Selective outsourcing
The never-ending IT debate is what to insource and what to outsource. The pendulum has swung back and forth from the 1980s through the early 2000s. But the majority of companies have selected a strategy that seems to be standing the test of time: selective outsourcing.
About 63% of distributed enterprises use Managed Service Providers to help with at least some part of their IT infrastructure—most commonly to manage routers, desktops, and IP telephony, according to Nemertes’ research data. Moving forward, we expect IT staffs to outsource the “nuts and bolts” tactical pieces of the network (ie, areas such as carrier services, routing and switching, Tier 1 support, basic security functions, and basic telephony functions).
What’s more, as companies want to link their networks and applications to business partners, a third party (particularly a carrier) may be the best choice for making that happen via network-to-network interfaces.
Strategic IT functions will stay in house, except when an IT organization recognizes it doesn’t have and can’t quickly obtain the internal expertise to roll out a new technology or application. In those cases, a third party often can make it happen quicker.
Using third parties gives companies a lot of flexibility—though less control than buying and managing products and applications in-house. IT staffs must consider several questions before settling on MSP offerings, including the following:
– Will the MSP own the equipment, or will the enterprise?
– If the MSP owns the equipment or application, will the enterprise lease or rent it? (The assumption with leasing is that the enterprise has a buy-out at the end of the term. A rental is open-ended and doesn’t result in ultimate ownership. There also are tax implications of each, which should be discussed with the corporate accountants.)
– How often will the MSP upgrade the equipment? (This is a big area of negotiation. You should insist on a minimum of 18-month technology refreshes, and some companies reduce it to 12 months. Why? To fully leverage the latest and greatest technologies that you may not otherwise have if you were managing internally.)
– Will the MSP manage 24 x 7, and if so, what is the size of the staff?
– Is the expertise of the MSP’s staff equal to or better than your internal staff? (If not, it’s risky to outsource to that MSP.)
– Who will manage the MSP? (Turning over the management to a third party doesn’t mean completely turning your back. Someone must manage the MSP, as well.)
– On what performance metrics will you evaluate the MSP?
– What pricing structure will you use? Will it be a fixed price per port for a fixed term? Will it be a flat monthly rate per user?
As with any technology decision, there are some clear disadvantages. Any company that plans to use MSPs also should consider these potential pitfalls and make sure they won’t harm company operations. If there is concern they will, the company should negotiate with the MSP to resolve any potential problems up front. Some of the disadvantages to consider include:
– Limited control of when the MSP upgrades equipment, implements new feature sets, changes underlying equipment vendors, and responds to problems;
– Limited control of the internal expertise of the MSP during the contract term. Prior to signing, the enterprise has a good sense of the expertise level, but during the contract term, the MSP could lose key people who have vital expertise. (This is one reason the contract with an MSP must specify the type of experts they have on staff, with details such as experience levels, certifications, degrees, and expertise in specific equipment and applications);
– Potential fallout if the MSP runs into financial difficulties;
– Inconsistencies with the enterprise strategic direction and the MSPs strategic direction for a given technology.
