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Before you sign up with a data centre outsourcing partner, it is imperative to assess the risks and look at the key selection criteria
According to a study by 451 Research, the amount of data centre space is growing the world over, on average, about 9% a year. Cost of power is only increasing and will continue to skyrocket in times to come. Another key factor adding to cost of data centres is the shortage of skilled resources to man data centre operations.
Demand is growing faster than supply, making the running of owned-and-managed data centres to be an extremely complex and expensive proposition for organizations.
Data centre outsourcing has emerged as a winning strategy that CIOs are increasingly adopting in India. Several major forces are shaping this market.
Physical limitations of existing captive DCs are a major concern for CIOs across the globe. Some of the key challenges faced by captive DCs are:
Advent of high-density computing technologies
Increasing volumes of storage
Coping up with increasing power and cooling requirements and escalating costs
Technology refresh
Need to consolidate for efficiency and security
Technologies relating to SMAC (Social, Mobile, Analytics and Cloud)
Risks associated with outsourcing
The fact remains that outsourcing is not just about the economics. The most important aspect of outsourcing is the level of maturity of the client organization: if the organization is mature enough to manage an outsourced partner, do they have a culture to support outsourcing? These are the factors that one needs to find answers to before evaluating the financial aspects of outsourcing.
Even within the financial aspect, CIOs of client organizations start answering questions like: What is the scale? What is the horizon of the particular investment? What kind of business growth can be expected that needs to be supported by IT?
One of the risks CIOs face while outsourcing their data centre operations and infrastructure is associated with the loss of control over their assets and intellectual property. They need to look for ways to put in place a governance framework and to safeguard the intellectual property that might be at risk.
Another important point to consider while outsourcing data centre infrastructure and its management is how to seamlessly integrate the organizations’ processes with that of the Outsourcing Service Provider (OSP). It is important that these processes are monitored continuously to avoid the risk of poorly performing processes at the OSP level, and mitigate any issues resulting from it.
By the virtue of leaving substantial control of assets and management in the hands of an OSP, there is the inherent risk of business getting affected because of SLA non-conformance by the service provider. Risk of business continuity resulting from this non-conformance should be mitigated by carefully planning the outsourcing strategy, clear expectations setting from the beginning, ensuring choice of the right partner for the deal and putting in place a stringent governance framework.
It is also important that the service provider as well as the client organization be sensitive about the changing regulations and their impact on the technology piece. Choosing a partner who does not have the expertise in the domain of the client’s business increases the risk substantially.
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Finally, financial implication of changing costs and exchange rates, if applicable, has to be monitored regularly. Project times lines as planned and the financial implications of any delays have direct impact on the perceived benefits of any outsourcing deal.
Service provider landscape
The resulting offering in the marketplace today is very interesting. Service providers are exploring multiple directions to offer these services from various vantage points – each having its own limitations and benefits.
Major among types of providers are:
Telecommunication Providers
System Integrators
Technology Providers
Data centre Providers
Choosing the right partner
Here are some of the considerations and evaluation criteria for choosing the right partner to outsource your data centre infrastructure and management:
Understanding Provider Types: It is important for client organizations to evaluate service provider types and choose partner based on the present and future needs. Table 1.1 gives details of benefits and limitations of the various service provider types.
Financial Health: An assessment of the financial health of the OSP is a key consideration. It is important for partner to be able to invest in technologies and people to stay ahead of their competition and able to deliver best-in-class services that can propel your business.
Innovation: It is important to analyse the innovation quotient of the OSP before signing a multi-year dea
l.
Proven Track Record: The partner’s track record in maintaining and delivering solutions on a long-term basis to clients in the same domain as the client organization proves the ability to deliver robust and performance-based solutions. It is important that the partner has domain expertise in managing and continuously delivering to clients.
Responsiveness of the Partner: It is important for partner to be responsive to every need or request of the client organization. Evaluating an OSP on responsiveness to various technology and business demands is a clear consideration to ensure that they are always committed to supporting the future needs of the client.
Technology Agnostic: OSPs should be able to support multiple technology platforms without selling or being proponents of a particular one.
Pricing Strategy and Flexibility: The partners’ flexibility in pricing and ability to tweak solutions to meet the needs of the client organization is very critical. Their ability to manage deals, pricing and solution offering is a key consideration.
Ability to Attract and Retain Talent: In today’s business environment the biggest challenge is the people challenge. CIOs constantly battle with the lack of skilled resources available to run critical parts of their IT. It is thus important to evaluate the OSP’s ability to hire and retain highly skilled people, and keep them motivated.
Product Strategy: The OSP’s product development and delivery strategies are very important in deals that are long-term. It is important that the clients future need, market changes are taken into considerations into the OSP’s product and delivery strategies in order to ensure that growth of the client’s business is never hindered.
Geographical Reach: For most growing businesses it is important that their strategic partners also have the ability to quickly ramp up their services and reach as and when required. It is important to choose an OSP partner who has a global reach in delivering and supporting services across boundaries.
While the advantages are many, the most significant would still remain – peace of mind – from realizing that the organization’s backbone, mission-critical systems are in the hands of an expert, secured and always available to the business.
CIOs should evaluate this new breed of service providers – data centre outsourcing providers – who can manage the entire lifecycle of the data centre infrastructure and, of course, not forget to evaluate the risks involved in the whole process.
Sunil Gupta is President & COO, Netmagic
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