The incredible disappearing sysadmin
New technologies are making it easier than ever to do without the expensive techs who monitor servers, sending their jobs offshore.
By Michael Fitzhugh, Business 2.0 Magazine

SAN FRANCISCO (Business 2.0 Magazine) -- Nearly half of U.S. IT jobs involve the upkeep and maintenance of computers - a sector previously thought to be safe from offshoring. But technological change is sweeping the industry, and soon the servers that host your favorite websites or run your online banking could be run from halfway around the world.

Almost any company, of course, stands to benefit from reducing its computing costs. But there's also a huge opportunity for companies that can help cut those costs: Worldwide spending on systems administration, as it's known, is an estimated $110 billion a year. In the U.S., systems administrators make an average of $29 per hour. Moving those jobs to India could save companies up to 60% per year, according to a new McKinsey study.

Who's poised to profit

The first group of companies that are likely to cash in are the Indian IT services firms that have already parlayed India's cheaper labor into outsourcing contracts to develop software and run call centers for U.S. companies. Tata Consultancy Services (Charts) and Wipro (Charts) are ahead of rivals like Infosys (Charts) in tapping the remote systems administration market.

Then there are software and hardware makers whose products help automate systems administration. Any process that's automated, after all, is that much easier to hand off to an outsourcer. Sun Microsystems (Charts), for example, has introduced so-called "lights-out" features into its servers, which allow the remote diagnosis of physical problems that used to require an administrator's presence.

And companies like Splunk, a San Francisco startup, are developing software that speeds up routine administration tasks.

The biggest winners, though, may be players like IBM (Charts) and Hewlett-Packard (Charts), which offer a complete package of all of the above - increasingly automated hardware, sophisticated monitoring software, and IT consultants who can design, build, and manage the combination.

Lights out for sysadmins

The result of these innovations: While the servers themselves will likely remain here in the U.S., they'll need fewer sysadmins, and it will be easier than ever to have those sysadmins based overseas.

The notion of more IT jobs moving offshore is likely to set off predictable controversy. But the truth is that systems administration is increasingly becoming a more remote, hands-off job, with servers already clustered in data centers, albeit here in the U.S., far from the administrators who monitor them.

Many data centers today operate with their lights dimmed - darkened homes for servers that only get visited when their minders indicate that they need attention. And if the administrators aren't in the same building, does it matter if they're on the same continent?

"The end-state is for large corporations to have a couple large data centers in the U.S., in Europe, and in Asia," with systems administrators distributed around the world, says James Kaplan, who is an IT infrastructure consultant at McKinsey, and one of the study's lead authors. Kaplan says that, at most, 20 to 50 percent of systems administration work will remain in high-cost areas like the U.S. and Western Europe.

For those only casually familiar with the IT outsourcing trend, it's easy to assume that systems administration is part of the work already parceled out to offshore companies. But that's not the case. According to Kaplan's research, few offshore IT contracts involve systems administration work today.

A variety of factors have limited this type of offshoring. For one thing, maintenance of many systems used to require hooking up a keyboard and monitor to a server to diagnose problems. That could only be done in person, requiring skilled personnel close to the server. And monitoring a system remotely requires a rock-solid network connection, something that was hard to get overseas.

Furthermore, the trained personnel to run such operations simply didn't exist overseas until recently. India's technical colleges had focused on training graduates for software programming. But that, too, is changing: According to Kaplan, the number of trained systems administrators in low-cost markets like India tripled from 5,000 in 2003 to 15,000 in 2005.

Coaxing reluctant IT managers

As a result, companies once reluctant to outsource crucial database and mainframe management are now reconsidering. More mature server-monitoring software from IBM and HP, coupled with improved networks overseas, has made reliance on offshore monitoring centers easier for U.S. IT managers to stomach. The offshore server monitoring and maintenance market stands to grow to $3 billion dollars by 2007, according to McKinsey.

To address this growing market, Tata has built a 250,000-sq. ft. network operations center in Chennai, India, from which it monitors and manages U.S. and European servers. The company now remotely manages servers for 120 clients, up from 73 at the beginning of 2005, including the likes of Verizon and Alcoa.

Smaller players, like San Francisco-based Splunk, have also benefited. Splunk's software indexes log files, the automatically generates records of a computer's activities, to make them easier to search and help diagnose problems. The company's software is used in continent-spanning projects by Tata, Computer Sciences Corporation, and EDS.

Opsware, a publicly traded software company based in Sunnyvale, Calif., also could get a boost from the trend, since it makes software that automates server installation and management.

And who stands to lose? Chiefly the 270,000 people employed as sysadmins in the U.S. But with only 15,000 low-cost replacements available overseas, it's unlikely their jobs will be at immediate risk.

And realistically, this wave of offshoring is most likely to eliminate the most annoying, repetitive parts of their jobs, freeing them up for more creative work.

Sysadmins of the world, unite - you have nothing to lose but your server log files. Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.