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Six IT Services to Outsource

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With the economic climate in the US and Europe still uncertain, many small and medium organizations are looking at outsourcing business services now more than ever. Those organizations that have already outsourced parts of their IT operations are looking to outsource more, and those that haven’t are looking to start. One thing that stops or slows down businesses looking to outsource is simply not knowing where to begin. Here are six places you can start:

  • SaaS: Software as a Service allows you to only pay for the software you use and only while you’re using it. This also has the benefit of cutting management and IT infrastructure needed to support a large collection of software across your computers. A report from 2008 suggest that even in the early stages of SaaS, organizations could expect to save over 50% in some instances, and occasionally more.
  • Managed Hosting: Off-site managed hosting will allow you to make drastic cuts to your in-house IT budget, as well as seriously reduce overhead from having your hosting infrastructure in your office or at a rented space. Managed hosting is one of the oldest, and most well understood, form of IT outsourcing, so there are significantly less risks than with almost any other plan.
  • Data Center: Data centers make the most sense for organizations that either generate or process large amounts of data, or for organizations that don’t have the local facilities to support a data center. Besides saving money on storage and processing, data centers also offer increased security, with redundant backups, redundant power & Internet, high-level encryption, and other protective measures. The added security often makes this a worthwhile investment even when cost-cutting is minimal.
  • Asset Management: In asset management outsourcing, an outsourcing agency takes over the management and support for IT assets like servers, computers and workstations, phones, and other office equipment. While the levels of support provided vary from provider to provider, this is a great way to offload many of the costs involved with running a large office organization.
  • Product Service/Customer Support: If you are in the business of selling technology, one less-often considered form of technology outsourcing is outsourcing your service and support divisions. Toshiba has had great success with outsourcing their service and repair divisions to UPS supply chain solutions in 2004, and HP has been doing it even longer. Likewise, tech support service and call centers can easily be outsourced, increasing margins on products and cutting infrastructure costs dramatically.
  • IT Strategy: Organizations can outsource their IT strategy to a firm that has the breadth of experience, domain/industry knowledge and diverse IT industry knowledge that is nearly impossible to duplicate cost-effectively in-house. Strategic advice can incorporate growth and capacity planning, addressing TCO and ROI, as well as risk management.

How to Create an IT Outsourcing Contract

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As outsourcing becomes the norm, many companies are working to incorporate the outsourcing process into their regular operations. Part of this process includes contracting employees and adhering to those contracts.

IT consulting and outsourcing companies usually work under a contract for a specific length of time, or until a project is completed. This contract is an agreement to perform services for a predetermined cost, and the service level agreement (SLA) outlines the details of this work.

Here is a guide for creating this basic, yet very important, document for IT outsourcing.

1. Specify the cost and scope of work

Contracts specify in plain terms what you will be paying for and how much you will pay for it. But, the actual contract doesn’t have to be too specific; save these details for the service level agreement. For ongoing services, you will likely pay a monthly rate for a defined period of time. Include a benchmarking provision, especially in a long-term contract, to be sure you are hitting goals. This provision will come in handy if you suspect that costs for already-contracted services have dropped below prior rates (something that happens often as technology improves); at this point, you can have rates evaluated by a third party.

2. Define how you will monitor work (work governance)

The contract should include provisions that state what will happen if service level requirements are not met, as well as how requirements will be monitored. However, having a contract in place does not mean you are off the hook for clear, regular communication. Communicating with your IT provider, or with your client, will help you avoid future headaches.

3. Make a plan to disengage

Expect the best, but prepare for the worst. Implementing the disengagement plan is the worst-case scenario, but you still need to create it. If you find you are no longer able to work together and need to terminate the contract, you will be glad you have this plan to refer to. This element is especially important in IT where a contractor has access to your information and infrastructure. Include ownership rights, transfers, and any other security concerns you might have. If your contract is large in scope or involves complex licensing issues, you may wish to have an attorney review it.

4. Document the Service Level Agreement

The SLA is the nuts and bolts of the transaction, specifying all the details that the contract doesn’t. This document should be specific and include concrete information such as how many hours a day the helpdesk will be available, or which days of the week service will be provided. If it is important, make sure it goes into the SLA.

A note about foreign outsourcing:

If you plan to outsource IT services to a foreign company, you need to be aware of certain legal issues. Since these providers are based overseas, U.S. contract law may not apply to some provisions. If you are a smaller company looking for helpdesk support, this issue may not concern you. However, if you are a larger company outsourcing data storage, you can expect to encounter foreign regulations at some point. It can be helpful to have an attorney review these types of contracts as well so you can be sure you are crystal clear on what you are contracting into.