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Outsourcing for value, not price

Outsourcing the management of a modern IT infrastructure can have a positive impact, but the decision to outsource must be based on value.

Read time 6min 50sec

Most people know that price should never be the only, or even necessarily the first, consideration when purchasing something. The value obtained from a purchase is far more important than the cost of the item, as anyone who has ever bought one of those gadgets sold by telemarketers will verify - the price may be a bargain, but when it only lasts as long as an ice-cube in a heat wave, it's not really good value. Why should this approach be any different when it comes to outsourcing IT infrastructure?

Cost efficiency is often cited as the reason why companies choose an outsourcing option, yet any business that believes it is by default the cheaper option will soon be disabused of this notion. However, while outsourcing non-core IT infrastructure may not actually save the company money in the short term, if it is done properly, it should deliver enormous value to the company.

It doesn't take a genius to work out that looking after the company's own IT shop includes a host of additional cost items in its budget - 'doing it yourself' means managing everything from power to software licences, data bundles to virtual machines and newbie end-users to temperamental rocket scientists. Along the way, it will require the purchase of some expensive tools, not to mention the deployment and support bill (an order of magnitude bigger).

Saving time, saving money

Companies will also need to invest in the right skills to be able to effectively utilise these tools. And while all of this takes time and money to get right, it detracts the company from its core business focus. And don't forget that just when the company 'arrives', the world changes again!

This is where outsourcing can deliver transformation, while it serves as part of a cost avoidance strategy. Bringing in an expert with the tools and skills available at the outset, ready to be deployed, means gaining time and avoiding a multitude of costs. Moreover, the provider's track record and experience mitigates business risk, provides a much greater level of security in operations, and all this is objectively measured against a strict service level agreement (SLA).

There is the likelihood that choosing the outsourcing option will appear to be a bit more costly than 'doing it yourself', but beware the hidden costs of DIY and be conscious of the value derived from such a partnership. It's the difference between depending on a pair of Ray-Ban sunglasses to protect your eyes, or purchasing a pair of shades from a guy standing at the robots - they may look the same and even claim the same benefit (with a cost advantage). However, in terms of what they deliver, there is no comparison, and sadly the realisation often only comes when the damage is already done.

Bringing in an outsourcer to handle the company's IT infrastructure challenges does exactly what it says on the tin - it allows the company to focus more clearly on its core business. Moreover, it offers even more value than simply reducing the headaches and expenses related to having the right tools and expertise within the company. Outsourcing also mitigates a range of other challenges: staff churn (having key employees who are trained for specific management tasks poached by another organisation); bleeding-edge pursuit (being encouraged to embrace the latest and greatest technology with last year's certifications and no prior experience); and 'hobby projects' (where techno-junkies build in-house solutions that no one else can maintain).

Additional value is found in the impact outsourcing can have on the company's risk profile, which is not always directly quantifiable in monetary terms. If the company does it all itself, what happens in a situation where the database administrator goes on leave, or is poached by a competitor? Can the company depend on its process documents, or will it find that it's thrashing around in the dark instead? This type of challenge is mitigated with an outsourcer that adheres to standards and has a depth of experienced staff to fill any gaps that may temporarily appear.

Comfort in conformity

Equally valuable is the impact an outsourcer can have on governance and compliance issues. For the CEO who has to satisfy investors and board members that the money they have spent on IT is appropriate and the risks to the IT environment have been dealt with effectively, there is comfort in presenting a reputable provider with the right credentials and certifications, backed by an outsourcing agreement with very clear SLAs. Outsource engagements can also provide step improvements in governance practices.

No business can avoid software licensing, and the larger the enterprise, the more onerous the challenge appears. Ensuring that licences are up to date and correct is often an extremely time-consuming and thankless task, yet the cost of getting it wrong can be massive. A good outsourcer, however, will be able to optimise the company's environment, getting the best from what it already owns, optimising the way the agreements are structured, while also ensuring the company is not paying for anything it's not using or does not need.

There is the likelihood that choosing the outsourcing option will appear to be a bit more costly than 'doing it yourself'.

In addition, a company needs to ask how it truly puts a price on a secure IT infrastructure. Everyone takes some measures towards securing their property and belongings, but most people will be quick to admit that having depleted the budget, there are often still holes in their security. And even if not, just wait a couple of weeks and someone is sure to invent a new way to break it! When this task is outsourced to a specialist that provides secure infrastructure to many clients as their main focus of business, then the company leverages the shared experience of others and effectively reduces its exposure window.

It's clear that the choice of whether or not to outsource should be driven by the answer to a simple question: "Can I get the same business return by purchasing tools and expertise to ensure my IT infrastructure operates optimally, as I get by investing in growing my business?" In all probability, the answer is 'no'.

Maybe business should stop resisting the inevitable and move to an earlier adoption of those 'megatrends'. A perfect example of shifting industry dynamics is the new paradigm of mobility and 'bring your own device'. A new paradigm demands an entirely new approach, a new skills set, new tools to administer, new policies to enforce, and a whole new raft of business issues to conquer.

There are also a bunch of benefits to be realised. It is opportune, perhaps, to look at using this trend as a way of ripping out all of that dated technology with its associated support cost, moving end-point ownership to the employee through a digital allowance, embarking on the journey to cloud (hybrid to start) and engaging in cost avoidance and measured benefit realisation. Perhaps the greatest value outsourcing offers to companies is the option of simply taking the lower-risk road.

It's easy to believe a company is nimble enough to keep up with the rapid changes that technological innovation is wreaking in the enterprise, but the harsh light of reality may prove different. Remember, the Titanic was a technological marvel that was considered unsinkable, until future events proved that paradigm wrong. So, before ploughing ahead in good faith, ask yourself if you really need to make each journey a 'maiden voyage'.

Allan Wattrus
programme director for Outsource Optimisation at Bytes Technology Group (BTG).

Allan Wattrus holds an MSc in engineering and serves as programme director for Outsource Optimisation at Bytes Technology Group (BTG). This is a role that is focused on enhancing the value that an outsource contract delivers to BTG’s clients. Prior to joining BTG, he spent 25 years working for Unisys Africa, where he held a similar position, being responsible for service delivery and outsourcing in the Africa region, including the Indian Ocean islands. His vast experience in the field of outsourcing has left him with a unique insight into the challenges posed by a complex modern IT infrastructure, and means he is ideally positioned to elucidate on both the dangers and the benefits of outsourcing. When he is not deeply embedded in the outsource world, he enjoys woodwork, technology design and helping people to realise their greater potential.

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