It Outsourcing Companies: Top 5 Outsourcing Models
Several IT outsourcing companies exist today to solve everything from application management and network monitoring to desktop support
. The right option should be selected based on the unique business requirements and outsourcing motivations of a company.
Companies can choose from the five main types of IT outsourcing:
Application Service Provider (ASP) - An ASP hosts and manages a single or limited number of packaged software applications located in its own or a third-party's data center. In general, an ASP provides hosting on their hardware with standard configurations or very limited customizations available. An ASP is essentially a "one-to-many" provider - they use one environment to support all of their customers.
Vendor Hosted Application Provider/Software as a Service (SaaS) - This type of outsourcer sells its proprietary software application, then hosts and manages it for customers. This type of provider is generally best for applications with relatively limited functionality.
Platform IT Outsourcer - These typically large-scale vendors manage all or part of a customer's IT environment, including transfer of the customers IT facilities, hardware and even staff.
Utility/On-Demand Hosting - These outsourcers provide hardware and/or software on an as-needed basis, typically priced according to the number of users. Customers pay only for what they use, just as they would for any utility.
Managed Services - In this model, technology services are provided at the operating system, database and/or application level by third-party organizations and/or individuals.
Each model has associated advantages and risks. Just as we wouldn't condone forcing a square peg into a round hole, we also wouldn't advocate that any one model of IT outsourcing would suffice for every company. The model selected should be a reflection of an organization's size, culture, complexity and requirements, both long- and short-term.
ASP Advantages: experts at the application they support, low cost
ASP Risks: inflexible, none or few customizations allowed, no support of third party applications, shared computing resources
Vendor Hosted Application Provider/Software as a Service (SaaS) Advantages: deep domain expertise in the software application, efficiencies through shared resources
Vendor Hosted Application Provider/Software as a Service (SaaS) Risks: less control, technical staff needed for management, no support of third party applications, hardward is not onsite, mixed responsibilities
Platform IT Outsourcer Advantages: economies of scale, usually can produce cost savings
Platform IT Outsourcer Risks: many variables that are outside of the core competency of the vendor, lack of focus on mid-market companies, hidden costs from service requests
Utility/On-Demand Hosting Advantages: minimal upfront investment, infrastructure economies of scale
Utility/On-Demand Hosting Risks: ongoing, long-term fee commitments, incremental cost per user, shared computing infrastructure
Managed Services Advantages: precision in resource costs (paying for the amount a company actually uses), deep domain expertise, wide bench, flexibility in diverse applications
Managed Services Risks: less feelings of control, service levels diminish when done remotely
A good IT outsourcing company, especially in a strategic outsourcing relationship, will require a governance structure, escalation procedures, change control, and an operational policy to track and manage the IT assets, applications, users and infrastructure. This structure will ultimately add tremendous value in predictability, management and process control. However, it will also introduce new ways of working that will transcend many departments. The likelihood of the partnership failing increases dramatically if the company is not willing or prepared to work with the outsourcer to align and improve IT operations.
by: Chuck Vermillion
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