Outsourcing the desktop

Outsourcing desktop management can shave costs while bringing relief to an assortment of infrastructure management headaches

In 2003, New York City consolidated 32 autonomous community school districts under a unified Department of Education, creating a vast organization of 130,000 employees serving 1.1 million students. The reorg also brought under one IT roof approximately half a million pieces of computing equipment, including about 300,000 desktops and notebooks. According to the Department’s CIO, Irwin Kroot, no one at the time really knew how many assets the system had. So Kroot’s predecessor outsourced an inventory survey to a division of Dell. “They went door to door,” Kroot says, to all of the district’s 1,200 buildings, to inventory the equipment for an asset-management database.

Today, under a contract for approximately $20 million a year (about $65 per CPU), Dell Services provides a mix of services to keep elements of the district’s IT infrastructure running. For example, it covers “initial install and on-site testing,” Kroot says, “and...provides techs who come out and make sure [CPUs have] the appropriate network access and disk image.” The district continues to manage software inventory and distributes patches and software updates. And it runs a level-one support center but escalates problems it can’t solve to a Dell-operated help desk.

This a la carte approach to mixing and matching services is typical of desktop outsourcing arrangements. In fact, the top two pure-play desktop outsourcing firms, CenterBeam and Everdream, divvy up their offerings into discrete buckets with published pricing for each service. A key differentiator for those two vendors is their heavy reliance on automation and remote service provision. Whereas Dell, with 1.3 million seats under management, sticks close to procuring and managing hardware — as you might expect from a company focused on manufacturing PCs. Other firms that are better known for consulting on business processes and strategic IT planning, such as EDS, Hewlett-Packard, and IBM, also contract to manage the PC lifecycle.

From the perspective of an IT manager or CIO at a multinational corporation, the global reach of the big consulting and outsourcing firms becomes critical.

For smaller customers, as a study by Robert McNeill at Forrester Research suggests, sharing in the economies of scale incurred by highly automated outsourcers such as CenterBeam and Everdream appear to be gradually supplanting the varying degrees of outsourced desktop management provided by traditional VARs such as CompuCom and SARCOM.

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Regardless of who owns this market, it’s big: According to Gartner analyst William Maurer, revenues for outsourcing desktop management hit almost $28 billion worldwide last year; at least 22 vendors participated to the tune of $50 million or more each.

Those numbers are likely to grow. Just like New York’s school system, an increasing number of organizations have reached the conclusion that at least some aspects of managing desktop PCs aren’t worth their toll on in-house resources. And in many cases, particularly when many small offices are geographically distributed, an outsourcer can bring order to situations that have spun out of control.

Getting professional help

Robert Crouch is vice president of IT at Promissor, a division of Houghton Mifflin that operates 150 centers for license and certification testing across the country. Crouch has about 2,200 computers to maintain. With so many far-flung small offices connected by 56K frame relays, he says, “We couldn’t visit all of our test centers and make sure all those machines were kept up to date.” So he approached Everdream for patch distribution and inventory management. “There was a small client installed on each computer,” and Everdream was up and running “within a month.” Under Everdream’s charge, Crouch quickly learned that Promissor had tens of thousands of missing patches on its network.

Crouch says he previously performed updates with Microsoft SUS (Software Update Services) “but that didn’t have the access and control that Everdream has.” Now, “We can custom-tailor when and how often those updates occur, outside the business window.” Everdream’s remote servers distribute updates to Promissor’s proprietary software as well as to OS and ordinary business software.

“One of the hidden benefits,” Crouch says, is that “we got immediate visibility ... across the network for compliance or noncompliance” with licenses for commercial software the company was using. Also, “Everdream’s reporting flags approved and unapproved applications,” which allows Crouch to remotely uninstall games, file-sharing software, and other bandwidth-wasting toys that employees download.

Policing license agreements can avoid run-ins with the Business Software Alliance. But that’s not the only kind of compliance to think about these days.

Last March, Michael Sher went from Plymouth Rock Assurance’s headquarters to take over as CEO of Plymouth subsidiary Encharter Insurance Group. He found a loosely knit group of seven insurance agencies spread across Massachusetts and Connecticut that lacked an internal IS department and an IT strategy. The company, says Sher, “had offices that were down for days at a time because we were dependent on a guy in a truck ... a home-town fix-it guy ... who was charging us money to drive around to all the offices.”

Sher says, “When I got there I said, ‘no way; this is too Rube Goldberg.’” He hired CenterBeam to take over.

Between CenterBeam’s off-site servers and Encharter’s in-house client machines plus paper records, the agencies have triple backup. Also, Sher says, CenterBeam’s communication and storage is certified compliant with the Gramm-Leach-Bliley Act, which regulates protection of personal information — an important consideration for an insurance company.

Another CenterBeam customer, Henry Svendblad, CIO of Millennium Partners Sports Club Management, says that CenterBeam confers SAS 70 (Statement on Auditing Standards 70) compliance, which will help him obtain a “cyber insurance” policy against data theft. His company, which runs 10 sports clubs in six cities and has 1,500 employees, is a recent acquisition of a bigger real estate development firm. He adds that CenterBeam’s operations also maintain Sarbanes-Oxley and HIPAA (Health Insurance Portability and Accountability Act) compliance, which trickles down to his organization.

The cost calculation

Will outsourcing save you money? That’s not always easy to determine. On one side of the balance sheet, when calculating potential savings, “80 percent of organizations fail to include ... a significant amount ... of [what] they’re spending internally to manage desktops” says Gartner’s Maurer. As an example, he says, many companies account for the cost of IT staffers “but not the cost of the HR person” who manages their employment.

In addition, each outsourcing provider calculates costs differently. For example, large services organizations such as Dell or HP negotiate pricing customer by customer. CenterBeam, though, is quite forthcoming with costs. It operates on a month-by-month contract instead of a three- or five-year commitment, and charges $49.95 per PC per month for patch management, virus control, asset tracking, configuration management, and backup. A hosted Microsoft Exchange e-mail system runs $13 per month per mailbox, and VPN access is $10 per user per month plus 3 cents per minute. The company also provides Microsoft software on a monthly basis — Office Standard, for example, is $13.20 per PC per month. And help desk support is $19.95 per month per user. Initial setup fees vary depending on the customer’s situation. Everdream, too, offers potential customers clearcut pricing for services, starting as low as $10 per desktop per month, and the choice of different suites of services.

Promissor’s Crouch claims dramatic savings by contracting with Everdream, noting that his Everdream engagement “was almost paid for by what we were paying for [Symantec’s] central virus control.” His department also laid off some support staff.

New York City’s Department of Education may be more typical. Kroot says the school district simply can’t determine whether the Dell contract is saving money or not. “The ‘before’ info isn’t available. We’ve tried to go back and do a comparison, but the numbers are just too buried.” Dell says the schools had a patchwork of 700 vendors providing the services that it delivers now.

At Encharter, Sher says his contract with CenterBeam costs about 10 percent more than his company was spending before, but it delivers other benefits that are not easily calculable. For example, when his computer died, he hooked up a spare, downloaded his most recent files from CenterBeam’s servers, and was working again in 15 minutes. The outsourcer is also vetting ISPs for a Web site Encharter plans to launch.

Money isn’t everything

Clearly, cost is not the only factor in making the desktop outsourcing decision. One major benefit not visible in the bottom line is an IT organization’s liberation from the taxing, daily grind of infrastructure management, which often can free workers to pursue higher strategic goals.

As Gartner’s Maurer puts it, “Ask if desktop managed services ... is a core competency that over time your organization wants to recruit, train, and retain people for.”

Even when an enterprise saves big money, the intangibles may be worth even more. At Crossmark, a packaged goods sales and marketing firm, vice president of infrastructure services Charlie Orndorff says his deal with HP Services saves the company more than $1 million a year. Crossmark has 3,500 Windows XP desktops and notebooks and 1,000 Pocket PC devices managed under HP’s Access on Demand plan. Of the 4,500 employees, about 450 are at the corporate headquarters in Plano, 1,500 are scattered among 55 branches, and the rest work from home offices. The company’s 20 IS staffers simply couldn’t handle it.

“We did all the support in-house — help desk, break-fix, desktop support; we had our own laptop depot, did all the procurement internally, and also the disposal. We were not doing it well,” Orndorff says. “End-users were frustrated. It could take two to three weeks to get new equipment ... because every time it was a capital expense.”

Along with a shorter procurement lag time, Orndorff cites reduced capital investment as a key benefit. “[Under] our arrangement with HP ... we do not own the equipment. The laptop at my desk is a monthly service fee, an operational expense.”

Although the company laid off 20 staffers and has no internal PC support, Orndorff says things have improved. “There are SLAs in the agreement on help desk, on break-fix, on procurement. Our SLA is 24 hours, and [HP is] meeting the SLAs.” Before the HP contract, the company’s internal SLAs were “best effort.”

Decision time

Most customers we spoke with reported only minor technical disruptions or changes from flipping the outsourcing switch. For example, CenterBeam requires its customers to add RILO cards, DRACs, or other devices that allow remote shutdown and restart of servers, if they’re not already present. The company doesn’t modify the customer’s network or install a server on-site, though; instead, it communicates with the customer’s servers via a VPN, which it says can operate even over a dial-up connection.

If you expect the latest technology to be immediately available to your company, however, you may be disappointed. Economies of scale dictate a degree of uniformity — as Gartner’s Maurer puts it, “Most outsourcers have a standard toolset from an end-to-end desktop-management process perspective.” He adds that asking for something different can incur extra costs.

One outsourcing customer, who asked not to be identified, expressed a high level of frustration at the lack of responsiveness by his provider to requests for changes, particularly those that involved technology more advanced than common denominator desktop software or hardware.

Whether customers get what they want from outsourcers ultimately depends on the business relationship. Robert McNeill, a principal analyst with Forrester Research, says, “Managing the outsource vendor requires different skills [than running support internally] — business skills, relationship-management skills, financial skills. Who are you going to retain, retrain, or acquire, to help manage these outsourcing relationships?” Crossmark’s Orndorff offers a similar warning. For one thing, it took nine months to hammer out his plan with HP, and three more months to roll it out. While that’s in process, “You’re displacing people, changing processes.” He emphasizes the need to manage the relationship with the outsourcer carefully, and gives an example. “You have to understand the cultural fit. Are the two groups [the outsourcer and the IS department] enough of a fit that ... you can have an honest discussion?”

All that hard work paid off, Orndorff says. When there was a problem with an SLA or inventory management, HP’s approach was to “sit down and say: ‘How are we going to fix it?’ ”