Outsourcing Your Company's IT Infrastructure

Updated: August 04, 2008

Issue

According to a recent Info-Tech Research Group report, about two-thirds of companies surveyed outsource at least a portion of their IT infrastructure. And it's no wonder: Handing over activities such as email , Web hosting, network management and service desk to a third-party provider can minimize internal headaches and maximize an IT department's ability to focus on core competencies. Nevertheless, there's nothing cut-and-dried about IT-infrastructure outsourcing.

Analysis


For starters, the reasons that companies opt to outsource vary greatly, from reducing head count to increasing service availability. In fact, drivers often correlate with a company's size and scope, according to Darin Stahl, a research analyst with Info-Tech Research Group. "Good-size enterprises need to provide some level of 24/7 infrastructure services, and that's often well beyond their current staffing capacities. So they'll seek value in outsourcing," said Stahl.

Other companies turn to IT-infrastructure outsourcing to "gain access to scarce skills and resources," said Stahl. "Sometimes you want to go ahead and just lease or rent those skills because it's not something that's core to your business." Furthermore, recruiting employees with such skills can be a time-consuming and costly endeavor.

Then there are companies that wish to convert fixed IT costs into variable ones. Whether a business is in the throes of a growth spurt or is being forced to scale back rapidly, outsourcing allows a company to pay for only those services that it requires, as well as add and subtract services on an as-needed basis. "With outsourcing, companies can rely on a pay-by-the-sip model until they reach a tipping point," said Stahl. "And that's when they can decide whether or not to invest in house or continue to outsource."

That's not to suggest, however, that IT-infrastructure outsourcing is a panacea. Rather, Stahl stated that the error threshold for estimating IT-outsourcing cost savings ranges from 25 to 50 percent. "That variability is the largest cause of dissatisfaction with outsourcing more than anything else," warned Stahl. "Companies really have to be targeting a minimum savings of at least 15 or 20 percent going into an outsourcing arrangement to see value."

There are ways, however, in which companies can maximize the value derived from outsourcing. For starters, Stahl recommended spending anywhere from 6 to 18 months evaluating your company's "end-to-end IT processes" and discovering their strengths, gaps, costs and key requirements. The next step involves mapping out a detailed service-level agreement in order to foster a strong vendor relationship.

The Bottom Line



This kind of preliminary legwork may strike some as excessive self-examination, but Stahl believes that "you can't outsource what you can't manage. You have to be able to define your IT processes, know why you're outsourcing and lay out your expectations." Besides, Stahl added, outsourcing a company's IT infrastructure "is a very expensive proposition. In no other area of an enterprise would you spend millions of dollars without a lot of due diligence and really knowing up front what your needs are."

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