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Managed security services: This is a hot sector that is gaining a lot of prominence of late. Security is of prime importance because being connected to the outside world like the Internet requires round-the-clock monitoring. If a customer has to do this in-house, first, they have to deploy people who are skilled to do this service on a 24x7 basis; second, the knowledge is limited to those people who are working within the organization; and third, the customer might also need sophisticated tools to do this. Whereas in case of outsourcing, a customer has to just pay per security device per month and leave the rest to the outsourcing company.

Remote infrastructure management: This service is also gaining popularity these days. In this case, a vendor manages the customer’s IT infrastructure from its own location, which could be situated in another city.

Application services: Companies these days use complex applications that may need 24x7 support. Thus, managing application services involves application maintenance, service management, application production support, etc.

Managed printing services: This involves end-to-end management of an enterprise’s imaging and printing environment, including total document outsourcing and enterprise print management.

Software as the service (SaaS): Also known as cloud computing. This is an emerging trend at present. Chandra Prabhakar, Global Business Head, OnDemand Solutions, Ramco says, “The customer tends to use the application from his own premises, wherever he might be. He is continuously monitoring his business requirements from his own location and at the same time he does not need to worry either the software or the hardware, management of the infrastructure. He also does not have to invest in any of this. He is paying for the usage. So he gets all the benefits of managed IT without incurring capital expenditure. At the same time, he gets a continuous upgrades.”

“The overall costs that companies would incur by moving on to a SaaS model would reduce at least by one-third. And they do not have to manage the infrastructure,” she adds.

What not to outsource?
While outsourcing is the best way out to a seamless running of IT infrastructure, the big question is what not to outsource. Applications that involve confidential data or intellectual property-related aspects could well be managed in-house. “For example, a telecom company may outsource services, towers, etc., but the core switching, or telecom service, is kept with the company because the revenues come from these areas,” says Bhatt of Allied Digital.

“There are a few tasks that should be handled internally by the enterprise IT team, for the reason of convenience and for the nature of the work that these activities include. Helpdesk activity related to new user enrollment and user removal activities. This should be part of normal user joining/leaving activity done by IT helpdesk, not the MPS vendor,” says Hiranandani of HP.

What to look for in a vendor?
Before signing up a managed services provider, it is advisable to weigh the competencies and track record of vendors that offer managed IT services. “CIOs/CTOs usually approach MPS vendors through word-of-mouth testimonials, or on the basis of the feedback from third-party research houses. Since outsourcing forms an important part of the IT infrastructure costs of any company, it is critical to know how successful the MPS vendor’s offerings will prove to be for the enterprise,” says Hiranandani. While opting for a smaller player may give you cost benefits, the larger players give you the advantage of the brand name. “If you are giving your entire IT to somebody, basically what you are doing is giving him a key. Obviously, you would not like to pass on the key of your organization to someone you cannot trust, and the trust in this case comes from brand reputation. So if you opt for an established brand, they have a reputation at stake, so they will always be careful,” says Aditya Singhal, Country Manager, Infrastructure Services, IBM India/South Asia.

Another major issue would be the experience of the vendor. “The experience that the managed IT vendor – whether they have been providing these kind of services in the past locally in India or internationally – is important. A large enterprise may look for a global experience, whereas a smaller and medium-sized enterprise may look for local experience,” says Singhal.

Checking for proper skill availability is also important. “Industry knowledge in similar industry environment is important. The other thing a customer looks at is whether you are just focused in deploying bodies to the customer, or you use automation or remote deliveries, or certain tools so that the cost of delivery can be reduced year-on-year basis,” says Kiran Desai, General Manager and Business Head, Managed IT Services, Wipro Infotech.

Cost comparisons also matter a lot in the long run. Vendors quote their price based on their initial assessment of the facility of the customer.

“One aspect is how we will go about delivering the service. This involves intense discussion in explaining the scope of the work, identifying what we will do, and what is to be in customer domain, what level of service domain that we offer,” says Simon Robin, Head, Managed Infrastructure Services, Tata Communications.

Also, the level of escalation in case of problems with the vendor is an important consideration. Some customers seek direct approach to the CEO of the company in case of laxity in service. “Then there is the SLA-related discussions in terms of how our response would be, how the resolution would be,” adds Robin.

Before and after closing the deal
There are several things that go into the contract. Before the contract is signed, several rounds of discussions take place between the customer and the vendor. A typical initial meeting is a discussion between the the salesperson of the vendor and the CTO of the company. During this meeting, the client discusses with the vendor the existing infrastructure of the company as well as the requirements. Based on the requirements, the vendor gives a quote. Then the terms and conditions of the service level agreement (SLA) are discussed in the subsequent meetings before signing the contract.

The SLA is a legal document that clearly defines the terms and conditions of the contract. Needless to say, it has to be throughly reviewed before signing on the dotted line. The first and the foremost thing is the description of the asset sheet and the services that would be provided by the vendor.

There are some key parameters of the SLA that a customer must throughly negotiate before signing the contract. “At the time of signing up there is a through discussion on the scope of work. There is a detailed document in terms of what we will be doing in front of the customer before the actual service is rolled out. The agreement will contain what will be delivered to the customers, how will it be delivered, how will we report that to the customers if there is a SLA violation, then the penalty for that, if there is a problem in how much time will it be resolved in, etc. These deliverables will form the part of the contract,” says Robin.

There is intense discussion on the response time, which refers to the time taken to resolve a problem when it arises, depending on its sensitivity. For example, a vendor may say that the time for the initial response (telephonic) to the query is 15 minutes, if the problem still persists then a person will visit the site within 30 minutes, and if still the problem is not resolved, the PC will be taken to the labs. Parameters such as the response/resolution time are monitored during the contract. “These parameters are measured during the contract. You cannot have violations of those commitments. These are issues that customers show concern on and insist on signing in a contract. Once an SLA is signed, you have to give reports every month to show that we have achieved the targets,” says Bhatt of Allied Digital.

Another important point in the SLA is how the problem will be escalated and the frequency of the review meetings. “We have an operations manager attached to a program. Depending on what work we are having, he tracks the services. For example, we track on a daily basis the calls that are coming in and which are the calls that have been closed as per the SLA. They are flashed on a daily basis to the customer. Then there is a monthly operational review that happens with the customer. Then there is a quarterly steering committee meeting where the entire program governance team meets,” says Bhatt. There is a penalty for non-achievement of the targets as well. These points have to be well-defined and well-understood in the agreement.

An SLA is generally signed on for a period of three to five years. However, if a customer is apprehensive and wants to check the service provided by a vendor before signing him in for a longer period, he can opt for a one-year contract as well. In the SLA there are clauses that clearly mentions the exit option as well. If the services provided by the vendor is unsatisfactory, the contract can be broken before its term ends.

The cost, a key component of the deal, varies according to the services opted for. Like, for example, a customer might want a dedicated storage that could run into crores of rupees. “If you go for a opex model, the portion of funds would be paid over a period of three years. Above this, we have certain tools that are deployed, which are utilized to monitor and manage the infrastructure, so there is a cost pertaining to that. Our services are 24x7, so there is a service component that goes into the overall cost. Broadly, the cost would include hardware, financing the hardware, tools, as well as effort,” says Robin. “If a customer were to come to us with a couple of servers in the opex model with the cost of hardware, the data center service, etc., the overall cost would come to anywhere around Rs 2.3 to 10 lakh per year.”

“The thumb rule is that for a customer having multiple end-users, several servers at three or four locations, etc., the cost per end-user is anywhere between US$ 10 to 15 a month,” says Bhatt.

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written by IT Services, March 25, 2010

That's interesting that outsourcing is good for everybody but it is very effective in small and medium-sized companies. The knowledge is really limited to a select few that the company hires. Nice blog.

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