Cost Considerations For Outsourcing It
IT outsourcing allows companies to focus on controlling and reducing the costs associated with managing IT services and hosting in-house
. While IT professionals manage your IT environment, you can focus on your strategic business goals. This article will discuss cost considerations when outsourcing IT and how it can be beneficial to your business.
Cost Considerations
When beginning an evaluation of IT outsourcing, IT managers must first know the current costs associated with, and current state of, their IT operations. And, they must evaluate objectively the service levels associated with these costs to understand how an IT outsourcing vendor's proposal might increase or decrease these levels. Other required cost figures include the total cost of ownership, the cost of hardware refreshes (and whether those will be capital or operating expenditures) and the cost impact on your disaster recovery plan. Finally, what is the cost of doing nothing and continuing as-is?
Compliance can create significant additional costs for businesses. For example, Sarbanes-Oxley, HIPAA, 21 CFR Part 11, SAS 70 Type II all come with hefty price tags. Examine if some of those costs can be deferred or eliminated by outsourcing.
Who you select as your IT outsourcing service provider and how you select them can significantly impact your IT costs. To get the best fit, you need to determine what criteria matter most to you and your organization, such as:
- Does the provider fit within cost objectives?
- Do you want your IT outsourcing service provider to be onshore, offshore or something in-between?
- Is it important that your vendor have specific experience in an application or your particular industry?
Another important consideration and one that will dramatically impact your IT costs is the type of delivery model your IT outsourcing service provider will use. If you operate within a time and materials (T&M) model, you will pay for resource time as it is incurred. Each project, task and issue will be billed separately and you will incur variable costs. In addition, guaranteed service levels for service delivery are typically included and you have substantial flexibility in managing your projects.
With service level (SLA) models, you pay a defined fee for a defined service level. Your costs are fixed and your results are predictable. The vendor manages your environment on an agreed upon service level rather than the amount of time it takes to complete tasks. Most often, IT outsourcing providers require a contract term.
Finally, the roles and responsibilities between you and the outsourcing organization must be spelled-out. Discrepancies can wreak havoc on IT costs and performance. Your contracts, service level agreements and measurement criteria should clearly identify who will be doing what along with the associated expectations.
Summary
To recap, identify the multiple components that could affect your decision and accurately determine the actual cost of those areas within your business. Understanding where you are now as it relates to costs are crucial to assessing the real cost of in-house versus outsourcing IT outsourcing.
Next, look at the management models available: remote managed services, infrastructure hosted, application managed services, fully managed or a blended approach. Compare the strengths and weaknesses of each model, paying close attention to cost impacts.
by: Chuck Vermillion
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