Data Center Operations

If asked to define classic IT outsourcing, many managers would respond with "data center operations." This has traditionally been the first function that most IT organizations consider outsourcing, and it is in many respects ideally suited to outsourcing, because the work is typically not a core competency and the skill is a commodity. It is also one with documented successes and proven cost savings, both of which encourage other companies to consider it.

The reasons why data center outsourcing is often successful at reducing costs include:

■ Tasks are clearly defined and repetitive. In most cases, the company has well-established procedures for the operation. This simplifies the outsourcer's transition time and reduces the impact on end customers.

■ The workload is not volatile and changes in the nature of the work are infrequent. This consistency makes negotiating a contract simpler because there is less need to provide for exceptions. Costs can be clearly identified. A steady-state workload also provides the outsourcer with the incentive to invest in long-term cost-saving changes, a portion of which can be passed through to the company.

■ The work is not company specific and requires no special knowledge of the company's business. The generic nature of the function means that there are many potential suppliers, and the company can contract with the lowest-cost provider.

■ Existing costs are normally well-documented. Because many companies have formal chargeback systems for data center costs, potential savings from using a service provider are readily determined.

■ The primary concerns associated with data center outsourcing are:

■ The company may lose control of decisions, such as a change from one mid-range computer supplier to another, or an upgrade to a new version of the operating system, which would have an impact on its staff. A carefully worded contract can reduce this risk by reserving the right to these decisions to the company, or requiring its concurrence before a change can be made.

■ Flexibility of shifting from one platform to another may be reduced by a long-term contract. If a company anticipates a major change in its computing strategy, such as moving from mainframe systems to client/server or Web-based applications, it may not want to outsource data center operations until the change is in place.

While staff augmentation can alleviate temporary shortages of operations staff, it is not used as often as outsourcing because it does not provide the cost savings most IT managers seek from the use of a data center service provider.

Understanding Outsourcing

Understanding Outsourcing

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