Hot commodities - Dell

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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.

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