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Outsourcing Info
The following articles have been published in national magazines and provide information on Managed IT Services, IT Outsourcing, and other topics of interest.
By Jennifer Mears, Network World, 02/27/06 Encharter Insurance, in Lexington, Mass., prides itself on its hometown appeal. That feel for the neighborhood has contributed to its rapid growth - Encharter doubled in size in the last few years, to 55 employees and about $8 million in revenue. But while business boomed, like many small companies Encharter paid little attention to developing an IT strategy to support expanding technology demands. "I came into this job and found that there was no IT department," says Michael Sher, who last year was named president and CEO of the group of seven insurance agencies in Massachusetts and Connecticut. He started looking for outside help, a maverick decision for the head of a small company. Most small and midsize businesses are reluctant to hand over IT functions to outsourcers, in large part because SMBs lack familiarity with the idea of outsourcing and fear they will lose control. In addition, while some smaller outsourcing vendors such as CenterBeam and Everdream have built their businesses by focusing on SMBs, big-name providers such as Electronic Data Systems and IBM have yet to carve out a niche in the low end of the market, creating a supply-side issue that is holding back more widespread demand, analysts say. Gartner estimates that about 90% of all new businesses created in the United States are in the SMB sector. It's a huge opportunity for outsourcers as these small firms begin to recognize that they can achieve the same benefits that large organizations enjoy when they hand over non-core IT functions to outside service providers. "There is a small but growing legion of SMBs that are considering outsourcing," says Robert Brown, a research director at Gartner. He notes that the base is small: Companies with 100 to 499 employees now account for just 7.8% of the $50.5 billion business-process outsourcing market, but that number is expected to grow to more than 8% of a $78.8 billion market by 2009, according to Gartner. "For most SMBs, there is an unfamiliarity with outsourcing that dictates that when they make technology buying decisions, the first thing they are going to think about is buying hardware and software, and then trying to integrate those through internal resources and staff, as opposed to turning to an outsourcer to help," Brown says. Sher says when he left Plymouth Rock Insurance about a year ago to run its subsidiary Encharter, he could hardly believe the IT situation"The offices weren't networked. And it was all supported by one guy, and if he was sick our whole system could be down. He was also charging us for travel between the seven offices in two states," Sher says. Encharter last year turned over the bulk of its IT infrastructure, including its Microsoft Exchange servers, to CenterBeam. "Now we have nightly backups. We have servers that are in a Class 1 data center. We have all the things that you would want a growing insurance agency with aspirations for further acquisitions and expansion to have," Sher says. The small company had to invest in upgraded hardware such as routers and T-1 lines to take advantage of remote service, but that investment paid off. "We have probably cut our IT costs in half," he says. In addition, Sher says Encharter now has the kind of technology support it needs to continue to grow. It's a growth-byacquisition strategy of the kind that is pushing other SMBs to look at outsourcers, including offshore. Kitcoff-APSI, a consulting and administration firm that focuses on full-service, employer-sponsored retirement plans, is using Indian offshore provider Patni to buoy its numerous acquisitions. Michael Campo, founder of the Coral Gables, Fla., company, says outsourcing is the key to his business model. "I needed to lower my labor costs," he says. "Once I bought holistically into the idea of outsourcing, I could then acquire another firm and completely take over its entire book of business and outsource it to India without absorbing any of their labor cost mistakes." Patni handles record-keeping tasks associated with the administration of Kitcoff-APSI's defined-contribution plans. Campo says outsourcing can be a tough decision for any company, large or small. "The problem is, inherently a smallbusiness owner has even more reservations because [the company] is his," he says. "But there are many ways to mitigate those fears." One is to completely embrace the concept of outsourcing, Campo says. "My business model is completely immersed now in the concept of outsourcing the heavy lifting to Patni," Campo says. The strategic advantage - customer service - remains in-house. Henry Svendblad, vice president of IT at Millennium Partners Sports Club Management in Boston, also was looking for a way to offload non-core IT headaches. He outsourced the company's IT functions to CenterBeam in December, just a month after coming on board. "As I looked at our IT strategy, I realized I could dedicate most of my time to building an IT infrastructure and then try to build our business systems from scratch. Or I could let CenterBeam focus on our infrastructure and focus all of my energies on our business systems, where I can really add value," he says. Click here for the original story "Network World Article"
An overview of outsourcing benefits and key qualities to demand in an outsourcing vendor In evaluating the merits of IT outsourcing, companies not only need to consider a complex mix of technical and business issues – they must also set aside the fear of losing control, which is the most common obstacle to an objective evaluation. For decades, executives have been conditioned to directly manage IT staff, procedures, and infrastructure. Yet, the benefits and strategic implications of transcending this anxiety are enormous. In a majority of business environments, an objective comparison between existing internal IT operations and equivalent outsourced services will reveal significant advantages in cost, reliability, quality, speed, and flexibility. It should enable an organization to immediately identify opportunities to improve operations and support; to increase productivity; to reduce expenditures; to gain access to emerging technologies; and to strengthen competitive market position. Further examination will reveal advantages beyond the obvious. Thus, after a well-structured and objective assessment of outsourcing, the usual dilemma is not whether to outsource, but with whom. IT outsourcing requires a partner that understands the complexity of the outsourcing decision and has a proven approach to helping companies achieve the full range of business benefits made possible by outsourcing. This white paper provides executives critical considerations when examining the outsourcing of information technology. It explores the primary business benefits of outsourcing value and provides key criteria for vendor selection. Finally, it demonstrates that Verizon IT possesses not only the experience and expertise, but also the best service model, to serve as an ideal partner for any IT outsourcing engagement. Ten Benefits to Outsourcing Information Technology 1. More profitable use of valuable in-house IT talent Typically, scarce IT support resources are divided between two competing goals: meeting the ever-growing business-related demands of corporate end users and, simultaneously keeping pace with fast-changing technology. There is a compelling benefit to concentrating management and support staff on IT strategies that actually drive business growth and operational efficiencies. Meanwhile, the continuous updating of server load balancing, system monitoring and tuning, capacity planning, help desk operations, and other routine IT functions can be outsourced to a qualified provider. In short, the company is free to concentrate on its core business, and the outsource provider can concentrate on its core business – staying current with evolving technology. 2. Reduced IT overhead Reducing or eliminating the costs of system and network administration, dedicated response capabilities and additional systemic and process support can allow greater investment in such business-driving activities as customer acquisition, relationship management, and manufacturing or distribution efforts. A recent IDC outsourcing study reveals that 12 surveyed companies realized quantifiable business returns by reducing such IT facilities costs as floor-space, heating and air conditioning, power consumption, reserve power capability (UPS), fire suppression, off-site archiving, and facility management. 3. Reduced capital expense Outsourcing IT operations can defray or level traditional capital investment in infrastructure and technology by migrating these costs to operating expenses. As an additional benefit, you can often pay for these operating expenses on a per-transaction basis (otherwise known as "by the drink"). This allows you to vary your expenses with demand, floating directly with the fluctuations in your market. 4. Improved IT performance and reliability The reduction—even elimination—of operational errors and inefficiencies is one of the most important advantages of outsourcing. Outsourcing providers employ seasoned staffs that adhere to rigorous and well-documented "run book" methodologies. The result is deep experience and consistent discipline that translates directly into improved reliability in system access and repeatability of expected outcomes. The outsource provider’s extensive investments in people, technology, and processes enable a level of service and quality that is virtually unattainable for enterprises attempting to handle their own IT functions. And because of its aggregated buying power, the provider can deliver performance and reliability improvements while reducing costs for customers. 5. A technology edge over competitors Outsourcing provides immediate access not only to proven best practices, but also to next practices just as quickly as they are developed. This is beyond the typical notion of leveraging economies-of-scale relationships of the provider. It extends into the realm of economies of skill and the ability it provides a client to engage an entirely new skill set demand. Because business strategy so often turns with technology, this early access to new IT capabilities can be a distinct advantage in a competitive market. 6. Access to different skills and technology as needed Outsourcing providers can rapidly and easily scale up and down to provide an agile infrastructure in response to changing business needs. This enables a client organization to rapidly assimilate or eliminate specific skill or resource needs as they change within a given architectural environment. For instance, database developers can be deployed to help the company migrate to a new data management system. The talent and best-of-breed capabilities of these specialists would be put to heavy use during development and implementation phases, and then reduced to a maintenance level for ongoing operation. 7. Accelerated development and time-to-market cycles In-house development can get bogged down by all kinds of factors, including staff shortages, lack of experience in key technologies, competing in-house projects, and a variety of technology or financial emergencies. Nowadays, protracted IT projects can be risky, given the competitive pressures and heightened customer expectations in the global marketplace. A qualified IT service provider can offer the specialized staff and expertise to get a project completed and launched quickly. 8. Reduced risk of unscheduled downtime Another key benefit is the elimination of unplanned downtime. The strict procedures observed by qualified providers reduce the potential for unscheduled downtime. In the advent of a disaster, a provider can leverage its expertise and established procedures to rapidly return a client company’s IT infrastructure to full operational capability. 9. Smoother, less costly technology migration Outsourcing can radically reduce the cost and risk of upgrading technology by allowing a company to rework selected features and functions rather than entire applications. Because outsourcing vendors provide access to many different platforms, a client organization can move gradually to more current and more powerful systems as business requirements change over time – without committing to a long evaluation, pricing, acquisition, installation, and implementation process. Additionally, providers offer access to a wide variety of key applications that are already licensed, stabilized, operational, and fully supported; allowing a company to evaluate, test, and implement new applications more efficiently. 10. Business contingency and continuity capabilities Providers operate in secure facilities with redundant power supplies, alternate telecommunications connections, and excess processing capabilities. They can provide a company with the ability to continue operations even after a major fault or system failure. Many providers also maintain a disaster recovery site that they can relocate to in short order should the primary facilities be affected by a disruption. Individual clients find that maintaining these capabilities themselves is extraordinarily expensive and cost-ineffective. – Other management considerations While we have discussed ten high-level reasons for considering outsourcing IT operations, there are many additional reasons, including: Doing business in today’s "connected" marketplace involves convergent technologies that span many disciplines. It is an unforgiving environment for those companies unable or unwilling to leverage technology with great efficiency and flexibility. For a growing number of organizations, success will hinge on selecting the right outsourcing provider to manage a complex and continually-evolving IT infrastructure. Critical Qualifications for IT Outsourcing Providers When companies initiate an IT outsourcing strategy, good business practices mandate that enterprises consider service providers that can demonstrate the following: These six critical success factors provide insight into the types of questions companies should be asking of current and future service providers for IT outsourcing. Each is equally important to the overall business impact and quality of services provided. Many companies typically examine only a handful of quantifiable measures like return-on-investment (ROI), payback, internal rate-of-return (IRR), return-on-assets (ROA), or economic value added (EVA) – and rightfully so, as these are important measurements for evaluation. However, the most savvy and successful procurers of outsourcing services integrate the factors listed above into the vendor evaluation analysis to ensure a successful outcome of the outsourcing relationship.
An overview of outsourcing benefits and key qualities to demand in an outsourcing vendor By John Hazard for eWeek Magazine, March 13, 2006. CEOs may not understand the nuts and bolts of technology, but they will take an increasing role in the decisions previously reserved for CIOs as innovation becomes a key focus in 2006. As the role of technology moves from a business supporter to an enabler, executives from outside the technology department are expanding their roles, especially when operations and a company's business model are altered, said CEO's, CIOs, and analysts. Using IT to enable business performance and innovation is now the No. 2 technical concern facing CEOs, behind secuirty, according to Stephen Minton, IT strategy and budget analyst at research company IDC, in Framingham, Mass. "Business managers have caught on to the concept that IT has a more strategic role to play than just supporting," Minton said. "Usually, CEOs were concerned with getting the cost out of IT or the complexity. It is a welcome turnaround that they are telling us they are driving strategic spending."
Do regular server reboots affect system uptime statistics and reliability? From an on-line newsletter WSN-reader Nick Meyer came back with a another important reason for regular reboots though. Here is what he sent in: "For my part, I have never been impressed by long uptime stats. It means that you haven't patched your machine, you've never powered it down, you haven't tested failover, and just generally have not done your job. The most memorable incident I had was a service call on was an IBM RS6000 unit that had run continuously for seven and a half years. They re-arranged the server room, so they powered the unit down, moved it, powered it up...and got nothing. 4 hour response time callout. Darn thing had had a failed drive in a RAID 5 array and wouldn't allow a bootup without replacing the bad disk. Sensible enough--keeps you from running a unit in a vulnerable situation. Brought in a SCSI drive replacement--larger than the original but compatible with the controller. Fugetaboutit, not allowed. Okay, replace all three drives and restore from tape. Fugetaboutit, the Unix backup routine was a sector-by-sector image that could only be restored to the EXACT same drive array. This was Friday. No air freight service on Saturday. Got a drive in Sunday evening. No joy. Sourced an acceptable drive from IBM on Tuesday. Got it Wednesday. In-house IT got the server running for Thursday morning--but Friday afternoon through Wednesday afternoon, 214 drafting/design personnel did jack squat. 30 hrs x 214 people x $14.00/hr average = $89880. I never was too impressed with uptime stats--but after that I was determined that NO server I looked after would ever go more than a month without a reboot. If I am going to get an unpleasant surprise, I want it to happen long before it turns out the hardware I am running can't be replaced or the backup routine I am using has a big gotcha". Wise words from the guy that was bitten and literally learned a valuable lesson! |
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