Background
Smith Information Services Inc.
Smith Information Services Inc. is a company that offers consumer information services. The company has grown very fast over the recent past. However, currently, competition in the market has increased posing a lot of challenge to the company. As a result, it has affected the profits of the company negative in the past two years. The key reason for the decreased costs within the company is the increased costs of operation. The Data Center of the company is the major reason leading to increased costs of operation.
The company has a mainframe computer installed in its premises since AS400s. With time, the mainframe has developed a problem in which cooling of the data center has become very expensive for the company. The cost of cooling the facility has risen significantly. Besides, the cost of electricity used for running all the devices of the company remains very high at the moment. Nonetheless, the cost of its hardware and software is also on the increase. To worsen the matter the number of the workers who should handle the devices in on the rise thus increasing the cost of operation in the company. The cost of operation within the company is becoming uncontrollable thus challenging the management of Bob Smith.
Consequently, the CEO of the company has a feeling that if action is not taken to control these costs may lead to poor performance of the company. Considerably, he is thinking of recruiting an outsourcing company to offer the data center services for the company with anticipation that such a move will help the company to overcome this challenge. The CEO has a wide range of data center choices for the company from which it can choice the best to offer the data center services. These choices include the overseas center, a local data center, and a well-known data center.
The company anticipates better services from the outsource services and believe that the outside source will assist the company to enhance efficiency in its operations. Such efficiency will play a great role in reducing operation costs for the company. However, there is a feeling that through the outside source, its confidential information will be under threat. Thus, paper thus focuses on analyzing the various choices of Data Center Companies that can help the company promote efficiency and reduce its costs of operation. The benefits and disadvantages that the company feels may arise from the outside source will be discussed later in the proposal (Kamel, 2006).
It is worth noting that the company needs to follow a certain guideline to ensure that it makes a proper selection of the qualified and competent outsourcing option that meets its needs. The outline below provides the project scope and data comparison of various vendors bidding for the project and later are my recommendations concerning the exercise.
Project Scope Overview
Project CEO: Bob Smith
Company: Smith Information Services Inc.
Project Title: BPO and Cloud Computing
Smith Information Services Inc. is looking for an outsourcing company that can offer excellent corporate data centers services. The company will consider bids from the following areas in its final review: Local Data Center
Well known Data Center
Foreign Data Center
Services to be rendered: Data storage, HR, and IT services
Exclusion: Data Center services required only
Unique Areas to Consider in selecting the bidder:
Cloud computing services
Tax incentives
Support for legacy systems
Approval Criteria: The accepted project must be able to comply with the services required and should be rendered as per the provisions in the procurement schedule. Some of the provisions that the bidders should focus on include environmental and infrastructure provisions supported by the company. Besides, such a project will have to receive approval by the CEO.
Technical qualifications: For data to receive an approval need to have a strong control system for data recovery and must support legacy systems.
Overview
Data Center operation by the company seems to be inefficient in various ways. First, the data centers require constant attention from the IT personnel who run and maintain the data. This is to mean that such personnel need to have more time which may not be available in the organizational setting. The issue of time management within the organization thus becomes a challenge to the organization. Instead of the personnel spending time in doing innovative activities that assist in promoting growth and development of the organization they spend that time monitoring the data center. Besides, the IT personnel required to do that work is very large since there is a need for shifts. Consequently, it leads to increased labor costs for the company (Ceci, 2009).
In the new structure that the company needs to adopt, there is the need for the outsourced data center to take charge in the advancement of the infrastructure and building systems for the company’s data center. They also need to adhere to environmental and infrastructure provisions laid by the company which remains a big challenge. Such agreements deemed to exist between Smith Information Services Inc. and the outsourcing company before entering into a contract. The outsource data center need to be very close to the company but not in the same premises to reduce the risks. The outsourcing company will settle the costs associated with the outsourcing developments such as infrastructure operating and capital expenses.
Benefits of outsourcing
Smith’s Information Services Inc. is facing a challenge in controlling the cost of maintaining its data. Outsourcing such services may present the company with various benefits as discussed below.
Increased efficiency in data maintenance and storage- Smith’s Company may look for expertise I data center for its operations. The expertise held by the outsourcing company may be classified as compared to that of the company. Quality services from the outsourcing company will assist the company to enhance efficiency. For instance, competence from the outsourcing company will assist the company in fostering proper time management in data center thus promoting efficiency in that area. Enhanced efficiency in its operations will further lead to increased productivity.
Reduced costs- Through outsourcing the company will be able to enjoy costs reduction in its operations. Outsourcing enhances efficiency in operation since competent employees are available. As a result, it leads to reduced costs of operations within the company. Besides, data center management requires the company to employ expertise which may be very expensive for the company in the long run. However, through the use of outsourcing services, the company will stand a better chance of reducing such costs. This is because outsourcing services are seasonal but employment terms for employees need to be permanent (Gouge, 2003).
Tax incentive advantage – Many data center companies offer a tax incentive that helps the company to reduce the amount levied as the tax. This is one area that the company will enjoy such benefit hence enhancing success.
Promoting flexibility and value for the business- The Company will be flexible to conduct other operations since there is enough time that formerly was used in running the data center. As a result, the company will promote productivity thus enhancing more value for its business.
Disadvantages of outsourcing
Outsourcing will expose Smith’s Information Services to various disadvantages that may affect its operations negatively. These disadvantages are as discussed below;
Exposure of confidential data of the company- When the company will look out for another company to offer data storage, it will risk exposing its important information to that company. It is a serious risk that may affect the company’s competitiveness in the market. In case the outsourcing company is malicious, then it can also provide this information to the company’s competitors thus affecting the company operations negatively (Gouge, 2003).
Hidden costs – Outsourcing is known to be one of the most effective regarding cost. However, these transactions involve various hidden costs when the transacting companies are signing the contracts which may pose a threat to the company.
The risk for failure in operations- Outsourcing works very well if the outsourcing company have competence in the area that the other company needs such services. However, if the outsourcing company is incompetent in those areas, then the company may face failure in its operations. Smith Information Services Inc. is at a risk of receiving sub-standard quality if it fails to recruit an outsourcing company with competent employees and good working history.
Data Analysis
Local Data Center
Cloud Computing services: Not offered
Infrastructure location within expected availability: 96.75%
Availability of power storage and distribution facilities within the site expectations: 96.5%
Support for Legacy Systems: Available
Room for site expansion: No
Capability to adopt new technologies: No
Support Around the Clock: Yes
Disaster Recovery: Yes
Tax Incentives: Available
Other comments: XYZ Data Center provides excellent outsourcing services that are cost effective and promotes efficiency in the operations of the client. It’s computing and infrastructure is in line with business requirements and changing client preferences.
Well-known Data Center
Cloud computing services: offered
Infrastructure location within expected availability: 99.75%
Availability of power storage and distribution facilities within the site expectations: 99.5%
Support for Legacy Systems: Available
Room for site expansion: Yes
Capability to adopt new technologies: Yes
Support Around the Clock: Yes
Disaster Recovery: Yes
Tax Incentives: Available
Other comments: Beta Solutions Data Center has enough competence and infrastructure required in the execution of all outsourcing services related to a data center.
Overseas Data Center
Cloud Computing services: Not offered
Infrastructure location within expected availability: 98.75%
Availability of power storage and distribution facilities within the site expectations: 98.5%
Support for Legacy Systems: Available
Room for site expansion: No
Capability to adopt new technologies: Yes
Support Around the Clock: Yes
Disaster Recovery: Yes
Tax Incentives: Not Available
Other comments: Dejohn’s Data Center is committed to ensuring client satisfaction through provision of good services as per the contract agreements.
Recommendation
The underlying situation affecting operations in Smith’s Information Services Inc. regarding the data center calls for an outsource data center. The use of the data center will offer the company various benefits. For instance, through outsourcing the company will enhance operational efficiency, mitigate risk for the closure of the company and promote productivity.
After reviewing and considering all the data center bids, it is worth noting that the Best Solutions Data Center should be awarded the tender because of the following reasons.
It is the only center that offers cloud computing services.
It has room for future expansion if required.
It offers tax incentives to its clients.
It is ever ready to accommodate new technologies that foster efficiency.
References
Ceci, F. (2009). The business of solutions. Cheltenham, UK: Edward Elgar.
Gouge, I. (2003). Shaping the IT organization: The impact of outsourcing and the new business model. London: Springer.
Kamel, S. (2006). Electronic business in developing countries: Opportunities and challenges. Hersey, PA: Idea Group Pub.
