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ITDebate: datacenter outsource economics

By itdebate ·
The economics of data center outsourcing (DCO) have changed dramatically in the past 10 years, and DCO vendors are expected to be able to pass on savings to any client via low-cost MIPS (millions of instructions per second). But Gartner suggests that a relationship with a DCO vendor requires careful consideration for it to be valuable. What have been your experiences with DCO? What kind of sales technique did the vendors use? What would you recommend to someone considering outsourcing? You can read the related Gartner article, which will be posted 3:00 AM Wednesday, at http://www.techrepublic.com/article.jhtml?id=r00620001213ggp01.htm

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ITDebate: datacenter outsource economics

by jdburgs In reply to ITDebate: datacenter outs ...

MIPS, DIPS, SLIPS.....Bottom line to reduce the TCO of us outsourcing to a DC has been the fact that we have been able to concentrate on our ERP implementation and not worry about Hardware upkeep and software fixes.
Our 3 College Consortium decided to outsource to another larger College within our System. This allowed us to better meet our own College initiatives which are to implement our Software System.
The DC is responsible for managing the Network and keeping us current on the product fixes, which alone requires 3-4 FT Techs.
I honestly can't tell you what we pay per MIPS - but what does that really mean?
To us, the most important aspect of this partnership, is the fact that the DC supplies knowledgeable staff that can concentrate on the support of the software while we can build and maintain our Business Processes.
Insightfull article, but sometimes we make things so difficult to understand and so triviel, that we focus on driving down the wrong path.
The DC now supportssix Colleges very sucessfully. I can't imagine having to hire additional staff to support a DC just for our college, let alone train them to "catch up" on technical support.
I measure TCO by means of support to the customer. Can you support our needs now or later? If it's later, see ya!

Aside from that, keep up the good work!

jd

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ITDebate: datacenter outsource economics

by itdebate In reply to ITDebate: datacenter outs ...

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ITDebate: datacenter outsource economics

by Shanghai Sam In reply to ITDebate: datacenter outs ...

I have managed a very efficient DC which was consolidated to a corporate Megacenter (internal DCO if you will), and I have worked for a commercial DCO, and now I am part of a team that manages an outsourcing contract with a DCO which is in year 3 of a 10 year contract for a Fortune 50 company. The advice I would give to those considering outsourcing is this:
1. Reduce your cost as much as possible before you outsource. DCO's will try to bid lower than your budget. There is no downside to this item, even if you decide not to outsource.
2. Negotiate into the contract a clause which specifies sharing of cost savings between you and the DCO. As stated in the article, in general, costs per MIP are dropping, so you should expect lower costs on your own. The outsourcer's cost may drop more because of economies of scale. Your organization should share in those savings.
3. Dont forget that if you outsource, you will have to dedicate resources (ie people) to manage the DCO. So all of your costs do not disappear. Dont underestimate this effort.
4. If you manage to negotiate a very good contract price from your perspecitve, expect the DCO to do everything to attempt to increase their revenues and margins. After all, DCO's are in the business to make a profit. If you negotiated well up front to minimize your costs, you probably have minimized the DCO's margins, so they will be looking for every opportunity to recoup those lost margins.
5. If your data center costs put you below the average for your DC size, be very cautious before you outsource, because when you outsource, you will give up some flexibity in terms of technology changes and process improvements, and the speed with which they can be implemented.

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ITDebate: datacenter outsource economics

by itdebate In reply to ITDebate: datacenter outs ...

Your answer was featured in our IT Debate TechMail. To receive your free subscription to the IT Debate TechMail, sign up at http://www.techrepublic.com/techmails.jhtml

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ITDebate: datacenter outsource economics

by itdebate In reply to ITDebate: datacenter outs ...

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