Author demystifies top outsourcing questions

CIOs know that outsourcing their networks effectively can be a daunting task, but when properly done, it could mean huge benefits for their organizations in terms of saving money and increasing quality of service.

Yet there is still much confusion about how to get the most from outsourcees. Peter Bendor-Samuel, author of Turning Lead into Gold: The Demystification of Outsourcing, spoke to Network World Canada staff writer Rebecca Reid last month to talk about the methodology involved in selecting a good outsourcing company.

In addition, this winner of the 2001 Outsourcing World Achievement Award and CEO of Everest Group, an outsourcing brokerage firm, also gave insight into the current outsourcing trends in the networking space.

NW: What methodology does the Everest Group employ in order to help CIOs choose the right networking outsourcee?

Bendor-Samuel: Well, when a CIO looks at outsourcing, they’re typically looking at how to make the biggest impact on the organization that they have the stewardship responsibilities for. Typically, a CIO is saying, ‘I’m interested in finding more cost-effective ways of doing things, higher-quality ways of doing things, and where I want to put my time, and where I can make the biggest impact.’

So those are issues they have to focus on, and they’re really trying to ask three questions which have to be answered simultaneously. The first question is: what should I outsource? [The second is] how are they grouped? [For example, the CIO would be thinking] ‘I should probably have more than one thing that I’m outsourcing – maybe network and IT infrastructure.’ [The third question is] in what sequence shall I take them out?

And you can’t answer them sequentially because they all interrelate. Let me explain why. Let’s assume that the CIO decides they really want to focus on applications and driving the company forward through that vehicle. The important but non-core elements would be the infrastructure. That would be network, the data centres, desktop support, those types of things, and that would answer the question of what.

But that wouldn’t answer the question, how are they grouped? For example, is the network interdependent into the server technology? Is it interdependent into the desktop? And that is not a clear question, it would be different for different companies. If you had, say, an architecture in which you had lots of agents spread across Canada, the network would be an integral part of the desktop support and probably the service support and that would argue for grouping the three together.”

NW: Does this complicated decision-making process deter companies from outsourcing their networks?

Bendor-Samuel: Companies outsource because they have a very good reason to, so the answer is no. What it normally does, it makes them do a poor job of it. A company typically who outsources is trying to address cost issues or quality issues or get access to capability they don’t have – one of those three questions. Those are going to drive them to outsource regardless of whether they answer those questions well. Those questions really help them do a good job of it because what they’re undertaking is something that looks deceptively simple but is actually quite complex, so companies are going to do it, but they might not do it well.

NW: Is the tendency to poorly outsource networks still prevalent?

Bendor-Samuel: I think that problem is compounded by something that is perhaps even more profound. What most companies do is focus on price because it’s easy to understand. In my book, I draw the distinction between contracting and outsourcing. In outsourcing, you’ve got this long-term relationship and there are other things that are as important, or perhaps more important, than price, and your price should be the very last thing you discuss.

So what are those other things? The first is the cultural fit of the organization that’s dealing with you. This is going to be much more like a marriage, and you want to end up partnering with someone who is compatible with you…

The next thing is, you have to understand the scope of the services, and that sounds like it’s very easy when you think of a network, but it’s not easy. Is the network just a backbone? Or does it go through to the desktop? Does it include the software running on the desktop? The scope of these services is complex and has to be clearly defined, and you have to get a clear understanding of scope.

[The next factor is] metric service levels. We have to get a very clear understanding of when this service is done well, and when it’s not done well. Only then are you in a position to start talking about price.

NW: In the networking space, is outsourcing increasing right now?

Bendor-Samuel: “Outsourcing in general is growing and there are some good reasons for that. Basically, in the IT space, at least in…North America, we’re in a recession. In recessions people look for cost savings and outsourcing is a very effective way to restructure to get meaningful cost savings. So we are in a time, an economic cycle that is more favourable specifically in the network arena. We have some more growth also coming out from renewed interest on the part of the suppliers.

The suppliers are very interested in offering this, so they’ve been very competitive in their pricing and in the flexibility in which they’re offering these services. You have those two things coming together to form a nexus to make it a fairly attractive market right now, which is why you’re seeing a bump in people outsourcing in networks.…I don’t think this a huge wave in the network area, we’re seeing an uptake in the space.”

NW: What aspects of networks are companies tending to outsource most?

Bendor-Samuel: “Desktop – anything to do with the desktop and that touches the desktop.…The next most common would be the overall backbone network, particularly [international backbone networks]. There’s a lot of complexity. If you’ve got an international company and you’re trying to arrange your network so it gets around the world, there’s a lot of complexity, let’s say, in dealing with Bulgaria or Switzerland or Germany. And outsourcers who have already got those relationships in place can do that a lot higher-quality at a lot lower cost.…almost all the big banks have done it in America.…it’s very common to do that.