Rapid change in technology is nothing new. But some things remain a constant: CIOs will always be under pressure to prove IT spending improves business growth and, at the same time, find ways to deliver more with less. These days, that means figuring out which parts of IT to keep in-house and which to outsource.
One logical conclusion, industry experts say, is to let someone else take over the organization's IT assets, or physical infrastructure. After all, says Laura DiDio, a research fellow at IT firm Yankee Group, based in Boston, Mass., "If you could get rid of an Excedrin headache, you would, wouldn't you?''
Someone Else's Headache
More and more IT departments concede that they don't have the budget to buy an increasingly complex infrastructure, let alone hire and train the technicians to service it. Outsourcing to a hosted environment offers an attractive solution. "The trend started several years ago, so moving the physical assets is not a new concept," says Eugene V. Zakharov, a senior analyst at Technology Business Research, Inc., an IT market research firm in Hampton, N.H. Recently, he adds, "I'm seeing more acceptance in the marketplace."
A hosted hardware model best suits companies that have data-intensive environments. Financial services and manufacturing industries are prime candidates. (article continues)
The potential advantages of outsourcing the infrastructure include:
- Reduction in overhead costs, including avoiding capital expenditures Having someone else host your hardware frees up resources and helps to offload non-core functions. Zakharov says that it also helps companies avoid the cost of "chasing technology" when they need to upgrade their infrastructure. "Now the third-party vendor is responsible for ensuring that your server is running the most recent technology and has the right patches,'' he says.
- Reduced staffing issues When companies outsource, the vendor is responsible for finding the right people and ensuring they are properly trained; turnover and retention become their problem.
For all the potential advantages, the decision to switch to a hosted data center is not a slam-dunk. The stumbling blocks include:
- Higher costs than anticipated While the cost of outsourcing a hardware infrastructure varies widely, Zakharov estimates that it could consume over 50 percent of an IT department's annual budget. DiDio sees companies spending between 20 percent and 40 percent of their budgets on maintenance and equipment management, with more for applications and people costs.
- Vendor performance issues Glitches often arise over security, not meeting promised cost savings or failing to reduce downtime. "Not all contracts go well," warns Zakharov. "Companies end up taking the assets -- whether people or equipment -- back in-house.''
- Losing direct control "When you're in a hosted environment, you're at least one step removed and that's enough to make managers hesitate," says Tere' Bracco, a senior research director at Current Analysis, located in Seaside, Calif. "They want to make sure they can actually produce reports, spot problems and take action to keep them in compliance." (article continues)
IT managers also experience a loss of control when the data crosses the firewall into a hosted environment. Says Bracco, "One of the things they are completely unsure about is how they are going to be able to track access and data bleed. Is that hosted environment really complying with the regulatory requirements of their industry?"
Before you jump to a hosted data center, do a thorough due diligence. Is the vendor in a secure financial position? Does it provide quality products and services? Can the vendor show actual results it has delivered? Are they going to store sensitive information somewhere safe from hackers? How solid are the vendor's business continuity and disaster recovery services? How does the vendor deal with employee attrition?
When customers consider outsourcing, DiDio always advises them to have a liaison in the IT department who works closely with the outsourcer to determine what they're doing, if they're doing it correctly and whether they are doing it in the most efficient manner. "You need to be kept apprised and abreast of what you're hosting and ask them for the appropriate depth in the reports," she says. "You want to hear about the latest updates in hardware and the corrective action they took if there was a problem."
In the final analysis, bear in mind that just because equipment moves outside the physical walls doesn't mean you relinquish overall management for it. "This is a live, ongoing investment,'' DiDio says. "Your data is still your primary asset, so you have to take responsibility."