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Outsourcing Data Center

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Hi,

We are moving to a new location and I've been planning a new infrastructure build out. Everything from HVAC and power to new core switches and servers. My CFO to look into outsourcing the Data Center. My first reaction was against it but he asked me to keep an open mind. I am trying to keep an open mind but I would like anyone's opinion on this matter. We run a multitude of services such as document management system, an oracle database, file and print services, exchange. We will also be running a conference center which requires Network services such as web conferencing, teleconferencing, audio and video recording.

Thanks for any opinion.

40 replies

by jamesrl

Outsourcing may work in some instances where the organization you are trying to service stays somewhat static.

Where many outsourcers will kill you with costs is with change. From what I have seen, if you save money on managing todays servers, the outsourcer will really gouge you on adding a new server, or even increasing bandwidth. This is because the outsourcerer plans on doing the job with just enough resources, and any change requires both additional and a different kind of resource.

Internal groups are generally more flexible and adaptable than an outsourcer.

So if your business is in a status quo mode, it might make some sense (though rarely does it actually save money), but if you are in time of change and growth, don't think about it.

James

by trtjj

I will be adding more services such as Sharepoint portal and live communications server. We also have alot of media files such as mp3 and video of our conferences.

by jamesrl

Ask them how much it would cost to add a sharepoint server - bet you get sticker shock.

It would help you make your case either way.

James

by reimar.fiedler

Hi,

> Where many outsourcers will kill you with costs is
> with change. From what I have seen, if you save
> money on managing todays servers, the outsourcer
> will really gouge you on adding a new server, or
> even increasing bandwidth. This is because the
> outsourcerer plans on doing the job with just
> enough resources, and any change requires both
> additional and a different kind of resource.

... To avoid that you should first define what kind of services you need from your outsourcing partner (also in future). Do you need a service like "housing" (just datacenter infrastructure including some rackspace) or do you also like to outsource services like OS administration and application management? Than define standard service elements you need, e.g. Internet Access (do you just need access with IP space from your outsourcing partner, do you like to have your own AS ans also different IP Uplink providers?). Whats about Backup and Recovery services, whats about Monitoring and SLA Reporting? You also should define standard server classes and ask for a fix pricing for that (monthly and non-recurring costs). The outsourcing provider should provide a kind of standard catalog including pricing for all mentioned services. You really need to know what is included in the mentioned prices/services in detail and what will be for extra charge.

Reimar

by willisblag

Would like to give you my experience of proposed outsourcing. We are a 500+ head Financial sector co in the uk, with a 40+ IT function supporting a complex multi-platford environment. Over the past five years the threat of o/s has been everpresent with a full blown project initiated 18 months ago. Six or seven serious players were invited to tender and the short list of two strong bids was eventually seen off. It is my belief that the complexity of our enterprise coupled with a lean support model saved the day. We managed to push change through quickly, effectively and cheaply. This is where I believe an internal IT team can score. Previous post is correct imo, these co's are very good at winning new business by offerring loss leader services and low low prices.
That is clawed back over the life of the contract through costs attached to change implementation.
As a starting point I would ensure you have a complete'service library' which includes ALL end to end components of the services that you are looking to o/s (ie don't forget 3rd party suppliers that are critical to this). From here you can start to see where your potential savings/costs can be generated if you o/s.

Good Luck.

by cruden2a

Over the years I've been on both sides of the fence regarding outsourcing IT services. In a previous life we looked at outsourcing the entire data centre to an external service provider. In this scenario we owned no hardware, the provider looked after to OS, patches, etc and all we did was manage and support the user applications. Financially, this was extremely attractive compared to purchasing new servers including a Citrix farm and all the licensing that this implies. However, the execs rejected the option because they were uncomfortable with the idea of housing our data offsite. Not so much discomfort over the lack of hardware, more a lack of trust with someone else having so much 'power' over the business. In my present life we are looking at purchasing new servers, rack, etc and housing them at a remote data centre, who will be responsible for monitoring the essential services, providing the SAN, backup and DR. The trick to this is planning exactly who is responsible for which services and structuring the SLA accordingly. We're still in the negotiation process and planning for the implementation (and a building relocation) so a long way to go yet. Some earlier posts have indicated an 'open mind' is needed when considering outsourcing. I couldn't agree more. I would also stress the need to define the responsibilities of both parties and structure contracts to reflect this. It can be done (I think)!

by ben.gent

What type of data precessing do you do?

If you are talking about email and database served up over a very high speed line it can pay off.

Some systems require LAN response times to function correctly.

How many Servers do you run and how many people are on your support staff?

Outsourcing does remove an element of control. Last minute changes by you require notice or will cost more.

Hidden cost like backup/recovery and DR requirements could cause you a problem.

by herbert_mendoza

you're right! i think it would be ideal to map all the services that the company is willing to outsource..its move must look into long-term benefits in terms of services, security and reliability..maybe more i think

by trtjj

We are using a third party application over an Oracle database. It does requires a fast LAN response time becuase every query sorts 1000s of records and displays them for the user. I am planning to implement Sharepoint portal for teams and Document managament systems for all our power points, multimedia and document files. I believe we will need a fast LAN response. The CFO is looking at cost savings from the build out but I don't see how it would work since we still need HVAC and Power for the Networking equipment.

by ben.gent

Are a depreciable item. Your finance dept or outside accountant can help you deal with this. Basically it is capital money but the business can play with its real impact on the bottom line. Headcount to maintain systems is usually more of a problem in companies. You can use contractors to play around with this problem but that is a short term solution.

Second. If you have to retain some services in house you will still need hvac and power. The cost of having APC or Liebert build out a small system is not much less than a slightly larger system. APC has rack based systems that are "reasonable".

Both have systems that are basically turn key and allow you to retain control over expansion. Depending on your size you can use these instead of traditional generator>battery>PDU solutions.

Again the number of nodes is a big factor. The Gartner group has a formula that approximates how many admins are required to properly manage x number of cpu's.

We use a doc tool called DocsOpen. It has tight requirements for connection quality to an oracle database and line speed requirements. If we can not meet them it causes support problems.

Unless you can show a large savings you run the risk of being nickel and dimed to death by your vendor for additional services or changes that you could do your self in house

by bill_davison

We just went through a migration to a third party IT support company and are on our way back again. It seems there was one significant problem, it wasn't worth it. They never really understood our entire environment and the transition not only didn't go smoothly, it was never completely finished. We went ahead with the process without a full analysis of what they would provide and what we would be responsible for. A lot of stuff was figured out on the fly with assurances that it was no problem. But in the end we ended up paying twice as much for their service than what was projected and still had to handle half of the service calls from the users. We have learned that we know our business better and can handle the users better than a third party entity. This is due to our small size and our diversity. We could not afford the delay and lack of flexibility. So make sure it is clear what exactly they will provide and the true price for all of the pieces together.

by herbert_mendoza

ur right sir! there are business process that a third party cannot understand and they gonna do a lot of recommendation without realizing it eat much of the budget..uniqueness in the operation would be one factor which must look into closely..

by herbert_mendoza

ur right sir! there are business processes that a third party cannot understand and they gonna do a lot of recommendation without realizing it eat much of the budget..uniqueness in the operation would be one factor which must look into closely..

by herbert_mendoza

well, outsourcing maybe sound option but you have to measure the cost benefit not only on money figure but the value of information you have to contract out on such services..actually, it depends also up to what scale you gonna outsource your company's IT asset. It's true some outsourcing company may gear you to a more "financial drain" services that sometimes in limited scheme

by mark

There is a situation in which having your data centre outsourced is highly beneficial. This is if you will relocate offices again. How easy is moving if you do not have to move any back office hardware? Much much easier. In fact for an organisation that needed to major infrastructure upgrades now but expected to reloacate in a couple of years I think there is a strong argument for outsourcing. In your case you presumably wont move again for some time so I think it might be less compelling for you. Although it is easy to set up branch or overspill offices by outsourcing. So I would definitely give it serious consideration.

by paul.beaudoin

The first question is 'What are you trying to accomplish here?' There are often good reasons for change and it is fundamental to the exercise to know what the goal is and keep it clearly in mind, especially with a project as complicatred and long-term as this. If it is simply cost make sure you know what your current costs are and how they will change as a result of outsource. Select a few (limit the number) vendors you would do this with and do a complete RFP with them. Design the RFP carefully to cover all aspects (base cost, service levels, cost of change, cost of transition etc.) Make sure you understand any compliance issues. Make sure you design a process that ensures on-going service at levels you expect and can measure. Decide what facilities you need to keep to police the contract. Make sure you understand the consequences at contract end (don't leave yourself in a weak position once the first term is completed). What happens to staff and how do you keep them on board for the duaration? Who owns the assets (Hardware, infrastructure and application software)? Who owns any maintenance agreements and who will administer them? Is this for a limited time? Back to the first point: Make sure you know why you are doing this and then test (and test and test and test ...) to ensure it can be accomplished.
Make sure you can measure the results in a manner the management understands (and agrees).
Outsource can be a good thing if done well and for reasons everyone understands.
Good luck
Paul

by pete.mcgettigan

You need to think about the things that keep you awake at night. For most senior IT people these fall into 2 main areas. The first is being able to handle the peaks brought about by change and yet to deliver business as usual (your business SLA) while this is happening. The second is the constant change and evolution in technology and how to keep up with it to ensure you are delivering the best you can to your business. Outsourcing can help in both areas.

Flexibility and experience. An outsourcer will be able to deploy extra resources and experience for either short term initiatives, or to handle a widening of the service/technology mix as your business needs change. So, make sure you understand what else your potential partner does and who they do it for. Speak to their other customers. Ask why the outsourced, why they selected a certain partner, what their experience was (in relation to what they asked for and were prepared to pay for). Part of the advantage of building a strong collaborative long term relationship is that you can, in effect, take out insurance against the ramp up cost of future change.

Not all outsourcers deliver the same service ? but not all customers are looking for the same.

At one end of the scale is the commodity outsource deal. This is constrained, but cost-effective. You are buying a standard package and taking advantage of the economies of scale the outsourcer can provide by sharing resources (be it people, bandwidth, whatever) across multiple customers. Deviation from this is justifiably expensive since the outsourcer will not have made provision within their service model and charging for significant change. This is not to say that adding an extra server with a standard build, or more bandwidth should be a big deal. But adding a new OS or a different set of monitoring requirements to support, for example, a different application profile will entail real effort hours that the outsourcer will need to recoup. Also, the commodity support model may not be adaptable to fit your new business requirement, at least not at the price you are used to paying. For an outsourcer who is used to providing pile-it-high-sell-it-cheap services, this change may be as difficult for them to encompass as it would be for an internal IT function adopting a whole new technology set.

At the other end is a collaborative, bespoke personalised service that has been designed and built for you alone. Obviously more expensive, but the extra expense vs doing it for yourself could be justified by guaranteed provision of such things as 24*7 expert cover, emergency resources for incident and problem management, pre-agreed lead times for repeatable tasks, access to skills and experience either within their organisation or by having leverage over the big boys that you may not have. The outsourcers experience should be able to deliver change faster, but they should still not be expected to be able to turn everything around with no notice. To facilitate this they should be closely involved with your technical and business strategy so that they can plan ahead to deliver the expertise you need when you need it. Part of what I would insist upon from a collabortative deal is dedicated access to a named Service Delivery Manager who would not only report back on service as delivered, but also form a part of my strategic team.

All this contributes towards more effective delivery for you against your internal SLA?s to your business.

One thing you should not do.
The one aspect of the deal you should be wary of outsourcing is the overall architectural control. You should certainly use the skills and experience of your outsourcing partner to help you design your technology roadmap for the future. But you are the one who is responsible for delivery and you should ensure you have the right team to retain overall control, and awareness of what is being done for you by your outsource partner. In the unfortunate event of a severance of the relationship, you may need to have to pick it up and move it. You also need to be aware of what you have in order to perform due dilligence to ensure service quality and price remain competitive. While outsourcers should have an understanding of the market they work in, it?s not a guarantee that they will volunteer revenue threatening suggestions to you before they need to.

And something you could do.
You don?t have to outsource the lot. Consider co-location for your infrastructure, with a separate niche management company providing a managed service on top. If either falls by the wayside then the other is still there to support you in dealing with the problem. And you still own the kit of course.

by stuck_in

As the only FT employee in a 10 server shop, with 80 users, I have to consider outsourcing as a way to maintain sanity. Every project becomes a candidate for outsourcing. Our accounting is done in-house but our website is outsourced. The scanning for document imaging is outsourced but I maintain the server and files.

Currently, I am looking to outsource our telephone support which will free up 15% of my time. Time could be better spent doing the migration planning. Everything has a cost; where are your skills best used and outsource the rest.

by rtucker

We recently moved from outsourcing our data ceter to moving it to houston. We found that there were a number of issues that were important to the company that were not considered. The biggest issue we had was making changes and response time to trouble. Once your equipment is in place and the outsourcer is making money after moving your data they do not like to add, change or move anything with going through weeks of paperwork. Secondly, the response times of resolving issues cant be handled outside the company quicker and more efficiently than you can in house.

In short, dont outsource any mission critical applications that have to run 24 x 7, remember the outsourcing company has reasources but they are shared across many organizations. Consider outsourcing non-critical services.

by halils70

Hi Sir,

In Turkey, I have completed big data center outsourcing with HP last year. Shortly, the project was including Oracle e-business suite, MS Windows environments, all server based hardware (except LAN/WAN infrasutracture).
My first suggestion is good planning, deciding very good vendor or service provider. Also, you should plan transition period detailed. If it is possible, keep it long time insted of short time.
You shoul follow a known standards like ITIL or COBIT for operation.
Another very important point is defining SLA and penalty.
You should consider reporting content as well. So you will track that whats happening there according to reports.

If necessary I can provide you more detailed information. I have planned and completed 4 IT outsourcing projects until today.
Regards.

Halil Sailusagi
Freelance IT Consultant
halil.satilusagi@gmail.com
Istanbul/Turkey

by jwschull9

I work for a large corporation that has outsourced it's datacenter and most of its IT programming operations. They even got awards for the job that was done.

BUT.. Beware, initial negotiations on cost will NOT include reasonable time-frames OR costs for additions. If your corporation requires an agile datacenter... Avoid outsourcing.

Also, unless your corporation can tolerate the slow response, Keep your inhouse programming ability. Speed and flexiability are NOT the hallmarks of outsourcing. Outsourcing is all about cost containment. And it works best in a steady-state setting or one where long timeframes between initial request and completion are acceptable.

Also, You will loose your inhouse talent, so expect to become heavily dependent on the outsourcing firm.

My personal opinion... IT technology is changing too quickly to get out of the loop. I would avoid it.

by james speed

Preach it Brother - Preach it!

You are absolutely correct. The hype over outsourcing is done by the outsourcers. Cost containment is the only positive point... but any changes quickly draw those savings down. Hence the yo-yo effect of going back in house.

by the chad

Our company can always use less competition anyway! :)

The outsourcer will only do what is required in the contract.

You cannot adequately specify "quality," "initiative," or "improvement" in your contract, so you can forget about getting any of those things from your new outsourcer.

Oh, and expect to spend more money doing the same things you did before. This is great if you only do stuff occasionally (backup, restore, etc), but if you're constantly doing things to your servers, then the per-task cost + the poor quality of the work will quickly eat up any "savings" you may have received.

by james speed

Over the years i have seen so many businesses go from local Data Centers to Outsourced...back to local...then to Outsourced....back to local or variations thereof.

As a Network Administrator and having been a Server Technician for the 2nd largest public hospital in the State of Florida - i am against it. Im sorry, you can beat local support when you have the right people who are dedicated and knowledgeable. At one point we had outsourced monitoring of some of our systems with Verizon,
it worked... but was more hassle than it was worth so we discontinued it. Our monitoring was more precise and 9 times out of 10 alerted us faster than the remote.

Maybe outsourced data centers would work for companies with no IT Staff or who are in a location where that talent was unobtainable or hard to keep.

Hope this helps.

Jim
LCHCS

by cactus pete

In most cases, I think outsourcing is the result of management who don't wish to put out the effort to attract quality people, and to fight for the money (in whatever form) to keep them.

My datacenter is much more stable, and far more advanced, than when it was outsourced. Backups are real now. Servers are built properly (securely and with the correct amount of resources for the tasks). I know that ever tech in that room cares about the product, and will work hard to make it right. There is a sense of ownership.

While outsourced, the techs always resented answering to two bosses and felt helpless. They also had a hard time suggesting improvements that were necessary.

It took a long time to recover from the damage done of outsourcing the datacenter.

That said, I believe there is still a place for consultants and remote monitoring. Each company must find the fit.

Right now my Help Desk is still outsourced, and I think we can realize the same improvement we had with our datacenter if we just try.

by beoweolf

I have been through and supervised several versions of outsourcing. Outsourcing in-house (where we moved from local control to datacenter; for improved monitoring, consolidated backup, economy of scale when it comes to A/C, PW gen, security, etc...all the supposed benefits of "all eggs in one basket"). I didn't personally approve of it...had a hard time restraining "gloating" when 3 years later, it all moved back. Then we went into a stage where we outsourced our Web site, supervised 2 moves to different hosts. Then supervised the move, back in house.

The main issue has to do with SLA's, responsiveness to outages, and timely reports (of outages, slowdown, code implmentation...you name it). If you are a a one man operation or have no reliable in-house talent, then outsoucing will get you up and running in the shortest period of time.

If you have any special needs, or have had the benefit of call "IT Joe" to complain about sluggish E-mail, "lost" files...then you will not be happy with outsourcing. You have no real control over staff...except money and SLA. SLA's don't do you any good when your previously loyal customers are scream over the phone, while you are threathening your outsource managment on another line and your busniess is in the toilet.

The good news, outsourcing has gotten much better. There are orginizations that specilize in it now...no longer is it a sideline or corporate mandate - its a niche business of its own.

Still, if you really desire effective management of your resources ... nothing beats being the guy that signs the checks for the staff. The seem to try harder and there is less filtering.

by trtjj

As part of my analysis, I will give the CFO this article. I am meeting with one vendor today and I am trying to keep an opened mind. I still do not think it is the right move for us. The CFOs big concern is the build out of our new facility and the cost in HVAC, electrical and cable pulls which I believe is unavoidable

by cactus pete

If you outsource, that compay will make a profit from you, one way or another. They must try to make as much from you as possible, or they aren't serving their own company's best interests.

How can you make savings then? Only if they can leverage HUGE savings on hardware themselves. The outsource company can't save on electricity - they can't save on union labor (for wire pulls, etc) - and they can't save (much) on any hardware.

Therefore, your costs, for equal quality of services, MUST go up. Otherwise, you're cutting off your own interests: uptime, quick response, knowledge...

by jaqui

since the four interviewees are from companies that have done outsourcing and no longer do it.
It shows that outsourcing doesn't give the returns expected.

by dgelect

We tried outsourcing on several levels and failed because we failed to take into account that third world enginers and programmers are not as well trained as commonly believed and their command of english is at best poor. Time lines were not met and in the end brought it back in house.

by herbert_mendoza

partially agree becuase even in my country, communication is a dilemma and the outsourcing providers sometimes can hardly understand us what we really mean on the things they have to do. They even have difficulty to document properly the things they gonna do in providing the services..really messing the ground..head wrecking!!!

by herbert_mendoza

partially agree becuase even in my country, communication is a dilemma and the outsourcing providers sometimes can hardly understand us what we really mean on the things they have to do. They even have difficulty to document properly the things they gonna do in providing the services..really messing the ground..head wrecking!!!

by it-sage (bschirf)

Don't forget to try and quantify the knowledge that would be lost (if any) through this outsourcing.

Some organizations have very good documentation. They have knowledgebases filled with information about how to manage processes. These KBs help the workforce learn and defines what they should and should not do.

Other organizations however do not have any documentation. The advanced knowledge is held in the heads of the Sr techs. That tacit knowledge is passed down to Jr techs as needed, or shared through email distro list discussions.

So if you outsource a particular job function, will you have the documentation to provide to the vendor about how to support your business? The companies that have formal processes and have quality knowledge management tools can get a vendor up-to-speed relatively quickly. On the other hand, if you never thought about KM and what critical knowledge might be lost when their workforce is replaced by another's workforce, then the vendor will never have a chance.

It's a shame that KM efforts are now being resisted because the workers fear it will lead to their jobs being outsourced.

by jeff.noell

In my 15 years of IT I have had my cake and I have eaten it too. I have been though the chaos of outsourcing a data center only to have it pulled back in house a few years leter when a new CIO took control. If I was faced with this decision in my new role I woudl take into consideration the following things:
1) easy of deployment- with everything outsourced you no longer have to babysit your servers. Will you miss swapping out backup tapes? The mess of redundant power as well as HVAC woes are not your problem. Make sure you get all disaster recovery items detailed in the agreement prior to moving/signing anything.
2)Remote access- make sure your staff has remote access thru the ofice WAN as well as thru your VPN. Routine calls to the outsource agent to confirm coverage is a must.
3) total cost savings and network slowness- If you add up the cost of a new data center and compare it to the cosot of moving/outsourcing what is the magical $$$ where it makes sense. many high level IT execs see outsourcing as a savings of man hours BUT if the cost of doing it is truly divulged they may take a closer look at tru cost savings. Also in the vent of router outages how robust is the pipe between you and the outsource agent? Do your core applicatiosn experience a lag tiem that wasn't present before?

Hopefully these poitns are useful with your boss. Frankly I am a "keep it in house" type of guy.

Jeff.noell@gmail.com

by frankz

I, too, am a "keep it in house" type of guy, particularly when an organization has systems requiring constant monitoring and/or has information that needs to be kept confidential (and what company doesn't?). One has to ask the question: Can my business afford to be in the hands of outsiders? I can see where outsourcing might make sense for small-sized companies. But I share the caveat that warns about the true cost savings of outsourcing - savings that can quickly diminish as your user population increases. This being said, as a software company we are finding ourselves having to address a growing demand for hosted solutions... Never a dull moment!

by markp24

Hi ,

I have run across a similar situation. I kept an open mind, and provided a simple pro and con list from both an IT viewpoint and a Cost view point. I suggested to my superiors, we should definitly give this a try (even though i was personally not for it), but not put all our eggs on one basket, I recommended we outsource part of infrastructure, and see how things go,
From there we can change out outsourcing options according to the results.

Lucky for us we were able to have a "trial" period with the vendor. It ended up our e-mail is outsourced and some of our client Primary site, but our DRS site is in our office (since we had the equiptment already). But in terms of other servers, some were just too slow to access over the connection to the outsourced site vs being locally housed, so for drs, we impliemented a nightly replication to a server at the outsourced vendors site for those applications we needed to house internally, which eneded up being beneficial to us.
In the end we ended up not outsourcing the entire datacenter as originally propsed, but i do feel we did benefit from outsources certian recources.

I hope this helps you out.

by dgillespie13

Can you give a little more about your situation? Your industry category has quite an influence on many of the considerations for outsourcing a data operation. Storage requirements are also strong factors as well as expectations for continuation of service. Redundancy and acceptable outages and downtowns can also affect decision making. Don't forget current numbers of IT department staffers and support services offered by outsource companies. Some charge higher fees for added protections and services.
Open minds are a good thing, open checkbooks are better...

by brianrogers171

Hi sourcing problem!

The easy answer is any time any where. I?m afraid after 20 years of experience in ousourcing this answer will never be easy, except if your service is well understood, you are aligned with the business peers, and your capability management maturity level is 3 and above then you might think of outsourcing.
Sourcing is a business venture that has distinct phases: business alignment, service assessment, vendor acessability, venture viability, vendor selection, contract, government.
You should ask for professional help the first time, it is worth the cost.

Outsourcing is not an easy game and needs much thought and control.

Your outsourcing commentator

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