Outsourcing looks good

J. KaplanObviously, this major consumer goods manufacturer's current ad hoc and decentralized IT approach has failed to support the company's corporate objectives adequately and has led to a severe deterioration in the reliability of its IT infrastructure and application services. As a result, IT leadership must take greater control of day-to-day IT operations end to end, and create a common vision for IT's overall role within the company.

IT leadership's first step must be to establish a stricter set of corporate IT priorities, policies and procedures for governing operations. This means that many of the company's IT decisions must be more directly based on corporate objectives. It also means that IT decisions must become more centralized to ensure better coordination and greater cost-savings.

Centralization might not sit well with IT staffers who previously have been allowed plenty of freedom to make their own decisions and to operate independently or with business units that had been making IT decisions autonomously. Given potential political ramifications, the move to a more centralized operating model should be mandated and fully supported by the company's senior management, starting with the CEO and CFO.

Start with an audit

With its new authority, IT leadership must next initiate a thorough audit of IT and application service levels and assessment of current and future business requirements. To ensure an objective assessment, this audit should be either conducted by an independent firm or by an internal team of IT and business representatives that report its findings to senior management.

Main: Out with the old, in with the new data center

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CDW: Layer by layer

The audit should target specific performance problems that are hampering business success today and those that could adversely affect the company soon. It should determine which problems are directly related to technology issues vs. those that might be a result of poor IT management practices. Given the escalating impact of the IT operating problems, the company needs to make important changes quickly. This audit process should take into account typical business cycles, but should not take more than 90 days.

Move on to outsourcing strategy

Given the company's limited resources, IT leadership then should develop an outsourcing strategy based on the specific priorities resulting from this audit and assessment. An outsourcing strategy should determine what roles outside solution providers will play in resolving the current problems, building an IT infrastructure and deploying applications that best satisfy the company's current business needs and meet its future corporate objectives. IT leadership needs to do this with the understanding that revamping the IT architecture and applications entirely on its own would not make good business sense given the rapidly expanding array of outsourcing or "out-tasking" alternatives.

The upshot: Corporate IT must take greater control of day-to-day operations, then consider outsourcing options for getting its infrastructure in new data center shape.

While I don't recommend a wholesale transfer of the company's IT operations to an outsourcer because a majority of these deals fail, a growing number of managed services are available for addressing many of the company's problems. For instance, a managed VPN service could end sluggish performance on the 1G bit/sec Ethernet backbone, and a managed storage service could satisfy the company's storage-area network needs and provide off-site back-up facilities for disaster recovery and business continuity.

Consider specific managed services

As they've matured, managed services have become beneficial for large-scale companies that want to offload specific IT functions. Independent managed service providers as well as a growing variety of hardware and software vendors, telecom carriers and resellers offer these services.

The rapid evolution of managed services is being matched by a resurgence of hosted software services. The success of Salesforce.com among small-to-midsize businesses has attracted attention from larger companies that are fed up with traditional CRM and salesforce automation software packages. Such on-demand services are available not only from major enterprise players such as Siebel Systems and Oracle, but also from other 'Net-native software service providers such as NetSuite. This consumer goods manufacturer might well be able to take advantage of a managed supply-chain management service.

Standardized platforms

Whether the company updates its hardware and software on its own or leverages third-party resources, standardizing the hardware and software platforms should be a priority.

This not only should permit the company to achieve greater interoperability across geographies, but also should increase system and application reliability, and reduce management and maintenance costs. Standardization also would permit the consolidation of systems and platforms, which could result in greater performance levels. Standardization could enable the company to establish strategic sourcing agreements with key vendors, reducing procurement and support costs.

Finally, the company must remember that we are still in the midst of a buyer's market. In this environment, it has the luxury of selecting from a wide range of product and service alternatives. It also has the opportunity to negotiate favorable prices for these alternatives. The company should not make its choices based on price alone. But, it should be able to find good, economical solutions that address its short-term needs and long-term strategic objectives.

Kaplan can be reached at jkaplan@thinkstrategies.com.

Copyright © 2005 IDG Communications, Inc.

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