Johannesburg, 02 Jun 2011
“Companies outsource IT functions that do not form a part of its core business,” explains Brent Flint, Services Executive for Dimension Data, Middle East and Africa.
“Since the economic recession, there has been an increase in IT service outsourcing as a means to minimise cost and increase efficiency.
But what are some issues that should be considered when contracting an IT service provider?
1. Adjust your contract duration
According to research, three years is the optimal contract duration as it results in the best blend of predictability, discount, technology life cycle, stability and flexibility. “This ultimately achieves the optimal balance between operational efficiency and competitiveness,” explains Flint. “Often, innovation is built into longer contracts.”
2. Optimise service levels
Classifying your organisation's locations by availability requirements allows for the most effective allocation of service-level agreement (SLA) requirements and ensures alignment to the business. “Currently this doesn't happen often, which means organisations do not make the most effective use of their IT management spend,” explains Flint.
3. Rationalise suppliers, negotiate volume discount
Organisations often have more than one IT service provider. Reasons for this include:
* Different technologies are supported by different vendors (eg, routing and switching with vendor A and IPT support by vendor B).
* Legacy contracts are in place, due to mergers and acquisitions with your organisation.
* Multiple vendors are used due to geographical constraints. “By collapsing support contracts down to a single vendor, the IT service provider should be able to provide greater discounts by leveraging the increased volume to improve scale and operational efficiencies,” explains Flint.
4. Rationalise installed equipment
There are a number of ways in which the management of installed products can drive efficiencies in terms in of maintenance costs. “This includes not only sweating assets rationally, ie, beyond 'last-day-of-support', but also upgrading equipment that collapses the functionality of multiple devices into a single device. The use of fewer devices leads to a reduction in long-term spend,” says Flint.
5. Analyse device life cycle
According to Flint, reactive replacement of aging assets is a recipe for over-spending. “This is exactly what happens most of the time as when a business attempts to renew their service contract directly with the vendor and finds that some products cannot be renewed. Rather contract with a service provider that can help you sweat your assets and get the most out of your IT spend.”
6. Purchase a 'restoral' service level
“The reality of manufacturer and other basic maintenance contracts is that they insure the client for issues which occur less often, namely device failure,” explains Flint. The current average failure rate for Cisco equipment is under 4% and this has been found to be consistent even in old equipment.
“What a business really wants is to ensure that when a failure occurs that someone is available, to not just replace the device, but to restore service to its previous working order. So who is that? If it is the internal IT department within the business, then they must have Level 2 engineering skills in-house and these are expensive. It is typically far less expensive for the business to have an IT service provider own the restoration and ensure business continuity.”
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