line critical business processes, gain competitive advantages, and adapt quickly
to the ebbs and flows of demand. Hot commodities. Managed IT services has ...
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n the business world, outsourcing has been around
I
Hot commodities
for decades, enabling companies to quickly gain specialized
Managed IT services has been one of the few success stories
capabilities without disrupting business operations or breaking
in an otherwise bleak IT spending environment. According to
the bank. During the dot-com days, when establishing an online
Forrester Research, outsourcing is the fastest growing segment of
presence and accumulating market share were high priorities,
the technology services market and should continue to expand at
the managed-services model for certain technical functions gave
a 14 percent annual rate through 2007.1
firms the efficiency, speed, and agility they needed to reach their target audiences and fend off growing competition.
Why? The reality is that some of the IT services once delivered by internal staff have become commoditized, making them easily
When the economy imploded and companies found them-
replicated by vendors for less money. One of the first examples of
selves more accountable for doing more with less, demand for
cost-effective managed services during the dot-com days was Web
managed services soared. Instead of investing in IT infrastructure
hosting. Companies realized that building a data center and fund-
and tools, many enterprises turned to service providers who
ing a 24-hour support staff sometimes did not make financial sense
already had these resources in place—and charged a low, fixed
or provide strategic value. Instead, they sought providers that
monthly fee for their services. Additionally, managed services
already had hosting facilities, tried-and-true processes, and the
allowed these firms to quickly scale technical personnel up or
personnel to manage around-the-clock operations.
down in line with their requirements. Now that corporate earnings are coming back to life, the trend
Now that Web hosting, help-desk support, and other standardized services are established as common managed services, many
toward managed services shows no sign of slowing down. Today,
enterprises are looking to farm out more advanced IT functions
organizations are off-loading more IT functions than ever, using
using a strategy called “multisourcing.” Like the general contrac-
the convenience and cost savings of managed services to stream-
tor model, multisourcing brings together a wide set of specialized
line critical business processes, gain competitive advantages, and
IT service providers, or “subcontractors,” under one point of
adapt quickly to the ebbs and flows of demand.
accountability. That way, enterprises get the expertise they need at
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Once viewed as a simple cost-cutting strategy, IT managed services have evolved into a competitive weapon, helping enterprises improve business processes and become more responsive to change By Paul Williams
a low cost without having to chase down the cause of a problem
providers can help companies assess their current needs, gather
or deal with finger-pointing among vendors. Rather, if they have
project requirements, conduct task and resource planning, and
an issue, they talk to the general contractor—typically another
determine which support systems and tools they will need. Other
service provider that handles the business of finding a solution.
services include process development—such as Move, Add, and Change procedures—and integration planning, in which the
Keep the change
provider investigates the exchange of data between service
The multisourcing concept arose from the ever-shifting nature of
processes and develops an integration strategy accordingly.
IT. From the moment a company deploys a new initiative, such
Deployment. The installation phase can be a major headache
as a server farm or customer relationship management (CRM)
because it is typically long and people-intensive—not to mention
application, an IT team must support and guide it through the
disruptive to business operations. Vendors can help by provid-
many changes that the business may face—and the resultant
ing skilled personnel to conduct the installations as well as
maintenance costs can end up being many times more expensive
custom services, such as data migration, de-installation, and
than the original cost of the equipment.
staging, in which the provider will guard against a major system
Enterprises are realizing that keeping these “life cycle” costs down to an absolute minimum requires managed-services providers that will alleviate the expensive and time-consuming
failure by setting up and testing a company’s configuration prior to implementation. Management and maintenance. This phase of the IT life cycle
support burden. In response, the market for IT vendors continues
can be the most expensive if not done properly. Companies must
to expand as players offer custom services at each phase of the IT
have a complete, accurate view of their IT systems. They also
life cycle—from planning and deployment to ongoing manage-
must have monitoring and support processes in place to ensure
ment and maintenance.
rapid response to failures. Service providers offer an array of ser-
Planning. At the beginning stages of an IT initiative, an enter-
vices at this phase, including asset management, which takes an
prise should know what it wants and how a new technology
enterprise-wide inventory of IT assets, helping companies meas-
installation will meet the objectives of the business. Service
ure the cost and service impact of IT on the business; help-desk NOVEMBER 2003 DELL INSIGHT
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service, which provides 24-hour hardware and software support;
contractor, assuming end-to-end responsibility for the integration
and field services, which include on-site break/fix support as well
and management of services from multiple providers. Such a
as change and configuration management.
provider also takes on the onus of the performance requirements listed in the SLA. For help-desk services, as an example, compa-
Best practices make perfect
nies can evaluate a vendor’s performance by tracking first-time
As enterprises increasingly rely on IT to reduce costs and stream-
resolution rates and time-to-respond measures. For IT infrastruc-
line operations, a multisourcing strategy is seldom a one-off
ture providers, firms can assess service-level compliance by moni-
decision. Some companies have a lot of in-house capabilities and
toring uptime statistics or server response times.
only need to off-load a few tasks to keep up with the competition; others are far behind the curve and need to outsource many func-
One is the magic number
tions to make up ground in the marketplace. The most effective
Having one company to call when something goes awry is essential.
multisourcing strategy is one that continues to evolve.
The goal of multisourcing is to integrate a collection of IT services
Firms should constantly review and articulate their business
into one stable and cost-effective system. However, it is increasingly
objectives and find the best attainable balance between external
difficult for an internal IT organization to manage multiple vendors
and internal capabilities. They also must adapt to the concept of
through complex changes in operational demand. Each vendor typi-
multisourcing from an organizational perspective. Purchasing IT
cally uses its own methodologies, asset data, contact personnel,
services means acquiring processes, knowledge, and personal
issue-tracking procedures, reporting tools, and billing and invoic-
interactions—not hardware or software. Losing control of once-
ing systems. Also, companies may outsource to competing vendors
internal capabilities can reduce staff morale, so savvy executives
that are unwilling to work together if something goes wrong.
should prepare for this dynamic by listening to employees’
Providers that offer vendor management can alleviate this
grievances up front and respond by explaining the business
burden. They typically have service agreements with niche
benefits of managed services.
providers, such as security monitoring companies, and act as the
Also, because multisourcing involves numerous providers,
single point of accountability if a problem occurs. For example,
enterprises must develop an oversight strategy backed by
Dell™ Managed Client Services helps to match an enterprise’s
contracts and service level agreements (SLAs) that govern the
IT service and cost requirements with a proven vendor that can
performance of each provider and outline escalation procedures
meet those demands. Dell is responsible for the execution of
and penalties for noncompliance. Many companies have accom-
the services, achieving agreed-upon performance metrics, and
plished such a strategy by using a provider who acts as a general
providing a single support contact.
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An outsourcing arrangement with one point of accountability
investment (ROI) in IT, but it also can shorten the time to market
not only helps a company to ensure that its business goals are
for critical initiatives, making companies more responsive to
being met, but it also improves productivity because problems
internal demands as well as changes imposed by competition.
are resolved faster and internal personnel do not waste time
Off-loading IT tasks also enables a company to concentrate on
looking for help. Other vendor management services include:
growing the core business instead of worrying about the network
• Analyzing the current status of a company’s IT situation and conducting an impact analysis of any anticipated changes
going down or a server going offline. Because IT is always evolving, enterprises should realize that outsourcing selected functions is not a one-size-fits-all scenario. An effective managed-services strategy requires the continuous
• Translating a firm’s business needs into IT specifications
evaluation of technical skills and costs, both inside the organiza-
• Consulting with an enterprise on technical choices,
tion and in the service provider marketplace, to determine in
such as architectures, integration standards, and data
which areas the enterprise can gain efficiencies and improve oper-
security policies
ations. To implement such a strategy, companies should seek a multisourcing arrangement that provides a single point of
• Managing vendor contracts, SLAs, and invoicing, and
accountability for the performance of multiple vendors.
enforcing penalties for underperformance • Selecting and supervising vendors • Testing and ensuring quality of new IT initiatives
As enterprises rely more on IT to solve business problems, it seems that managed services is not just a competitive strategy in a struggling economy—it also could help lead the way to economic recovery.
• Providing training and user documentation for IT projects
For more information: From pain comes gain
www.dell.com/services
Managed IT services have helped enterprises reduce expenditures amid a rough economic landscape, but outsourcing shows 1
Forrester Research. Can Outsourcers Really Transform IT? by Christine Ferrusi Ross. April 2003.
2
Accenture. Outsourcing in Government: Pathways to Value. May 15, 2003.
value beyond mere cost savings. Not only can farming out IT functions under an enforceable contract improve return on
As United States businesses tightened their IT purse strings, the federal government stepped up its technology investments, including its reliance on external vendors. According to consulting firm Accenture, nearly 90 percent of government managers worldwide say they outsource activities that are “important or absolutely critical” to delivering services to citizens.2 The activities most frequently outsourced by government agencies include IT applications and infrastructure support as well as supply-chain operations. The study also reports that governments in Singapore, Hong Kong, and Japan are the most experienced in using outsourcing to achieve process efficiencies and reduce operating costs, and they have achieved those results by consistently using the same proven processes. These governments also reported that they have used the money they saved to fund other government operations. An interesting note: Accenture found that government managers who outsourced to gain access to new technologies or to streamline operations were more satisfied with the decision than those who outsourced to save money.
NOVEMBER 2003 DELL INSIGHT
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