance, operation and management of their desktop IT equipment to professional service providers enables enterprises to sail through IT challenges with better desktop IT services.

Customer benefits of the desktop IT outsourcing services provided by professional service providers include:

Professional desktop IT support means and tools. Many desktop IT outsourcing service providers use Helpdesk or other remote support tools and means to provide enterprises with more professional services. For instance, whether using remote support tools or not means differently to Service Desk, a typical remote service mode in desktop IT outsourcing. Lenovo’s professional remote support tools greatly increase the possibility of solving desktop problems through telephones from the average level within the industry.

Quick response to emerging and changing needs that ensures more efficient business operation. Professional desktop IT service providers are able to quickly respond to user demands for desktop support services, making business operation more efficient and gaining higher customer satisfaction.

IDC believes that enterprises should make a long-term, strategic decision about desktop IT outsourcing service providers, by considering their experience and devotion to specialty. A bad choice in selecting service providers (e.g. the lack of devotion to one’s primary business area, or the risk of being acquired due to insufficient scale and poor management) will inflict immeasurable losses upon enterprises in terms of business operation and strategic decision.

IDC recommends that enterprises should select professional service providers that are able to provide long-term stable services, and service-oriented vendors that prioritize service over other activities.

S e c u r i t y S e r v i c e M a k e s D e s k t o p I T S u p p o r t M o r e R e l i a b l e

Security is not only a major challenge facing Chinese enterprises in managing and operating desktop IT systems, but also one of the major inhibitors for Chinese enterprises embracing desktop IT outsourcing. In it lies a large part of the reason why some Chinese enterprises shun desktop IT outsourcing services.

Enterprise desktop satisfaction cannot be guaranteed without solving security problems. In case of unexpected risks, such as disclosure of core technologies and defection of managers, enterprises without IT savvy will have to bear enormous

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operational risks. For IT personnel are more professional and of higher labor cost. For enterprises without IT savvy, where it is difficult to employ backup IT personnel, the brain drain of IT people not only hinders normal O&M, but also endangers business security, such as system log-on and resource access authority. “In traditional manufacture companies like us, IT personnel belong to the top of payroll. However, their loyalty is relatively low. Some IT talents, whose development may entail great efforts, just hop to other companies after only a short stay. This not only frustrates management, but also sows seeds of disaster in information security,” said the CIO of a food manufacture company.

Frequent personnel turnover endangers the stability, operation and security of IT systems in many ways, with enterprises having to face greater operational risks. Outsourcing desktop IT support services to professional service providers, in which case their behavior is constrained by valid contract terms, may effectively mitigate those risks.

As professional customer-service companies, IT service providers should, as IDC believes, subject to higher standards in information security management. They must satisfy relevant international standards in terms of the knowledge of information security management as well as establishing information security systems. This ensures that they have rigorous internal information security management regulations to comply with, and that they can assist their customers in promoting the construction of information security management platforms in a professional way.

In selecting service providers, many customers have already taken the universal ISO27001 certification as an indispensable yardstick by which their performance of information security management to be judged. ISO27001 certification is one of the major international standards for information security, and provides a set of best practices and guidelines pertinent to the management of enterprise information security risks that enterprises can follow in establishing high-standard information security systems to safeguard business continuity and protect customer information security. Being ISO27001 certified implies the ability to provide enterprises with good security management services.

By dint of the professional service capabilities of desktop IT outsourcing service providers, enterprises are expected to achieve better cost control and IT people management, while avoiding information security risks caused by personnel turnover.

IDC recommends that desktop IT service providers should be ready to grow together with users and address Chinese enterprises’ concerns about the security of desktop IT outsourcing by establishing effective personnel management mechanisms and long-acting confidentiality mechanisms.

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C H I N E S E E N T E R P R I S E S ’ E X P E C T A T I O N S O N T H E I R D E S K T O P I T O U T S O U R C I N G P A R T N E R S

Chinese enterprises expect desktop IT outsourcing service providers to be their long-term, strategic partners who, beyond providing desktop IT O&M services, can offer better suggestions about IT system O&M.

S e l e c t i n g Tr u s t w o r t h y S t r a t e g i c P a r t n e r s

Figure 5 shows that the three criteria a user is most concerned with when it comes to selecting a desktop IT outsourcing service provider include rapid and timely response, superior technical strength, and a stable, safe, long-term partnership. Moreover, reasonable pricing, industry background, ability to provide solutions, more successful cases, scale and coverage are qualifications that a user may consider when selecting the desired service provider.

F I G U R E 5

M a j o r C r i t e r i a i n S e l e c t i n g D e s k t o p I T O u t s o u r c i n g S e r v i c e P r o v i d e r s

N=61

Source: China Enterprise Desktop IT Outsourcing Application Survey, IDC 2011

In the China desktop IT outsourcing market, service providers providing specialized desktop IT outsourcing services are grouped into global IT service providers, large domestic service providers and small local service providers. These three groupings vary from one another in terms of major characteristics and targeted enterprises:

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Global IT service provider. Global IT service providers are characterized by superior technical strength, high inter-customer brand awareness and abundant globalization experience, while their deficiencies include lack of localization, heavy reliance on local partners for the delivery of desktop IT outsourcing services, and high cost of delivering services.

Small local service provider. When selecting different types of desktop IT outsourcing service providers, many enterprises prefer small local ones for rapid response, service flexibility and low price. However, in terms of expertise and coverage, they are dwarfed by large domestic service providers such as Lenovo. Such small local service providers can only serve a city or a province, rather than many company branches at the same time. This is likely to result in the "Multiple Effect” in service modality or standard, preventing them from becoming desired partners accompanying enterprises engaged in expansion. For instance, the Beijing-headquartered Datang Mobile Communications Equipment Co., Ltd. (hereinafter referred to as “Datang Mobile”) has been outsourcing its desktop IT services to a local vendor whose operation is confined in Beijing. Due to the vendor’s insufficient coverage, Datang Mobile’s Shanghai branch, Xi’an branch and over 20 offices nationwide have yet to have access to desktop IT outsourcing services.

Large domestic service provider. It is comprehensive coverage that distinguishes large domestic service providers (such as Lenovo) from global IT service providers and small local ones. For instance, Lenovo’s nationwide service network, comprised of over 2,000 service stations and more than 10,000 professional service engineers, covers most of the county-level cities within the country. Moreover, many large domestic service providers are able to provide end-to-end, comprehensive desktop IT outsourcing solutions, and are on a par with global IT service providers in expertise.

Figure 6 shows the three types of desktop IT outsourcing service providers and their major characteristics.

F I G U R E 6

T h r e e T y p e s o f D e s k t o p I T Ou t s o u r c i n g S e r v i c e P r o v i d e r s a n d T h e i r M a j o r C h a r a c t e r i s t i c s

Source: IDC, 2011

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For many rapidly growing Chinese large and medium-size enterprises whose expansion requires wider coverage by service providers, large domestic service providers with comprehensive service coverage and ability to provide professional, safe and efficient desktop IT outsourcing services are a good choice. Lenovo is preferred by many Chinese enterprises for its outstanding performance.

D e s k t o p I T O u t s o u r c i n g P r o v i d e r H i g h l i g h t

As a desktops-savvy IT company and China’s largest IT equipment provider, Lenovo has a distinguished advantage in desktop IT outsourcing and its PC install base accounts for nearly one third of the total in China. With its expertise and service resources, Lenovo is now providing large manufacture companies, multinationals, financial institutions, and chain stores with services in relation to the construction, O&M of IT systems and relevant processes. Its desktop IT outsourcing service solutions are based on the ideas of professionalism, efficiency and safety, which can help enterprises better manage and use their desktop IT equipment.

Figure 7 shows the advantages of Lenovo desktop IT outsourcing service solutions.

F I G U R E 7

A d v a n t a g e s o f L e n o v o D e s k t o p I T O u t s o u r c i n g S e r v i c e S o l u t i o n

Source: IDC, 2011

Professional service provides considerate support for enterprises

Multiple technical service tools address various needs for desktop IT management. Lenovo’s multiple desktop IT management tools (e.g. auditable remote support tools, rapid software and hardware diagnosis tools and enterprise-specific service portals) can ensure the quality of service delivery, providing users with more considerate support.

Three-tier integrated delivery management avoids “Isolated island effect” in service delivery. Through three-tier integrated delivery management (Lenovo headquarter, regional support for project locations, and on-site delivery), Lenovo

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protects its desktop IT outsourcing services against “Isolated island effect” ubiquitous within the service delivery industry.

Zero-risk service migration management. To ensure successful service migration, Lenovo develops the Service Migration Plan and the Service Migration Risk Recognition and Prevention Plan in advance to effectively achieve zero-risk service migration management.

Quick response to enterprise demands through efficient service

Quick implement and response services. Lenovo’s efficient service delivery platform ensures quick response to emerging and changing demands. It takes less than 15 days for Lenovo to motivate resources to respond to demands for outsourcing less than 5,000 units of desktop equipment. For desktop IT outsourcing projects involving more than 5,000 units, it takes only 30 days. It can make response to a changed demand within 10 days, 1.5-2 times the average response speed in the industry.

Thorough service delivery management. In line with its principle of thorough service delivery management, Lenovo makes its service monitoring data (OLA) available to enterprises it serves, ensuring the fulfillment of its service commitments (SLA) and helping enterprises stay informed about the progress of service delivery.

Comprehensive service delivery network. Capable of covering the county-level cities nationwide, Lenovo’s service delivery system is able to deliver the uniform deployment and implementation of services in a short period of time for any enterprise with branches distributed nationwide.

Safe service provides security for enterprises

ISO27001 international security management standard. To safeguard the security of enterprise information assets, Lenovo regulates its service delivery with some universal information security standards (e.g. observation of the ISO27001 international security management standard in delivering desktop IT outsourcing services), freeing enterprises from security concerns.

Safe personnel management. Lenovo has developed effective personnel management mechanisms and long-acting confidentiality mechanisms out of its long-term partnerships with Chinese enterprises. It restrains the behavior of on-site service engineers through confidentiality agreements. It also introduces the decryption mechanism to satisfy enterprises with more stringent information security requirements.

Safe physical environment. Lenovo is able to offer various means (e.g. closed service area, independent access control, independent video surveillance and network physical isolation) to control physical and environmental security.

A d d r e s s i n g C h a l l e n g e s t h r o u g h E x c e l l e n t P e r f o r m a n c e

Driven by internal and external demands as well as state policy support, desktop IT outsourcing is becoming a mainstream development trend. There will be more Chinese enterprises in favor of desktop IT outsourcing in the future. The rapidly

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growing desktop IT outsourcing market presents service providers with opportunities as well as challenges.

Opportunities and Challenges in Desktop IT Outsourcing Market

With the booming business expansion and the increasingly popular awareness of labor division based on specialization, it is inevitable that Chinese enterprises will outsource more non-core activities to professional companies so as to concentrate more on core ones. Driven by changing external environment, internal demands and policy support, desktop IT outsourcing has become an important means of helping enterprises save cost and improve operational efficiency. This offers a rare development opportunity for the desktop IT outsourcing industry.

Figure 8 shows the key motivators that drive the development of the China desktop IT outsourcing market.

F I G U R E 8

K e y M o t i v a t o r s f o r t h e D e v e l o p m e n t o f C h i n a D e s k t o p I T O u t s o u r c i n g M a r k e t

Source: IDC, 2011

Internal needs for business growth

It is a hard task to manage a large number of desktop IT equipments distributed discretely, which are supplied by different vendors. For most enterprises, IT personnel number is too limited to address their needs for desktop IT support service and rapid business growth. Therefore, there is an urgent need for professional, safe, efficient desktop IT outsourcing services to help them solve the “last-mile problem” in the use

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of IT infrastructure, enabling them to concentrate on core activities, with no distractions.

Desktop IT outsourcing service is the most convincing measure of a service provider’s service and attitude. Its importance is self-evident, since it indicates the ability to provide high quality services in a consistent manner, and focus on end users and details. Furthermore, it has direct implications for customer satisfaction. As the cases of many enterprises have shown, desktop IT outsourcing service has become a key entry point for enterprise users to cooperate with service providers on IT outsourcing services.

Impact of external economic environment

Due to worsening inflation and soaring labor cost, the role of IT systems in enterprises is changing. The role of CIOs and IT teams has been shifting from focusing on technical matters and O&M of IT systems to greater participation in the business process. CIOs are required to be responsible for technical issues as well as business results. The future role of a CIO and his team is to bridge the gap between business and technology. However, the challenges facing Chinese enterprises in operating and maintaining IT systems, particularly the desktop IT systems, prevent their IT teams from concentrating on business and innovation.

Desktop IT outsourcing services can somehow address those concerns, allowing enterprise managers to concentrate on business to adapt to the quickly changing business environment.

State policy support

In recent years, Chinese government has successively enacted a series of policies to encourage the development of the IT outsourcing service industry. In 2009 and 2010, 21 cities including Hangzhou were identified as the service outsourcing pilot cities. Over 30 policies concerning finance, taxation, telecommunication and intellectual property protection have been successively enacted to support the development of the outsourcing industry. Moreover, in 2009, the State-owned Assets Supervision and Administration Commission of the State Council issued the Opinions on Further Promoting the Informatization Work of Central Enterprises (hereinafter referred to as the “Opinions”), which provides specific guiding opinions on the development of outsourcing services. The Opinions provides that “enterprises with insufficient fund input, shortage of technical personnel and backwards informatization construction may consider outsourcing. Such enterprises should submit their specific needs. Network operators, system integrators and software developers that belong to the central enterprises should construct uniform information network platforms and management information systems, and should take charge of their daily O&M. Rents should be paid annually, so as to reduce concentrated investment, shorten construction cycle, address the shortage of technical personnel and accelerate informatization construction.”

Against such background, government departments, enterprise and public institutions and state-owned enterprises have been successively expanding the scale and content of service outsourcing, and encouraging the outsourcing of confidentiality-irrelevant activities to professional service providers. As a key part of outsourcing services, IT desktop outsourcing service is thus provided with an unprecedented development opportunity.

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Technical motivation

Besides state policy support and internal and external impacts, emerging technologies such as cloud computing and remote support are also driving the development of the desktop IT outsourcing service market. They can somehow make desktop IT outsourcing safer and more controllable.

The above-mentioned motivators will present the China desktop IT outsourcing market with a desired development opportunity. According to IDC, the desktop IT outsourcing service market size reached RMB 3.62 billion in 2010. IDC predicts that the market size will reach RMB 8.45 billion by 2015 at a growth rate beyond the average level.

Nevertheless, Challenges remain for the China desktop IT outsourcing market. For instance, among the large army of competitors active in this market, no dominator is present. For large domestic service providers such as Lenovo, to get a larger market share and become stronger and accepted by more Chinese enterprises, the only way is to stick to self-improvement and continue to provide professional, safe, efficient desktop IT outsourcing services.

Service Providers' Challenges and Countermeasures

Despite the stronger public awareness of and demands for the increasingly popular desktop IT outsourcing service, no one can deny that some users remain concerned and suspicious about desktop IT outsourcing. They may ask: Is desktop IT outsourcing safe? Do desktop IT outsourcing service providers have a sound confidentiality mechanism? How fast is their response? Can their service quality be guaranteed?

These questions carry great weight when users consider whether to choose desktop IT outsourcing service, which part of services to outsource, which kind of desktop IT outsourcing service model to adopt, and which service provider to select. Addressing their concerns is a major challenge facing desktop IT outsourcing service providers. Whoever is able to help address such concerns and provide pragmatic solutions will beat the competition.

How to respond to enterprise demands for desktop IT support service efficiently and rapidly?

As it has been mentioned, rapid and timely response is the primary criterion Chinese enterprises use when selecting desktop IT outsourcing service providers. In this quickly changing economic society, it is more critical for CIOs and IT departments to find a way to support strategic business decision-making through efficient IT technical means.

Suntech Power Holdings Co., Ltd. (hereinafter referred to as “Suntech Power”) is a provider of PV products and solar system solutions, with a worldwide sales and service network. Since its branches are located in different regions, IT system management is time-consuming and labor-consuming, and it is difficult to quantify results. At first, it solely relied on its own IT team, which led to ineffectiveness, conspicuously increased expenditures and mounting pressure on relevant managers. Finally, Suntech Power selected Lenovo as its desktop IT outsourcing service provider, with desktop service as the entry point in their cooperation. By dint of its professional technology and service resources, Lenovo provides Suntech Power with IT systems and constructs, operates and maintains relevant business processes.

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Lenovo’s desktop IT outsourcing service successfully solves the problem of IT system management among Suntech Power’s headquarter and branches, greatly increasing the response speed and the problem solving rate. This enables its IT O&M team to concentrate on core business activities.

As enterprises become more rational in selecting desktop IT outsourcing service providers, small service providers with low pricing as their winning key will face more challenges. On the other hand, large domestic desktop IT service providers, represented by Lenovo, will become more popular for comprehensive coverage, reasonable pricing and rapid response to business needs. For desktop IT outsourcing service providers, low pricing is no longer a desirable strategy. More attention must be given to providing efficient desktop IT support to address enterprise concerns; growing with enterprises and helping enterprises improve their core competitiveness

How to address enterprise concerns about desktop IT outsourcing security?

Security is one of the major factors that prevent Chinese enterprises from embracing desktop IT outsourcing. Their concerns are pinpointed by information security and personnel security: Firstly, the lack of a uniform security module to address security loopholes in enterprise IT systems is a major IT challenge facing many Chinese enterprises; Secondly, frequent personnel turnover and unexpected disclosure of core technology or brain drain of managers endangers the stability of enterprise IT systems in many ways, which in turn will put business operation into greater risks.

It is notable for enterprises that outsource desktop IT support services to small service providers for the purpose of cost control, such providers will suffer from brain drain not even less due to their insufficient risk-resisting ability. Enterprises will suffer, as their service support teams have no substitutes to fill positions left vacant by key personnel.

Outsourcing desktop IT support services to professional service providers, in particular large domestic service providers such as Lenovo, in which case they should observe valid contract terms, can effectively mitigate the above-mentioned risks

How to meet enterprise expectat ions about expert ise of desktop IT outsourcing service providers?

Superior technical strength is another critical criterion against which enterprises judge desktop IT outsourcing service providers. It is also a major challenge facing many service providers.

Below is the case of a blower manufacture company located in Shaanxi (hereinafter referred to as “Shaanxi Blower”). Shaanxi Blower is a traditional manufacture-based enterprise, and its traditional superior products include energy recovery turbo-expanders, centrifugal blowers, ventilators and military modified vehicles. In recent years, in order to improve its international competitiveness and align itself with foreign markets, Shaanxi Blower has been constantly increasing its informatization level to achieve the seamless alignment of IT systems with its business. Widespread application of information technology transforms the IT environment of Shaanxi Blower in a great way, with systems including software/hardware and relevant technologies becoming increasingly complicated. Meanwhile, driven by rapid growth, its main business areas have become increasingly reliant on the efficient management and configuration of informatization level and informatization resources.

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Finally, Shaanxi Blower decided to outsource desktop system maintenance, which entails many chores, to Lenovo, for the purpose of making IT operation more efficient and reducing management cost. After a detailed analysis of Shaanxi Blower’s demands, Lenovo MS, also taking into account Shaanxi Blower’s existing IT resources and operation processes, provided a customized desktop service proposal, and designated special persons to track the whole service process to ensure service quality. At the same time, Lenovo provided scientific performance indices by which the service results can be analyzed, so as to provide Shaanxi Blower with a clear access to its ROI. Through its professional O&M team and scientific desktop management method, Lenovo manages Shaanxi Blower’s desktop IT systems in an all-around, uniform manner, with improved system stability.

“As a well-known provider of IT solutions and services, Lenovo has a complete product line and a professional outsourcing service system. Its vast service network and professional IT technicians are able to make a rapid response with a professional attitude worth approving. The most important point is its good reputation, particularly its years’ experience with the IT outsourcing service industry.” ——Director Sun, the Strategic Management Department of Shaanxi Blower

C O N C L U S I O N A N D S U G G E S T I O N

For desktop IT outsourcing service providers, winning a customer is much easier than maintaining a stable, safe and long-term partnership with it. The latter is also what Chinese enterprises expect from desktop IT outsourcing service providers. For the same reason, the only way for Chinese enterprises, which have already chosen or are prepared to choose desktop IT outsourcing service, to make desktop IT outsourcing yield the desired results is to treat desktop IT outsourcing service providers as genuine strategic partners for common development.

For Chinese enterprises prepared to choose desktop IT outsourcing service, IDC has the following suggestions:

Incorporating key indices into contract

Upon making the decision to choose desktop IT outsourcing service, enterprises should develop a preliminary forecast of desired results and goals, and communicate and discuss with desktop IT outsourcing service providers on relevant matters.

Enterprises may consider incorporating some key indices critical to the results of desktop IT outsourcing into desktop IT outsourcing contracts, such as response time, response speed, extent to which outsourcing services should be deemed as satisfactory, and extent to which the user complaint rate should be controlled.

As enterprises expect, the service provider selection process is just an overture to a long-term, stable partnership. However, personnel turnover will inevitably beset enterprises, since they have to communicate with substitutes to reschedule the ongoing project, and it takes time to rebuild trust when they are suspicious of the substitutes’ expertise. Indeed, personnel turnover is unavoidable, but service providers, in particular large domestic service providers, should have the ability to minimize customer concerns and impact of personnel turnover on customers,

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by establishing sufficient talent reserve and back-up mechanisms, certifying the expertise of personnel, and incorporating relevant specific terms into contracts.

Regular communication

Outsourcing is by no means a guarantee that, after handing equipment and services over to service providers, enterprises, being only a user and a payer, doesn’t take any responsibilities. Enterprise involvement always plays a key role in the entire life cycle of service. Effective communication between enterprises and service providers is indispensable to needs analysis, organization optimization, process review, and service implementation, delivery and use. Therefore, a regular communication mechanism is required for smooth delivery of services.

Active involvement to stay informed about project progress

What enterprises are most concerned with is the loss of control upon service outsourcing, with ensuing enterprise concerns about security and confidentiality. For this reason, before a problem is submitted for solution, service providers should proactively offer necessary measures and means (e.g. providing a monitoring platform) to make enterprises stay informed about project progress and understand their role, so as to make them feel the sense of ownership, beyond being a participant.

Few domestic vendors have the ability to provide comprehensive desktop IT outsourcing services, and a majority of service providers focus on the O&M of hardware devices such as PCs, printers, etc. In this circumstance, customers have to outsource in part or outsource different desktop equipments to different service providers, which produce muddle-headed management, and even less-than-desired results.

As a matter of fact, what desktop IT outsourcing service entails extends far beyond hardware devices such as PCs, printers, scanners, projectors and fax machines, to software such as OS, office software and mail client, and even enterprise application systems. Therefore, whoever has the ability to provide comprehensive desktop IT outsourcing services will be the vendor of choice for more customers.

M E T H O D O L O G Y A N D F R A M E W O R K

This White Paper is based on IDC’s China Enterprise Desktop IT Outsourcing Service Survey 2011. This Survey has its origins in the face-to-face or telephone interviews conducted by IDC from March to April 2011 with CIOs and IT managers of 61 Chinese large and medium-size enterprises which have already adopted or are intended to adopt desktop IT outsourcing services in the coming two years. Meanwhile, IDC has conducted face-to-face interviews with major desktop IT outsourcing service providers in the Chinese market. Indirect researches such as IDC’s global analysis reports, news release, statistical yearbooks and other disclosed information, are complementary to these interviews.

The surveyed enterprises were selected randomly, including domestic manufacture enterprises and franchises, most of them are listed private enterprises. In addition, some foreign companies have been surveyed in this study too. In the terms of the enterprises scale, all of the enterprises are large and medium-size enterprises with over 500 employees.

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Through this methodology, IDC believes that this White Paper clearly demonstrates this important group’s attitude toward desktop IT outsourcing service and their plans. Statistically, quantified data in this White Paper is just for reference due to limited sample number.

Figure 9 shows the overall methodology and framework IDC used in writing this White Paper.

F I G U R E 9

F r a me w o r k

Source: IDC, 2011

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I N T H I S W H I T E P A P E R

In this White Paper, IDC examines the major motivators for Chinese enterprises to choose desktop IT outsourcing service, their ways of selecting desktop IT outsourcing service partners, and their expectations on partners. This White Paper also analyzes what Chinese users are concerned with when choosing desktop IT outsourcing service, the characteristics of their demands, and their awareness of IT service providers and the IT outsourcing service market. At the end of this White Paper, IDC offers its suggestions and insights.

D E F I N I T I O N S

Desktop IT outsourcing: Enterprises outsource the technical support, repair, maintenance, operation and management of desktop IT devices, including PCs, printers, fax machines, office software and application systems, in whole to professional service providers, so as to provide enterprise IT users with better desktop IT service support.

C o p y r i g h t N o t i c e

External Publication of IDC Information and Data — Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason.

Copyright 2011 IDC. Reproduction without written permission is completely forbidden.

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