Outsourcing: Do You Want Out?
Outsourcing services is becoming increasingly common in the computer industry, but Annie Gurton discovers that many dealers still are missing out on its potential rewards
Dealers are frequently encouraged to spread their portfolios to offer outsourcing to their clients. But caution is required. Managing other companies? IT is a complex business, and the road to outsourcing profits is littered with dealers, integrators and resellers that thought that they could dabble.
Outsourcing is not for the fainthearted. It is multifaceted and every customer and provider means different things by it. One fact stands out: the outsourcing market as a whole is vast and rich. But are dealers equipped to plug into it?
Predictably, the specialist service providers think not. Jim Spooner, technical marketing director of storage specialist SST, says general dealers and integrators cannot provide a good enough service, mainly because it is too expensive for them to retain the necessary high level of skills in-house. ?Providers have to fully understand all aspects of the systems they are setting out to manage ? that is a complex challenge.?
For Chris Thwaites, strategic business development manager at Siemens GEC Communications, the issue is one of perception as much as ability. ?Companies considering outsourcing their IT management are understandably picky about who they give it to.
?If you are a small company which historically has only provided hardware and software, you are going to find it hard to make the transition to provide outsourcing services.?
Mike Boreham, marketing manager at reseller Info Products, agrees with both views. But he says there is no reason why resellers cannot make the grade ? it is a matter of trust. ?Certainly no one can set up as an outsourcing service provider overnight.? But he adds that Info Products is an example of a reseller business that decided outsourcing was one of the offerings it should make available to customers. ?We grew up selling PCs,? says Boreham, ?but we realised we had to move into services to make respectable margins and profits.?
There was, he says, a clear transition path through to providing full outsourcing but it was not achieved overnight. ?We started by providing more formal support and maintenance for the hardware, then we expanded that into providing software support and then into bespoking.?
Boreham says that providing software support was something software vendors were keen for Info Products to do, and from there it was an easy transition to running a help-desk for its clients.
?The key is to get your customer?s trust and that is something that is built up over years of working together. They have to understand what the reseller is capable of and how much and which elements of the IT infrastructure can be passed over for outside management.?
There is no doubt that successful outsourcing arrangements depend as much on the competence of the customer as the reseller or integrator providing the service. Some are more clued up than others on how outsourcing arrangements should work, but Boreham believes that if the outsourcing deals are not to end in tears, it is in the reseller?s best interest to make sure that the customer knows what is provided and how they can best manage their outsourcing. It is not good in the long run, for example, if the customer hands over total control and responsibility to the third party.
Boreham says: ?The main points are that the customer should have someone in-house who is in control of the outsourcing, and who understands that they have to be very specific about what their outsourcing arrangements are.?
The client from hell, he says, is one that throws everything at an outsourcing company expecting it to ?take care of it?.
?The advantage of outsourcing to the customer is that they can get expert people as and when they need them without putting them directly on the payroll, and they get one bill for several IT functions,? says Adrian Jasper, head of technical services at International Data Security, a specialist in IT security services.
But Jasper believes it is unrealistic to expect most small and medium resellers to have the necessary skills available, or be able to keep expensive people on the payroll, any more than the customer can. ?I see the integrators acting as prime contractors for the various outsourcing skills,? he says.
IDC regularly works through integrators to provide the high-level skills which are required to ensure that networks and systems are physically safe with impeccable data integrity.
?We have built our business largely on working though other third parties who deal direct with the customers,? says Jasper. ?But I would not recommend that integrators attempt to provide high-level security themselves. It is too highly skilled, too specialist, and too many things can go wrong.?
Jasper points out that BS7799 recommends that experts are used to provide systems security, because it is so specialist and vital. ?We use standard products and procedures,? says Jasper, ?but a large part of the skill we provide is in interpreting a customer?s requirements and expectations, and making sure that the system delivers what they want.?
He is unconvinced that a reseller providing basic products would have the necessary experience, but agrees that most integrators should know what is required.
Richard Coppel, chairman of Softbank Services Group, which provides outsourcing services through resellers to customers and users, says many dealers and resellers are not offering full outsourcing services when they could easily do so. The reason, says Coppel, is a paranoia that they are going to lose the customer.
?The small and medium dealers and integrators are unconvinced that their customer is safe in a third party?s hands,? he says. ?As a consequence, they are losing out on business that they could have a slice of.?
Small and medium dealers and integrators that do offer a full outsourcing service often don?t deliver the best available to their customers, partly because they are unable to offer the full broad range of services which outsourcing embraces, says Coppel. ?They are also unable to deliver full reporting on the outsourcing to enable the customer and provider to refine the services they offer.?
Coppel says that efficient outsourcing should include regular reporting and analysis of the service, so that response times can be improved, productivity increased and staff need only be sent on site when a telephone or hot computer link cannot resolve a difficulty.
?Most resellers and dealers only see outsourcing in limited and immediate terms, but it also involves a long-term responsibility to improve the customer?s IT,? he says.
Siemens Nixdorf general manager Les Francis says smaller dealers and integrators may not be able to find the necessary funding to support a move into outsourcing. ?Taking on board the IT management for a customer requires financial outlay as well as a sound understanding of their business and its objectives and challenges.
?It often requires confidence from the customer before the dealer is sufficiently well briefed to provide an adequate service. And it requires confidence in the dealership for the investment to be made, usually in staff and skills.?
Francis sees a direct link between the size of dealer business and their success in providing outsourcing services. ?Smaller firms are bound to be restricted in the skills they can provide,? he says.
Like many large vendors, Siemens is in two minds about encouraging resellers to provide outsourcing. ?We have our own business unit which provides outsourcing,? says Francis, ?and unless the reseller is a large one, in which case we will go in and help them as we can, we prefer to take over the outsourcing ourselves.?
The tending process, in which customers ask several suppliers to quote and pitch for their outsource business, will usually weed out those who are incapable of delivering the level of service that customers require, says Francis. ?It is not often that a dealer or reseller who is not able to deliver a full outsourcing service will get past the tending process.?
Few resellers considering moving into outsourcing think about risk management, or see it as an important aspect of this service. Francis believes risk management is an essential part of outsourcing, and is one reason why only the larger resellers will be able to provide competent outsourcing. ?They have the funds to invest in setting up the service,? he says. ?Unless that funding is available I can?t see credible outsourcing being delivered.?
Yet demand from customers for one-stop shop outsourcing is increasing, and dealers and resellers are foolish to ignore it. IT managers within customer organisations know that if they are going to provide competitive systems management they have to seek skills from outside their organisation on a regular but part-time basis. They are also reluctant to involve fresh third parties, and invariably prefer to deal with a systems provider they have had satisfactory dealings with in the past.
Jasper says: ?The dealer is the one who already has a foot in the door and already has the customer?s confidence. The sensible thing is for the dealer to leverage that contact and expand their services portfolio, but without any further investment on their part.?
This is particularly true, says Boreham, when the customer is large and there is a requirement for staff to be permanently based at the customer site. ?The customer is usually happy to leave the recruitment, training and management of IT staff to a third party. After all, managing specialist staff like IT people is a skill in itself.?
Furthermore, he says, as a company evolves its IT skills requirements change, so it makes sense to use a third party rather than have to hire and then fire specialists a year later when they are no longer needed. ?There is an inherent flexibility in outsourcing which makes it attractive to customers, and there is no reason why resellers can?t provide it.?
Spooner agrees that dealers and resellers can confidently offer full outsourcing, if they are prepared to outsource themselves and recruit specialist services from other agencies. This opens a Pandora?s box of legal complications and the possibility of endless buck-passing in the event of trouble, but is still the only way that a full outsourcing service can come from a small or medium business.
?Provided everything is talked through and all parties are clear about the expectations and limitations, then there is no reason why it cannot work,? he says. ?Handled properly, everyone wins. The specialist company feels good because we are doing the business, the reseller keeps the customer and the customer gets a first-rate outsourcing service.?