Organizations must be diligent when selecting an external service provider (ESP) for data center services. It's not enough to base your decision on price, current data center location and technical capability. You must consider an ESP's overall vision and its strategy for developing services, if you want to get a long-term data center outsourcing contract that supports your critical functions. Gartner's evaluation criteria provide a comprehensive framework for analyzing an ESP's capability to deliver across Western Europe.

As part of our due diligence for this Magic Quadrant, we interviewed dozens of client references. These interviews, combined with our normal interactions with Gartner clients in Europe, provide a continuous and significant pulse analysis of this market. Most of these clients are satisfied with the service they get in this area and the relationship they have with their providers. Although a number of unsatisfied clients always exist, data center outsourcing overall is a viable, satisfactory and mature sourcing option in Western Europe.

The market is changing, however, as infrastructure services industrialize and as pressure increases to consolidate service delivery, reduce costs, increase standardization and leverage global delivery approaches. Also, enterprises' demands for innovation, flexibility, continuous optimization, automation and virtualization are changing the data center market (see "Data Center Outsourcing in Europe: Where It Stands, and Why It Won't Stand Still").

The providers represented in this Magic Quadrant have roughly 11 billion euros turnover in data center outsourcing services. This represents roughly a quarter of the IT outsourcing (ITO) market and half the server/host platform service management in Western Europe.

These providers are managing more than 450 data centers spanning all European countries. Some of these are providers' sites; others are client sites or are leased from third parties. These providers manage about 700,000 installed million instructions per second (MIPS) and 330,000 servers.

The average service provider represented in this Magic Quadrant records roughly 900 million euros from this service line, manages approximately 55,000 MIPS and 27,000 servers, with 38 European data centers in 10 Western European countries. Each service provider has significant variation in size and staff, number of clients, number of data centers, and geographical coverage. There are also differences in the whole approach to this service area. Some see data center outsourcing as a strategic business, while others see data centers as a necessary base capability.

Gartner's definition of Western Europe includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the U.K.

Data center outsourcing is a segment of ITO. ITO can include a portfolio of product support and professional services that is brought together to provide the client with IT infrastructure, enterprise application services, or both. Minimally, outsourcing will always include some IT management service. ITO is further segmented into data center outsourcing, desktop outsourcing, network outsourcing and enterprise application outsourcing.

A data center is the centralized support of computer equipment in a secure facility, the underlying network infrastructure, and the processes and organization that support this environment. A data center generally includes the following activities/services:

• System operations
• Tape operations
• Print operations
• Second-level data center support
• Production control
• Backup and recovery processes
• Technical support (operating systems and subsystems)
• Performance analysis and capacity planning
• Storage management
• System security and contingency planning
• Asset procurement and third-party management

This Magic Quadrant is intended to evaluate each service provider's capability to deliver data center outsourcing services across Europe, so our focus is on management services for mainframe and centralized server environments.

Each service provider included in this Magic Quadrant was required to declare that it satisfies all these criteria:

• Service provider must be able to demonstrate that it provides data center outsourcing services as a sole source, direct provider (data center services delivered entirely by partners or subcontractors are excluded).
• Service providers must be present with delivery capabilities (data centers) in at least six Western European countries.
• Service providers must not have more than 70% of their total Western European data center outsourcing revenue in a single country, as this Magic Quadrant is intended to evaluate Pan-European capabilities.
• Service provider must have a minimum of 10% of its total Western European data center outsourcing revenue in at least three Western European countries.
• Service provider must have at least $150 million in annual Western European data center outsourcing revenue.

Because of the focus on IT management services for the mainframe and centralized server environment, we have excluded pure hosting services, such as colocation, simple hosting or the pure rental approach to data center activities.

Each service provider included in this Magic Quadrant was required to brief the authors and present, either in person or via telephone, their vision of the market and their ability to execute.

This Magic Quadrant includes two new service providers that previously had not been included:

• LogicaCMG — LogicaCMG has been included as, thanks to organic and inorganic growth, this service provider recently has improved its penetration of the European market. As such, LogicaCMG currently meets the necessary geographical criteria.
• BT Global Services (BT) — The recent focus on data center outsourcing services (which runs parallel to the traditional focus on hosting) has guaranteed BT's participation in this year's Magic Quadrant.

• Getronics — Getronics is not included in this Magic Quadrant. After a string of divestitures in 2006 in Austria, France and Italy, Getronics did not meet the criteria set up for this study.

Gartner evaluated these providers on the quality and efficacy of their processes, systems, methods and procedures that enable each provider's performance to be competitive and effective, while positively affecting revenue, retention and reputation. Providers were judged on their ability and success in capitalizing on their vision, as well as their Western European foothold in terms of resources, coverage and seamless delivery within different countries and toward client requirements. Feedback from client interviews has been factored into this evaluation.

Service

We evaluated each provider's capabilities and the services it offers. We gave special consideration to practice area profile and service capabilities in Western Europe, service definitions, effective "resourcing" and transition management. This category of data was weighted high. The subcategories for our study are:

• Practice area profile and service capabilities — This category focuses on:
  • Overall European data center outsourcing revenue, client numbers and staff allocated
  • Data and control center locations, ownership (provider or client) and size
  • Management team and position in the corporate structure
  • Amount of MIPS and servers managed
• Core services and service-level agreements (SLAs) — This subcategory focuses on SLA management and includes core and ancillary data center services provided (such as full facilities management, remote management, customer on-site support, capacity/configuration planning, and consulting on consolidation).
• Resource and transition management — This subcategory measures each service provider's ability to effectively provide the relevant resources to the customer as well as efficiently transition assets, workloads and facilities. We also asked each service provider about its ability to integrate staff coming from the client organization. We also sought clients’ feedback on their experiences regarding transition projects (initial and in case of provider moving toward a global delivery model) and day-to-day service.

Overall Viability

Viability includes an assessment of the organization's financial health, the financial success of the data center operations and the likelihood of the individual data center business unit to continue to invest to support a state-of-the-art delivery within the organization's portfolio of services. This category of data was weighted high.

We gave special consideration to the recent growth in the outsourcing data center segment, both in terms of volume per units (MIPS and servers) and revenue. We asked each service provider about the future outlook for this outsourcing segment of its business, and asked whether it expects revenue and margins to grow, decline or hold stable.

Sales Execution and Pricing

We assessed each provider's capabilities in all pre-sales activities and the structure that supports them. Specific consideration was given to teams in charge of deal management, pricing and clarity of scope. This category was weighted standard.

During interviews, we also asked clients for their feedback on their experiences with the service provider in terms of negotiation and pricing.

Market Responsiveness and Track Record

We assessed each service provider's ability to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, customers' needs evolve and market dynamics change. This category was weighted standard.

We asked clients for their feedback on their providers' flexibility, continuous improvement and innovation.

Marketing Execution

We assessed the clarity, quality, creativity and efficacy of programs designed to deliver an organization's message to influence the market, promote the brand and business, increase awareness of the services, and establish a positive association between the service/brand and the service providers in the minds of buyers. This category was weighted low.

Customer Experience

We asked each provider for five Western European references for data center outsourcing services. References are expected to follow the geographic distribution required to participate in the study and the different vertical industries addressed. The overall satisfaction with the service and the relationship — from these references and other Gartner client interactions — has been factored here. We also asked for samples of the past 12 months of global reports on SLAs, customer satisfaction and other relevant measures. We factored in the overall satisfaction with the service and the relationship reported by the references, as well as other clients of the relevant providers we discussed recently as part of our regular research and advisory activities. This category is weighted high.

We gave specific consideration to important elements for a successful data center outsourcing customer experience, such as the fact that client satisfaction is part of the evaluation criteria and incentive plans for the account teams, and that continuous improvement processes are in place centrally and within the account management team.

Operations

We assessed each provider's ability to meet its goals and commitments, while satisfying contractual obligations for service delivery to clients. Factors include the quality of the organizational structure, skills, experiences, programs, systems and other vehicles that enable the service provider to operate effectively and efficiently on an ongoing basis. This category was weighted standard.

Specific consideration was given to communication processes, quality control and quality assurance processes, relationships, contract and service delivery management, continuous improvement plans, methodologies — especially related to Information Technology Infrastructure Library (ITIL) processes — and other certifications available for all sites or specific data centers or clients.

Service providers' main procedures (operational, transitional, program management, relationship management and change management) have been discussed with providers, and feedback was requested from reference customers. We asked providers to deliver information on facilities/services provided, principal systems platform managed, locations, capabilities and resources, disaster recovery plans, security (physical and IT), and backup procedures.

Gartner analysts evaluate service providers on their ability to convincingly articulate logical statements about current and future market direction, innovation, customer needs, and competitive forces and how well they map to the Gartner position. Ultimately, providers are rated on their understanding of how market forces can be exploited to create opportunity for the provider.

Market Understanding

We assessed each provider's corporate view of the data center services and outsourcing market in Western Europe. We assessed how each provider is trying to address the main requirements of Western European clients. We also looked at the main effect of new technologies, delivery models and services in the short and medium term on each provider's business and delivery model. This category was weighted standard.

We gave special consideration to each provider's:

• Vision for data center outsourcing services
• Plans to differentiate from major competitors
• System for segmenting and analyzing the target market to drive marketing and sales
• Plans to position these services within the broader offering

Marketing Strategy

We looked at each provider's main marketing messages related to data center outsourcing services in Western Europe. This category was weighted low.

We gave special consideration to:

• Current and future value proposition for data center outsourcing in Western Europe
• How important data center outsourcing services are within the broader IT service portfolio
• Channels for internal and external communication
• How the message is differentiated from competitors

Sales Strategy

The sales strategy category was weighted standard. We asked each provider to illustrate its overall sales strategy for data center outsourcing (for example, direct vs. indirect selling partners, allies and channels), reactive answer to RFPs vs. proactive, stand-alone offering vs. bundled within other services, and dedicated vs. shared sales force.

Special consideration given to:

• High-level sales organization chart to illustrate ESP's go-to-market strategy
• How many dedicated personnel in Western Europe
• Number of offers issued in the past 12 months and offers in the pipeline
• Countries covered by direct, local teams vs. centralized teams
• Clients’ retention rate (driven by ease to do business with the ESP and ESP focus on relationship management)

Offering Strategy

This category was weighted high. We asked each provider to specify the most-important aspects of the service offering that create differentiation and value to the client.

• We gave special consideration to each provider's:
• Ability to integrate clients' assets, including data centers in Western Europe
• Ability to transfer data center staff from client to provider in each Western European country
• Approach for combining standard service elements into a customized service delivery to provide flexibility and low-cost services

Business Model

Each provider was asked for a high-level description of its data center outsourcing service business model and how it fits within its whole business model. We gave specific consideration to the ability to address and satisfy two competing requirements: clients' specific requirements (driving client satisfaction) and industrialized, centralized delivery of data center outsourcing services (driving low-cost and margin). This category was weighted high.

Regarding account management, we asked for information about:

• The structure of the management teams used to support and manage customers
• Average experiences and skill levels in the executive management and the assigned key customer-facing managers
• How customer issues are addressed locally vs. centrally, including customer access to the appropriate level of management within the service provider and escalation procedures

Regarding the delivery we asked them to describe the strategy for providing centralized delivery of standardized data center services. We focused on how much of the service is based on virtualized and automated platforms. We also asked for information about the approach to the global delivery model for data center outsourcing services as well as the established or planned remote premises.

We asked each provider's client references for their judgment of the provider's business model, including account management and service delivery, and factored the answers in this section.

Vertical Strategy

We assessed each provider's strategy to direct resources, skills and offerings to meet the specific needs of individual market segments, including vertical industries. This category was weighted low.

We gave specific consideration to each service provider's:

• Penetration of different industries for data center outsourcing services
• Ability to demonstrate expertise in vertical markets and business processes, underpinned by data center outsourcing services

Innovation

We evaluated each provider's position in the market as a thought leader and an innovator. We also evaluated each one on its leadership and investment to achieve its vision and develop innovative strategies in the data center outsourcing market. This category was weighted high.

We gave specific consideration to answers to these questions:

• What investments is your company making to sustain and enhance its vision for innovative data center outsourcing services?
• How do you offer innovation to your established and new customers?
• What innovative solution have you provided to customers in the past 12 months in this area?
• What global alliances do you have with other leading suppliers and with proven investments?

We also asked whether each service provider's utility-based offerings included:

• Highly standardized services, processes and SLAs
• Virtualized and automated computing platforms
• Utility pricing units
• Reduced baselines and increased flexibility

We sought client references' judgment on their providers' ability to innovate, including the technical aspects, ability to lower cost and improve the service, proactivity, adaptability, and service flexibility.

Geographic Strategy

This category was weighted standard. We looked at regional capabilities, global consolidation processes, local alliances and partnerships, including:

• Each provider's strategy to target different Western European country markets with the appropriate resources, skills and offerings to meet specific client needs
• How infrastructure consolidation processes are affecting the practice area landscape
• Relationships with product and service providers to add value, to provide full-service solutions or bring innovation closer to their clients
• How each provider takes responsibility for managing the service delivered, even when using subcontractors or partners

We asked reference clients for their feedback on local capabilities and the current or potential effects of consolidation and global delivery processes.

The ESPs in the Leaders quadrant are performing skillfully. They have a clear vision of the market's direction and are developing competencies to maintain their leadership. They shape the market, rather than follow it. The Leaders quadrant includes in alphabetical order: CSC, EDS, HP and IBM.

ESPs in the Challengers quadrant execute well today, but they have a less-defined view of market direction. They need to be more aggressive in outlining and communicating their strategy for the future. The Challengers quadrant includes in alphabetical order: Atos Origin, Capgemini, Fujitsu, Siemens IT Solutions and Services, and T-Systems.

ESPs in the Visionaries quadrant have a clear vision of market direction and are focused on providing services to meet future market needs. They need to improve their ability to deliver and penetrate the Western European market. The Visionaries quadrant includes BT.

ESPs in the Niche Players quadrant focus successfully on a particular service, a limited number of Western European markets or both. Their ability to outperform or innovate may be affected by this narrow focus. The Niche Players quadrant includes in alphabetical order: LogicaCMG and Unisys.

• Atos Origin has confirmed an increased focus on its data center outsourcing business, focusing on service resilience based on twin data centers and driven by the intention to offer very high availability and security.
• Atos Origin's 3o3 Program is designed to address pending issues such as organic growth, industrialization and implementation of a global delivery model.
• Clients praised Atos Origin for its flexibility, its focus on relationship management, its strong and resilient service delivery, and its positive ITIL orientation. In terms of infrastructure as a utility, Atos Origin's offering is called Utility Computing. For data center ITO global delivery, Atos has facilities in Poland, India and Malaysia.

• Although Atos Origin has consolidated its presence in key European markets, such as Germany, France, U.K. and the Benelux, its penetration of the European market is still patchy.
• Atos Origin's focus on global delivery and industrialization is sound, but late. Consequently, Atos Origin will be challenged to promptly execute while avoiding pitfalls related to process homogeneity.
• Atos Origin needs to more efficiently manage requests for nonstandard services, introduce more utility-based services in established deals and improve aspects of SLA management, such as reporting, to drive continuous improvement.

• BT Global Services appears determined to exploit the convergence between IT and telecommunications services. Its vision is further strengthened by a road map for utility services that is rightly pointed toward evolving data center outsourcing services to include standardized, automated and virtualized components.
• BT Global Services' vision is strengthened by pragmatism and its potential to influence competitors and partners via its investments in network and IT services.
• Clients praised BT Global Services' flexible approach, technical expertise and resilience, especially in the network and dual data center performance. BT has an infrastructure utility offering, Virtual Computing Architecture. It owns data center ITO global delivery centers in Spain and Italy.

• BT Global Services' European growth has been supported by intense acquisition activity that requires a continued focus on consolidation and alignment of different delivery and commercial entities. Further challenges will appear from those customers in new territories that will require BT Global Services to provide high-quality integrated services focused on data center outsourcing.
• BT Global Services' approach toward global delivery applied to the data center outsourcing business remains conservative and behind that of leading competitors. The whole area needs to gain internal consensus as well as external visibility and business to offer a credible alternative to traditional hosted offerings and to promote globally delivered data center services.
• BT Global Services needs to improve in areas such as delivering continuous improvement, asset management, offering support in terms of IT and business strategy alignment, further deployment of utility and global delivery services, and the alignment of practices, tools and capabilities in different countries.

• Capgemini has reached a stable balance between traditional "heritage" consulting and systems integration (C&SI) services and outsourcing. Its focus on infrastructure outsourcing as a platform for value-added services is confirmed by a near doubling of servers under management in three years, and by investment in staff and tooling in its Infrastructure Management Command Centers (IMCCs).
• Capgemini's I3 program should provide the whole-business evolution that fits the major data center outsourcing trends: increased global delivery, service innovation and automation (its Virtual Enterprise Initiative).
• Clients praised Capgemini for its flexibility, its efficient management of its technical skills, the high availability of critical environments and its focus on deploying globally delivered and ITIL-oriented services. It has announced an infrastructure utility offering, Capacity on Demand, which is part of its broader Virtual Enterprise initiative. In terms of data center ITO global delivery, it owns capabilities in Poland, Spain and India.

• Capgemini's aggressive data center rationalization plan, part of the I3 program, is under way, but will need to be managed carefully to avoid service issues during transition.
• Capgemini Rightshore is still much concentrated in India and the "nearshore" IMCC in Poland. New locations will be required to support further deployment of global delivery services.
• Capgemini needs to improve its ability to introduce innovation into established deals and to add utility services and solutions to offer more cost/utilization alignment. Although strengthening the processes underpinning global delivery is under way, the company can achieve further alignment.

• Having recently renewed a number of important deals, CSC remains a major player in Europe. Commercial penetration should be reinforced by the recently announced "Project Accelerate." This is designed to enhance CSC's global delivery reach, and integrate end-to-end account management and service delivery while driving the growth of outsourcing service offerings.
• CSC maintains a reputation for strong technical capabilities, flexibility and openness in evaluating emerging clients' requirements.
• Clients praised CSC's customer orientation and its resilience in service delivery, with a focus on incident management. CSC has an infrastructure utility offering, Results Driven Computing. CSC owns data center ITO global delivery capabilities in India, Malaysia, the Czech Republic and Lithuania.

• CSC's plan to separate physical and logical data center components and standardize platforms and services is sound, but in its infancy. Service delivery quality may be challenged by CSC's need to quickly ramp up its global delivery capabilities in which India still plays a leading role.
• CSC has started to address its need to consolidate its customer data centers, but its portfolio remains characterized by a large portion of client-owned facilities and a low number of Tier 3 and Tier 4 data centers.
• CSC needs to improve its ability to innovate and drive the deployment of global delivery and utility solutions to a wider portion of customers, as well as SLA management (reporting, definition and support of continuous improvement [CI]).

• EDS maintains a comprehensive penetration of the European market with an untouched reputation for technical expertise and focus on key data center topics such as security and resilience.
• EDS's focus on IT as a utility, supported by its commitment to the Agility Alliance and coupled with its investments in process standardization and automation, positions it well to exploit IT services industrialization.
• Clients praised EDS's resilient data center service, quality assurance, continuous improvement and relationship management. In terms of infrastructure as a utility, EDS has announced Virtual Services, which is part of its Agile Enterprise development. Its data center ITO global delivery capabilities include Hungary, Ireland and Spain.

• EDS's aim to rationalize its portfolio of capabilities and consolidate the data centers it manages is likely to be challenged by the needs of its government clients.
• EDS's focus on IT as a utility is sound but not advancing beyond large clients (private, one-to-one installations) because of market concerns on cost, security, profitability and client maturity. Furthermore, the Agility Alliance may limit the architectural choices and flexibility in multiplatform, multisourced arrangements.
• EDS needs to further align its service delivery processes to the ITIL framework and increase the global delivery and IT-as-a-utility solutions deployed to its customers.

• Fujitsu is committed to growing in continental Europe as two-thirds of its data center outsourcing revenue is currently in the U.K. This plan is coupled with portfolio rationalization and standardization to protect profitability.
• Fujitsu's growth in this space has been driven by major wins and its ability to act as a partner or subcontractor.
• Clients praised Fujitsu's cooperative attitude and technical expertise. Positive SLA management, continuous improvement and ITIL underpin resilient service delivery. Fujitsu's initiatives in IT utility, platform virtualization and grid computing form part of its Triole technology program. For data center ITO global delivery, Fujitsu mostly relies on capabilities in South Africa, Portugal and Northern Ireland.

• Fujitsu’s R&D commitment is positive, but solutions such as Triole need to further advance the level of perception and accelerate the deployment in the market to increase brand recognition and business opportunities.
• Fujitsu's global delivery strategy is late and relies on limited capabilities for infrastructure management and partnerships for application management.
• Fujitsu needs to achieve further penetration into key European markets, improve its reputation for technical innovation, provide further pricing clarity and leverage market evolution toward the use of IT utility and global delivery.

• HP's comprehensive penetration of the European market has recently become more geographically distributed, allowing it to manage data centers and infrastructure services from low-cost locations.
• After the decommissioning of its Utility Data Center (UDC), HP is increasing its focus on IT utility themes such as standardization, automation and virtualization of services.
• Clients praised HP customer management, its focus on ITIL, and its technical competence, global reach and service delivery. HP offers infrastructure utility services, such as Flexible Computing as part of its Adaptive Infrastructure development. HP owns data center ITO global delivery capabilities in Ireland, Slovakia, Spain, Poland, India and China.

• HP appears to have halted its initial data center outsourcing fast-growth phase. Increased competition and the need to standardize infrastructure and services could reduce HP's flexibility in the market and affect its future growth.
• Despite being the first provider to openly announce its focus on utility computing, HP appears to be late, given its size and R&D potential, on delivery of "industrial offerings" of infrastructure as a utility.
• HP needs to improve its coordination between account and service delivery teams in global deals, leveraging its internal best practices to deliver innovation, proactively turning incident management into problem management and continue to focus on evolving its utility offering from products to service.