Management
Abstract
This paper describes Smiths Information Services Inc. Data centre outsourcing options. As part of corporate overhead reduction program Smith’s Information Service Inc., is faced with a variety of options with regards to outsourcing its data centre management services. The paper reviews the business outsourcing alternatives, short term and long term considerations with data security, service-level agreements, and HR and client issues being of major concern. It will also discuss contractual parameters for the outsourcing process as well as evaluation criteria proposed to be included in the RFP. Finally, the paper will discuss vendor particulars and timeline for the execution of the project.
Smith Information Services uses a data centre developed in the mid 80s. The data centre has evolved rapidly from the mainframes first installed in the 80s, followed by AS400s and finally servers mounted on racks. The cost of disk storage was once at the peak but has considerably decreased. However, cooling cost for the data centre has increased over the years. Hardware and software costs together with the employees required to run the data centre are increasing. This together with the cost of electricity is pushing the overall cost of business out of reach. Bob Smith is aware of the surge in the overall cost of running business and is of the opinion that the services of an outside party are inevitable. The organization has a great potential to do business and increase its market share and profitability but increase in business implies that the cost of operation will also increase. Increase in business implies that more data will be stored and the associated cost will also increase. This necessitates an efficient cost saving strategy to counter incremental costs.
Clouds present the best option in terms of cost savings and flexibility. However, the choice of a vendor is a task that requires consideration. There is the option of a local data centre, a well known data centre, and oversees vendor. Each of the choices presents merits and demerits. Issues imminent are service-level agreements, HR issues for local and remote staff members, informing or not informing company’s clients of the need to outsource among others. Chief among them is the security of data contained in local, well-known or oversees information systems.
Business Process Outsourcing considerations
Business process outsourcing has grown to be one of the recognized ingredients for high performance businesses. BPO is projected to grow at a compounded rate of 9% per annum. The right use of BPO can lead to new products, differentiated strategies, higher returns, continuous operational improvements and more profitable customer relations. However, identifying and focusing on the most important BPO to outsource is not a easy task. A systematic and objective assessment of outsourcing potential is necessary to bring out outsourcing potentials.
Smiths Information Services Inc. will decide on the services to outsource will keeping others in-house. Outsourcing some operations while keeping other in-house will accord the organization the flexibility of managing what they think is more private and crucial to outsource. The organization will outsource the data centre as well as other major IT services but retain crucial activities such as payroll management and finance. By outsourcing most IT services, the company is relieved of the major task of ensuring that company operations are always available. Outsourcing to professionals who have the knowledge and capacity to conduct the operations effectively will save the company lots of cost and time.
The company has an option of outsourcing its data centres to local, well-known client or overseas.
Outsourcing to a local service provider seems the best option because of familiarity and location. A local service provider will imply that services are available locally, eliminating numerous process involved with contracting, permits, government regulations and related procedures. This implies that the overall cost of implementation is reduced than established and international vendors. However, it presents challenges in terms of security. A local host might not present the much needed security like an established cloud service provider. Smiths Information Services Inc deals with numerous amounts of data from different clients. It should be noted that the security of such data is a primary objective which should not be jeopardized. A local provider may lack the capacity to provide sufficient security, availability and other time critical services.
A well-known and established cloud service provider will provide the best services because they have the capacity and infrastructure to host Smiths Information Services Inc data centre. The company will benefit because of their enhanced professional might in handling data centre services. However, one set back is the initial cost of implementation. Because of improved infrastructure to offer enhanced security of client’s data this might come at a extra cost. An established client will quote much higher than a local client and an international vendor.
An international vendor will ultimately provide services at cheaper costs than local vendors. The attraction of an extremely low hourly rate is a motivation to go for an international vendor. However, some of the imminent setbacks include cultural and language barriers as well as international laws and regulations. An international vendor will provide services but with differing time zones, putting a limit on availability and quality. This may mean that quality can be compromised or deadlines are shifted deviating the mean hourly rate from the expected. Dealing with an international entity can derive a lot of benefits in terms of cost savings. However, limitations arising from country-to-country regulations, time zones and cultural differences can affect the overall performance and drive up the cost of business.
Dealing with an established local partner will make a lot of sense. The benefits of lower cost and flexibility are easily derivable. The time difference is insignificant, meaning that there is inherent understanding of the client’s requirements in real time, and the lower rates translate to genuine savings since quality and efficiency is not compromised. The company’s concern lies in the safety of client’s data. An established local vendor is at a better position in terms of technology and security than any other local vendor. Thus, a local well known alternative is the best option.
Short term and long term issues
Security of data is a crucial consideration for any of the choices made. Smith Information Services value its consumer information and demand that the data centre be outsourced to a party that guarantees its security. Data centre management outsourced to a well-known vendor is beneficial because the company understands what the vendor can deliver or not. Thus, it will not only enter into blind agreements but, understands its structures, security parameters and controls as well as what the vendor is obliged to provide.
A service-level agreement will be drafted to determine the services anticipated by the company from the vendor. Among the contents of the SLA include round the clock, 99.99% service availability. Also, the company has over 50 users using its networks, thus, all the users should be supported simultaneously. The services will be compared to performance benchmarks of the current system and are expected to be above them to accommodate increasing users. SLA will also document help desk response time and usage statistics.
Remote and local users will be managed through protocols signed between the company and the vendor. Access will be strictly via defined policy and service level agreements.
Company clients will be notified that their data are maintained by an external party and a notice of liability and protection given.
Contract
Time and material type of contract is chosen for data centre outsourcing. This is because performance and availability metrics are the determining factors of a data centre. Uptime guarantees and availability penalties are the determining metrics and the contract should be modelled according to these parameters.
Vendors
A single vendor is advisable for this event. Already there is a local well-known vendor whose services and requirements are well documented. Thus, it would be impractical to incorporate multiple vendors. However, for the purpose of comparison, multiple well known vendors can be invited to submit their tender proposals.
Evaluation criteria
Financial prospects will be evaluated based on the current $2 billion company’s worth against its standings after adoption of the outsourced service. Technical capability will be measured as a factor of uptime guarantee and availability percentage (99.99) desired. Management buy in will be the basis of measuring management approach towards the project. The success of the data centre is determined by client’s satisfaction of the services provided by the company. Thus, company’s reputation will be a factor of client’s satisfaction rates. High production capacity will signify that the company undertaken a worthy cause by outsourcing its data centre management. The value of the services provided by the company prior to and after outsourcing will enable the determination of success rates. The timeframe set for the implementation of the project is an indication of the efficiency and success of the implementers. Finally, human resources manning IT department are expected to decrease after outsourcing data centre management.
Timeline
The process of procurement is expected to take a period of six months as shown in the table below.
References
Bishop, T. (2009). Next Generation Data Centers in Financial Services: Driving Extreme Efficiency and Effective Cost Savings. Elsevier.
McIvor, R. (2010). Global Services Outsourcing. Cambridge University Press.
Rudy Hirschheim, A. H. (2009). Information Systems Outsourcing: Enduring Themes, Global Challenges, and Process Opportunities. Springer.
Vagadia, B. (2011). Strategic Outsourcing: The Alchemy to Business Transformation in a Globally Converged World. Springer.
