When it comes to technology, business and IT leaders are taking a hard look at the current status quo and finding it wanting. Today, many organizations find themselves asking why they choose to purchase and maintain costly servers, storage, networking and other IT infrastructure, when in just a few years’ time, much of it will be outdated. They also find themselves wondering if the cost and time spent hiring IT personnel to “keep the lights on” could be more strategically applied to support core business growth.
These queries inevitably lead to the one decision at the center of these concerns: Should organizations be in the business of technology, or in the business of serving their customers and creating value for their shareholders?
This is not a new dilemma, but advancements in the technology landscape are changing the answer. If you look at the big picture, IT as a whole is not inherently strategic. Individual technologies can be, but companies benefit little from owning their own infrastructure. On top of that, finding, hiring and retaining scarce IT talent presents a major challenge for time and resource-constrained enterprises.
Given these realities, getting rid of in-house IT altogether seems like the simple answer. However, that thinking is unrealistic. Organizations that have invested millions in their IT infrastructure cannot simply walk away from those investments, nor should they. The fact remains that not every IT supported function, service, or application can or should be outsourced – either to a third-party hosting provider, or the public cloud.
However, whether you are a rapidly growing company that needs the flexibility to scale on demand, or an established enterprise that needs to respond to business disruption via technologies like Big Data, mobile or cloud, all organizations want to deploy IT strategies that can deliver “more with less.” That means the decision to outsource comes down to evaluating your current technology needs and capabilities, and contrasting those against future requirements – all set against the backdrop of your
overall business strategy. The goal is to figure out which functions are truly core and should be retained and run in-house, and which are non-core and can be run, managed and maintained just as effectively by a third-party.
Presented here are four of the key factors to consider when evaluating whether to insource or outsource your IT infrastructure.
The 4 Key Considerations of Outsourcing IT
1. Technical Staff and Resources
Unlike other occupations in the post-recession economy, demand for IT specialists has not waned. In fact, today’s hyper-competitive technology landscape has increased the demand for IT talent. That means that companies big and small must vie for the same limited pool of candidates. As a result, IT skill sets have become increasingly hard to find, expensive to acquire, and difficult to retain.
Also, much of what these highly-trained individuals do – such as provisioning servers, configuring networks, patching operating systems, swapping out faulty drives, etc. – is critical. However, third party companies such as data center and managed service providers are able to deliver these services at much lower costs due to significant economies of scale and specialized expertise.
Another consideration is whether or not you have the right staff to execute against your current and future business strategy. For example, many organizations are looking at cutting-edge analytics technologies such as Hadoop to help fuel gowth. Finding staff that understand the intracacies of solutions such as Hadoop-as-a-Service (HaaS), is not easy, especially when understanding that competitors are also courting the same highly sought after talent.
Conversely, IT organizations need to envision the strategic projects they could tackle if they focused their resources in a different area. Outsourcing infrastructure provisioning, management, and maintenance frees up internal talent to focus on strategic business needs like rearchitecting home-grown business applications to run in the cloud.
2. Level of Support
Even the best laid plans can go awry. IT architects calculate technology issues and downtime into their designs, but companies still need to evaluate what levels of IT support their business strategies require. Organizations must determine how much risk and downtime they can handle, and ensure the proper level of staff is employed to execute against their strategic company goals.
For example, a high frequency trading firm on Wall Street can justify spending millions on IT specialists and infrastructure to attain a second or two of downtime per year. Supporting SharePoint or Exchange with simliar resource levels, however, would be unnecessary and excessive – although that does not mean these critical business applications can be unreliable either. That is why managed service providers and their data center partners are focused on maintaining infrastructure, networking, and customer connectivity at the highest levels possible. If clients do experience application issues, infrastructure is typically the last place where problems will be found.
For businesses that prefer to own their own hardware but forgo an in-house data center, on-site technical support services can act as an extension of their internal IT team. In this case, service providers can support an organization in many of the same ways a business’ IT team would – by racking and stacking hardware, provisioning servers, and troubleshooting. The key difference is they are engaged only as long as needed, which moves CapEx to the OpEx side of the ledger.
3. Types of Applications
As discussed earlier, not every application, IT function, or service can or should be outsourced. Deciding which applications make good candidates for outsourcing can be challenging until you evaluate them from an operational and strategic point of view. Applying the lessons learned from a simple 2×2 decision matrix as developed by the consulting firm McKinsey can be a very enlightening exercise. From low to high, the vertical axis represents strategic importance, while the horizontal axis represents operational importance. If an application is strategically and operationally important, retain it in-house. If, however, an application scores low in strategic importance, then it should be outsourced. If it scores low in both, it can be eliminated.
This same line of thinking can be applied to core vs. non-core IT functions. Is your IT infrastructure strategically and operationally important? If so, then continue to own, maintain, and run the infrastructure. If not, then outsourcing it is a viable option. According to this logic, even business’ backbone applications like enterprise resource planning (ERP), customer relationship management (CRM), or supply chain operations can make good outsourcing candidates. These applications are mission critical, but are not typically considered core, in that they do not differentiate the business.
Further, applications that rely on skill sets or a knowledge base found only within your company’s four walls, can be another key criteria for differentiating core from non-core.
4. Business Growth Strategies
Today, IT is about business enablement. How a company deploys IT and engages with technology matters – from accelerating new product development and opening new markets in novel ways – to realigning capital, virtualizing once hard-wired processes, and trying out new ideas quickly and cost-effectively.
Fortunately, the 2×2 matrix mentioned above works just as well for determining which IT functions are growth-orientated as it does for applications. Strategic and operationally important functions stay in-house, but anything else is fair game for either outsourcing or elimination. For example, application development and testing is strategic, but operationally unimportant to perform in-house, making that function an excellent outsourcing candidate for infrastructure-as-a-service (IaaS) or platform-as-a-service (PaaS) providers. Ultimately, these decisions are determined by a business’ invididual needs and outcomes. Just as fast growing companies do not typically invest in infrastructure for business reasons (i.e., a lack of capital), this same mantra is being embraced by companies in mature industries, like insurance.
Mature-industry companies are increasingly focused on taking market share from their competitors. How they do this is dependent upon understanding customers in greater detail and, today, that means fielding technologies like Big Data and analytics. These cutting-edge technology projects are perfect outsourcing candidates because the skills sets needed to execute them are scarce, and the outcomes may or may not prove useful.
The ability to mix and match internal capabilities with external service providers has never been greater or more effective than it is today.
Most internal IT shops simply don’t have the modern data center architectures, budgets, personnel, or knowledge required to field the technologies that will propel their businesses forward. This is not to say these IT organizations are ineffective or somehow lacking, but they were architected to support the business as it was yesterday, not where it needs to go tomorrow.
Gone are the one-stop-shop and one-size-fits-all offerings of just a few years ago. Companies like T5 Data Centers and Carpathia can leverage their extensive expertise and nation-wide reach to provide customers with a technological edge that most internal IT organizations cannot attain. Such partnerships are unmatched in sophistication, scope, power, scalability, and flexibility to provide organizations the features, capabilities, and reach they need to try new ideas, explore new options, and move their IT infrastructures into the 21st Century.
About Carpathia and T5
Together, Carpathia and T5 offer businesses a simplified approach to IT efficiency through top-tier managed services and flexible cloud solutions purpose-built to meet the needs of any business or mission. The companies’ full suite of IT services and hybrid cloud solutions, operated out of T5’s single and multi-tenant data centers nationwide, ensure that customers’ IT infrastructure is always operating at peak performance. Together, Carpathia and T5 deliver on-site support, incident response, hardware troubleshooting and repair, visual verification inspections, audit preparation and more, all backed by Carpathia’s experienced and professional team.
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