Managed IT Services: In-house or Outsourced?

Managed IT services ARE becoming popular because THEY reduce the pressure on CIOs, aND PROVIDE reliability and performance to IT management. In addition, enterprises can concentrate on their core business, without worrying ABOUT IT issues

Tuesday, July 03, 2007

Gone are the days when you could manage your entire IT infrastructure using a handful of people. Today, the number of IT functions across all enterprises has grown by leaps and bounds. IT infrastructures are becoming increasingly complex, and crossing geographical boundaries. In such a case, you need a bigger team to manage your setup. The question that arises from this is, whether to build an inhouse team to manage it all, or outsource parts of it to a third party.

Increasingly, more companies are using the latter option and outsourcing parts of their IT infrastructure to managed IT services providers. This leads one to several questions. How do you decide which parts of your IT infrastructure to outsource and which ones to keep with your internal team? How many service providers should you approach and what should be the duration of the contract with them? What should be the terms in such a contract? For which services can you easily find a managed IT service provider, and how should you choose the right managed service provider?

Today, there's a huge market for managed IT services, and in this story, we'll analyze the key trends that are shaping this market.

By and large, the easiest functions to outsource are the non-business critical ones. The difficult part is in defining what's non-business critical, since IT is increasingly being subjected to business norms. Something that's extremely business critical for one organization, could be 'not-so-critical' for another. That's why, there isn't a 'one size fits all' answer to this.

The logical way to decide between outsourcing a function or keeping it inhouse is to weigh both options in terms of cost and downtime. How long would a service provider take to resolve a problem? If you needed it to be done faster, how much would be the additional cost for it? Would it be more cost effective to have inhouse staff handling it instead?

For instance, increasingly, most companies are implementing remote infrastructure management, and many others are outsourcing the management of their branch offices. In both cases, if you were to do it inhouse, then you would need to find the right manpower and train them. As the first one can be quite a tedious and monotonous job, you would also need to keep them motivated, as retaining the manpower would be a challenge otherwise. In the latter, ensuring that they're trained and equipped enough to manage the branch office is a task in itself. It makes sense therefore, to outsource such functions to a service provider. Moreover, now managed IT service providers are getting the attention of CIOs on more focused areas such as security, storage, WAN, etc.

Today, CIOs' role is to formulate the IT plans, assess requirements and manage all IT functions. In order to outsource any IT function, you should divide your IT functions into smaller groups, and then identify the areas that can be outsourced, be it hardware or software. After deciding what to outsource, then the next challenge is to choose the right vendor as per the IT budget and quality of service desired.

The advantage of using managed IT services is a CIO can concentrate on new projects without worrying about infrastructure-related issues. Even if something were to go down, it would be the managed service provider or MSP's job to rectify the same.

Why outsource?
If you manage the entire IT yourself, then you need an IT staff in-house that is well trained to handle the technologies, platforms, hardware and software that you use. Secondly you have to pay for their salaries, training, etc. Further, due to the high attrition rate in the IT industry, your organization's HR department will need to spend time finding new professionals with sufficient skillsets and in training them. While this is happening, the technology outside is also changing. If you change your deployed technologies, you again need to train your IT staff. After that you have issues like managing multiple vendors and their associated AMCs and costs. The more the number of vendors for an organization, the more complicated things become when a problem occurs. So, try to minimize the number of vendors, as much as possible. On the other hand, the MSP can act as a single-point of contact for all your needs. While some vendors specialize in one or two areas (like networking, hosting, etc.) many others provide end-to-end solutions. The end-to-end providers further outsource parts of their worok to other down-level MSPs.

With the kind of services being offered today, you can outsource your entire set of IT functions, including implementation, products, sourcing, and maintenance. You can even ask the vendor to set up the whole thing for you, run it for some time and eventually hand it over to you to run after you have the required skillsets. Such contracts are fairly long term, to the tune of 10 years and longer, and the deals are worth huge amounts of money. The feasibility of such long-term deals needs to be evaluated. Does it make sense to be locked in with a single MSP for such a long period? What if it doesn't work out after the initial few years? The best approach in such cases would be to get into an annual contract and renew it based on what the MSP has delivered. Alternately, organizations can also choose to outsource only parts of their infrastructure to an MSP, and sign short-term contracts. We'll now look at the services that can be outsourced.

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