Organizations have been making the decision to rely on external managed IT services providers for a number of reasons, and a number of years. Today, though, the hype around the cloud, the dizzying array of services and service providers, and the long-standing mandate to drive down costs are all pointing to an unprecedented move to IT outsourcing.
Today, businesses can take virtually any on-premise, internally sourced IT service they rely on, and turn the development, management, and hosting over to an external provider. However, that doesn’t mean this decision is a no brainer, far from it. Over the years, while there have been many stories of client success, there are also a lot of tales of failures. While the benefits of moving an IT service to an external services provider can be great, so can the cost if the relationship fails. Lost time, money, and customers can all be in the cards.
At most organizations, the mix of IT services that are externally or internally managed is under continuous evaluation and reassessment. Ultimately, before the decision to outsource is made, organizations need to move past the hype and take an objective, considered look at their resources, needs, and goals. For executives contemplating outsourcing IT services, following are some key considerations to make as they formulate an outsource strategy.
1. Start with IT Services
To gain a high level, cohesive view of the business and IT landscape, and the opportunities available for outsourcing, it’s important to start by looking at the services the internal IT group provides to the company. While it may be challenging to look past existing departments, reporting structures, roles, etc., starting with a business view of IT services provides an invaluable perspective on the ways IT is supporting the company. For example, rather than looking at tasks such as database administration, start with the business services that rely on that database and the other parts of the infrastructure. This is vital because, in the end, 99.999% uptime of a database doesn’t really help the business if the business service that sits on top of it isn’t performing acceptably.
2. Engage Business and IT in Formulating an Outsource Strategy
Whether the decision is ultimately to outsource IT, invest more heavily in internal resources, or stand pat, it is critical to engage both business and IT leadership in the outsource strategy up front. Fundamentally, executives need to discuss key business objectives and how can IT contribute to them.
Further, organizations should try to assess existing IT services within a business context. Having a dollar-based vantage point can be a critical first step in understanding where investments should be made, and in assessing whether and where outsourcing makes sense. How much revenue is associated with the company’s ERP system? How much revenue is lost when email goes down? The answers will vary widely across organizations. For a B-to-B Web site, downtime over a weekend may have a negligible business impact. For a large online retailer, even sluggish performance may lead to shopping cart abandonment and significantly impact the day’s revenues. By looking at the performance of an IT service from a business standpoint, an organization is much better equipped to make the right IT outsourcing decisions for the right reasons.
3. Assess Strategic Value of IT Services
Next, organizations need to assess the strategic value of IT services. Some may effectively be a utility for the company, others may play a significant role in the extent to which the business can gain competitive differentiation. Looking at services in this way can help decision makers segment those services that could potentially be outsourced and those that need to remain internally sourced.
4. Do an Honest Assessment
For each of the services provided, both IT and the business need to take an honest look at performance. Where is IT succeeding? Where is it failing? Here, it is important to factor in both hard metrics and the more subjective opinions of users and stakeholders. Whatever performance metrics may say, if users are loyal and satisfied, outsourcing may prove risky, running counter to “if it ain’t broke, don’t fix it” adage, which can be problematic if user buy in and participation are important. On the other hand, if satisfaction is low in spite of relatively strong performance metrics, getting support for outsourcing that service may be a lot easier to do.
5. Assess New and Emerging IT Service Requirements
In plotting a long-term IT outsourcing strategy, it is important to take a look at new and upcoming services that the business will need. Depending on the nature of the new service, it may be an ideal candidate to lean on a managed IT services provider to support. A few questions are important to consider in making this decision. For example, can the requested service be leveraged by other departments and groups? If so, investing in the people and infrastructure to manage the service internally may make most sense.
On the other hand, the management team needs to look at the new service within the perspective of the existing team. Do we have applicable expertise or do we have to hire new staff to get the expertise required? By starting a new service with an external MSP out of the gate, businesses can avoid having to incur the cost of developing the required expertise and infrastructure—and avoid the potential cost and effort of migrating the service to a managed IT service provider down the road.
6. Look at IT Service Requirements
Each IT service can have widely divergent requirements—and these differences can play a big role in whether outsourcing makes sense. Fundamentally, executives need to look at how service requirements map to in house capabilities. Following are some of the core requirements to consider:
- Operating windows and availability. Some services may require 99.999% up time. Others may be fine with long backup windows during non-business hours. If supporting a service 24/7 means one support engineer is always on call, not to mention disgruntled and sleep deprived, turning to a service provider with a dedicated NOC may be the right way to go.
- Accessibility requirements. Does an IT service need to be accessible only to employees working at corporate headquarters, or to remote employees, partners, and suppliers? In the former scenario, managing access control may be straightforward. In the latter, SaaS and other cloud offerings may be ideal candidates.
- Security, compliance requirements. What are the security requirements of a given service? Is it in the scope of regulatory mandates? These are fundamental issues when contemplating outsourcing, but they aren’t necessarily clear cut. In some cases, if organizations have the in-house expertise and infrastructure to adhere to security and regulatory policies, the prospect of outsourcing may be a non starter, given the potential risk. On the other hand, if a business is looking to address a new mandate, relying on a service provider that has proven capabilities may be much more cost effective than investing in the internal staffing and infrastructure required to achieve and sustain compliance, support regulatory audits, and more.
- Scalability requirements. Are performance requirements stable, or do they fluctuate dramatically? Does the business continuously struggle to accommodate expanding storage or processing demands, or is there always excess capacity? When meeting performance requirements is challenging, turning to external service providers, particularly those with virtualized and cloud-based, pay-as-you-go offerings, often promise significant value and flexibility.
7. Assess Relative Costs of IT Services
Often, it can be difficult to gauge the true cost of a specific service, given it may rely on a number of IT teams and a range of technologies to operate. Further, the fact that one service continues to encounter outages—and time consuming fire drills for associated support staff—may not show up on any monthly expense report, but it will have major cost implications. However, the better an organization can realistically assess the relative cost of each IT service, the better they’ll be able to knowledgeably assess the potential cost savings of externally sourced offerings.
8. Assess “Portability” of IT Services
It is important to look realistically at the portability of a given service. Are home grown applications in use? What are interdependencies of a given application and service? Are standard, broadly deployed technologies in place? How routine is support of these services? Some of these factors can make external managed IT services a non starter. On the other hand, for services based on commoditized platforms for which expertise is abundant, moving to an external IT service may be a perfect match.
Conclusion: Putting it All Together to Make the Right IT Outsourcing Decisions
Businesses, whether regional shops or global multi-nationals, are increasingly turning to external managed IT services providers for everything from email to archiving to ERP. For all the momentum and growth in the managed services segment, however, deciding when and where to outsource is not straightforward. By taking a business-centric approach to the IT services the organization requires, and carefully considering the characteristics of each given service, organizations can be in a position to make the best decisions about outsourcing.
Once you’ve decided which services to outsource, the next step is finding the right service provider. In our next article, “10 Questions to Ask Your Prospective Managed IT Services Provider”, we’ll look at some keys to making sure you pick the right managed IT services provider for your business.
In the meantime, you can download the “Successful Managed IT Whitepaper” and gain a complete understanding of the considerations of moving to a managed service provider – those that need to be addressed before speaking with MSP’s, during the selection process, and in making the relationship thrive.