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June 27, 2008
• Vol.30 Issue 26
Page(s) 1 in print issue
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Services: The Right Option?
SMEs Should Consider Certain Factors Before Using Third-Party Services
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 In theory, outsourcing always sounds like a beautiful arrangement: For a certain chunk of money, you can wipe tasks off your to-do list forever, including data center cleaning, regular data backups, and network maintenance.
But before an IT manager attempts to dole out every data center task, it’s important to recognize exactly what’s needed. Sometimes, the items on a chore sheet aren’t worth the hassle of lining up someone else to do them and are actually fundamental for keeping an eye on overall data center operations.
With the services that are ripe for outsourcing, though, several major factors go into the decision-making process, including cost, guarantees, and reliability. But there are also pitfalls to avoid, such as hidden line items and more management. When taking a look at third-party services, the trick is to consider all the advantages and sidestep the potential headaches.
 Cost-Benefit Analysis
With budgets growing ever tighter, the largest factor when it comes to using third-party services is cost. An initial run-through of the numbers should determine whether it’s less expensive to have a service provider do the work, such as data storage, or to handle the major task in-house.
When coming up with these numbers, it’s important to factor in not just the labor cost of an IT employee but also equipment costs in the long term. For example, given the amount of capacity needed every month, a manager can track the growth of data storage needs and project that into a few years ahead.
If it appears that more backup will be needed, in-house management will have to include potential equipment costs, software application upgrades, consultant fees for project management if necessary, and possibly more labor as the time needed to do backup increases. Managers will even need to add power and cooling costs to the mix because the amount of each that is available affects how much equipment can be added to the data center.
Sometimes a company may find that it’s more cost-effective to do its own services in-house in the short term but potentially more money-saving to use third-party services as the business expands.
An important consideration, then, is to lock in the rates for at least a few years so that if costs increase for the provider, they won’t be passed on to the SME. Every six months, the SME can go back over the numbers and make sure that using the service still makes sense and deserves to be in the budget.
Management Levels
Another top factor in determining if services are the right option for an SME is to gauge the level of oversight and management that the relationship will require. Some services, such as specialized data center cleaning, involve some negotiations and instructions at the initial phase of the agreement and not much interaction once the work gets underway.
But in general, most tasks will require some level of management, and the service provider should state that expectation upfront. It’s also important to make sure that the SME isn’t the only one paying attention to projects or tasks.
The service provider should be keeping in touch, making suggestions about tweaks to the arrangements if necessary, and being as hands-on as possible, notes Patrick Zelten, vice president of professional services at Forsythe Technology, a technology consulting firm. “The consultant or third-party service provider is there to look at what issues need to be addressed and [be] on the lookout for whether something isn’t working,” he says.
If talking to an outsourcer feels as if it’s taking more time than handling the tasks in-house, it may not be a good arrangement. Chatting with a company’s references can help to get a good perspective on how much time a firm’s other clients take to manage the arrangement and also who might be most effective at an outsourcer in terms of the work.
Relationship Know-How
Unlike contracting with a delivery service to pick up packages or a cleaning crew to vacuum the offices in the evening, the relationship between the IT department and a third-party service provider should involve numerous discussions, and not just about the work at hand.
One major reason that some companies choose an outsourcer is because that firm has an extensive industry network, and representatives there can provide more than just the contracted services.
For example, some vendors will be able to talk about the technology used in network maintenance or bandwidth allocation but also discuss larger trends that could affect the SME down the road, notes Russell Morgan, founder and current president of ITSPA (Information Technology Solution Providers Alliance). “Consultants realize that IT is more closely linked to business goals and strategy at this point, and they should be able to address areas like a company’s mission if they want to be most effective,” he says.
When shopping around for vendors, Morgan suggests SMEs talk to current customers about their service expertise but also about what other levels of value the provider is supplying. Some may even go outside the realm of their contracts for clients that they like—for instance, referring candidates for an open position.
“It’s like any other kind of relationship,” Morgan says. “You want a level of comfort and familiarity and even some chemistry in how you work together. So take your time and shop around until you find someone that clicks with your mission and your operations.” 
by Elizabeth Millard
Question Sheet
In determining whether a third-party service is appropriate for your SME, these are the types of questions you should ask before signing on the dotted line:
• What is the cost difference between hiring another IT employee with relevant experience vs. outsourcing the work?
• How will the service scale up as the company grows?
• What type of access to networks and equipment is required for the best service? Is everyone in the data center comfortable with that access level?
• Is there a rep or technician available locally who can come onsite if necessary for meetings?
• What types of guarantees do you want, realistically? What level of downtime is the company able to withstand, and how much will it cost to guarantee that level with a service firm?
• Who will act as the SME representative to make sure the service provider is doing the work as expected? Will that person review contracts periodically, schedule regular conference calls, and create performance benchmarks, or will those duties be shared throughout the IT team? |
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