The joy of outsourcing

Despite the inherent pain, budgeting can actually be a really useful thing. Since last week's column about budgeting, I’ve gotten deeper into my budget planning and had my first meeting with our CEO and CFO to go over my proposed budget in more detail. A number of the decisions I made for next year’s budget brought some of my own strategic thinking into clearer relief and hinted at some IT trends that are slowly but surely taking hold.

Although most IT managers want increases, the dirty little secret of IT budgeting is that a lot of IT gets steadily cheaper even within a 12-month budget cycle. The time between the day when a budget process begins and the books are actually closed on that budget could be as long as 18 months. This means that the $5,000 server you put in your budget in July 2004 for 2005 might cost $3,000 when you actually buy it in December 2005. In general, my non-personnel budget was flat this year, but that doesn’t mean I wasn’t able to propose any investments. Instead of looking for increases, I tried to “borrow” money from the savings I yielded from existing expenses via contract renegotiation or system consolidation. This is the new IT reality for many, even in an economic upswing.

One of my major savings areas was IT support services for end-users: desktop support, file/print services, and other mundane yet important tasks associated with day-to-day IT. Regular readers of this column know that I outsourced my IT support services slightly more than two years ago to CenterBeam (competitors in the space include Everdream). Although I don’t think outsourcing is inherently beneficial, a good outsourcing relationship can deliver amazing benefits.

Right now, my key internal systems are being monitored by a 24-hour NOC (network operations center) using integrated monitoring solutions that I would never be able to buy or integrate into my environment. Our employees benefit from around-the-clock support. A seamlessly automated, proactive patching solution keeps our systems up-to-date and every desktop or laptop is backed up every day regardless of location. I don’t manage these nuts-and-bolts, but I am able to track them via a convenient Web-based dashboard that gives me an instant read on the health of my IT environment, and I receive monthly reports on end-user satisfaction that are audited by a third party. The array of services offered to me has broadened in the past year, but I will actually be paying less for them as my provider continues to achieve economies of scale with a growing customer base.

When I spoke to the folks at CenterBeam recently, they referred to their offering as “fractional ownership” of IT services. This might sound like ASP redux, yet the difference is the personal service component combined with a breadth and depth of services that I could only replicate by hiring 40 people at a ridiculously higher cost and buying and integrating dozens of software suites. CTOs are accustomed to fractional ownership of datacenter space and even storage, but my sense is that the services offered by companies such as CenterBeam and Everdream are seeing a slower uptake than they should. In another five years, I expect the fractional ownership of end-user IT services to be the dominant model because businesses must focus IT investments in strategic areas. The model saves too much money and delivers too high a level of service for in-sourced IT to compete.