Outsourcing data centre management transfers key business processes and deliverables from in-house teams to an external supplier. The aim is to have the management and/or day-to-day execution of one or more business functions delivered by a third-party service provider that has a specialisation and expertise in performing these functions beyond those available to in-house teams. The client company will use the external provider for a variety of reasons that will be explored in greater detail below, but key benefits include, scalability, access to expertise and best practices, reduction of risk and inevitably cost benefit.
In many cases the external supplier provides services that could potentially be delivered inhouse, however these are probably not considered core business. This means that sufficient depth of experience or the specialist expertise required to manage business critical data centres is very unlikely to be available. In addition to this the management time to focus on these non-core functions may be lacking and the required training and development of expertise may be considered too expensive or too slow to deliver. All these combined with the inevitable pressure on the ability to scale or adapt to changing business conditions and requirements makes outsourcing an attractive option.
Objectives
The broad aim of outsourcing data centre services is to make a business or organization more competitive by allowing the option to stay focused on its key business drivers. This is achieved by allowing greater flexibility, offering cost certainty and releasing both financial and other resources into the core business. Outsourcing also allows a client to focus on their core business by having non-core operational functions assumed by an outside expert. When no longer devoting energy and resources to areas that are not in its expertise domain, a business can focus more resources on directly meeting customers’ requirements.
The Management of Risk
The data centre sector is first and foremost associated with continued service availability and the reduction of the risks that might result in a service outage. Outsourcing can reduce exposure to risk as it can provide a far greater breadth and depth of resources, offer brand insulation, put people related and financial risk at an arm’s length, guard against potentially stagnating operational processes. On the operational side the outsourced provider can offer lessons, best practices and training opportunities gleaned from a wider portfolio of sites and operating environments. Outsourced suppliers can far more easily justify the cost and benefit of development and sharing of best practices and methodologies acquired from a diverse client base than individual businesses are able to do. Outsourcing providers make investments on behalf of multiple clients, rather than just one, learning valuable transferable lessons in the process. This investment spreads knowledge of known risks and risk mitigation strategies significantly reducing the risk exposure held by a single company, an essential aspect of overall risk reduction. Outsourcing can also provide valuable insulation against exposure to statutory and compliance issues.
Outsourcing also enables businesses to pass certain elements of risk to their outsourced supplier(s). This can provide insulation from changing external factors such as market fluctuations, competition development, government regulations, financial conditions and emerging technologies, all of which may change rapidly, especially in the data centre sector. Keeping up with these changes, can potentially be risky and something to be avoided in a highly risk averse industry.
Scales and Access to Resources
Many companies outsource data centre management because they do not have access to the correct resources within their business, either in the right locations or at sufficient scale. This is generally true for businesses experiencing rapid growth, moving into new geographies or taking advantage of new technology. Every organization has practical limits on the resources available, particularly in a competitive market. This is especially relevant in the data centre industry where technology changes rapidly and experienced people with the correct skills are in great demand and short supply. It may be possible that outsourcing is the only option available if deadlines are to be achieved as it offers a viable alternative to building the needed capability from the ground up.
Large outsourced service providers have the advantage of scale, which offers the ability to attract the best talent based on brand awareness and demonstrable career path, unlikely to be available with an in-house delivery model. This in turn reduces staff churn and subsequent loss of skills and experience. HR costs are reduced as recruitment and selection can be absorbed by outsourced supplier rather than the client. The outsourced supplier has greater and experience in retention and management of data centre engineering skills, engineering career opportunities, training, progression and motivation. Personal development can therefore be better provided for employees operating within a business that has engineering skills at its core. Ultimately it is likely that there will be better career opportunities for personnel who transition to the outsourcing provider if services are outsourced.
Data Centre Technology and Pace of Change
Leading outsourced service providers typically make extensive investments in technology, methodologies, and people. They gain expertise by working with many clients facing similar challenges. This combination of specialization and expertise gives their customers a competitive advantage and helps them avoid the direct cost of chasing technology and training. Knowledge and expertise held in-house by the outsourced service provider along with consistent and well proven practices and processes are made available to their clients. These are unlikely to exist or be kept up to date in businesses which manage data centre operations, engineering and maintenance outside of their core operations.
In a rapidly changing, technology driven, sector businesses are continually being ‘re-engineered’ with the aim of improving critical measures of performance such as cost, quality, service and speed of delivery. However, the need to increase efficiency can come into direct conflict with the need to invest in core business. If focus is taken from non-core business functions these can become increasingly less efficient and less productive over time. If these non-core functions are outsourced specialist provider and properly monitored the client business will speed re-engineering, improve operational efficiency, reduce risk and improve costs.
Financial Benefits and Financial Control
With a properly considered contract and appropriate SLAs, outsourcing data centre management can offer more control rather than less. Loss of control is a common justification for not outsourcing, however a single knowledgeable point of contact with clear accountability and responsibility means that it is easier to make changes to operational delivery structures, roles, methods and KPIs etc. These changes can be delivered by experienced outsourced providers who do this routinely rather than rarely as is the case in most business. Clear financial accountability, well defined deliverables and agreed outcome-based transformations or re-engineering are achievable within much reduced timescales when the incentive or financial penalties can be applied. With this in mind outsourced engineering and fabric maintenance operations are far more insulated from the rapid pace of change of legislation, policy, technology, market demands and rapid Innovation within the data centre industry.
Despite the introduction of a margin by the outsourced provider it is still possible to reduce costs in real terms by outsourcing data centre operations, engineering and maintenance. This is due to the advantages of scale which both reduces overhead costs per specialist employee and can also offer very significant supply chain advantages. Cost reduction with an outsourced delivery model is a possible target even with the improved service levels, reduced risk and greater depth and breadth of skills provided. This is largely due to economies of scale, particularly in relation to supply chain and purchasing capabilities. Access to the outsourced provider’s lower cost structure, due to the result greater economies of scale and purchasing power, particularly within the supply chain, is one of the most compelling tactical reasons for outsourcing.
Outsourcing data centre operations can also flatten operational expenditure and provide more accurate and consistent financial forecasting over a longer period leading to increased ‘Cost Certainty’. Outsourcing can potentially transfer ‘fixed’ economic exposure to the outsourced provider offering the benefit of insulation from external economic variables. This is potentially extremely valuable in times of economic uncertainty. In addition to this there may be the option to contract out capital items such as infrastructure upgrade, replacement or refurbishment as operational expenses spread over a contracted period with the outsourced provider, This transfer of capital costs to operational cost can be particularly attractive to some business and potentially free up capital for other projects elsewhere in the business.
Data Centre Management and Delivery
Companies that attempt to take on non-core functions and operate at low volume, especially across a diverse portfolio or multiple sites are likely to incur significantly higher training, recruitment, supply chain, research, development, marketing and deployment expenses, all of which are passed on to the customer. An outsourced provider’s lower cost structure, which may be the result of greater economies of scale or other advantage based on specialization, can reduce a company’s overall operating costs and therefore increase competitive advantage.
Control and management challenges are often given as a reason for outsourcing. However, there may be underlying causes such as unclear management expectations or difficulty in measuring performance. Outsourcing is one option for addressing this issue but outsourcing alone is not the whole solution. Outsourcing in this case merely moves the symptoms of the problems elsewhere without identifying or dealing with the underlying causes.
Mere abdication of management responsibility does not solve the underlying problems, rather the organization needs to examine the underlying causes. If the requirements, objectives, expectations or needed resources are not clearly understood, then outsourcing cannot improve the situation; it may in fact exacerbate it. If the business does not understand its own requirements, it will not be able to communicate them to an outside provider.
Well defined outcomes and clear deliverables set for the outsourced provider ensure consistent service quality over time with less likelihood of service degradation due to loss of focus, misaligned goals and objectives, complacency and changing business conditions and requirements.
For data centre outsourcing to be successful, business management must have a clear and agreed set of objectives in mind and a clear sense of the benefits and risks involved. It should also be noted that the client business should always retain a limited amount of in-house knowledge to properly engage with and manage the outsourced supplier(s). Many outsourcing contracts fail to deliver the promised rewards due to misaligned goals and objectives, lack of clarity on the part of the client and in some cases failure to grasp or act upon the technical feedback provided by the outsourced supplier within their domain of expertise based up the detailed knowledge and understanding of their in-house team of subject matter experts.
A summary of key data centre outsourcing benefits presented below:
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- Acceleration of re-engineering benefits
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- Access to a broader range of capabilities
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- Acquire access to best practices and proven methodologies from a wide portfolio
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- Focus limited resources or resources not available internally
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- Free internal resources for other purposes by offloading non-core functions
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- Functions difficult to manage in-house
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- Gain access to specialist expertise and capabilities
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- Improve company focus
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- Improve cost efficiencies through economies of scale
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- Increase efficiency by consolidating and centralizing functions
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- Level out cyclical or seasonal fluctuations and eliminate peak staffing problems
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- Leverage the provider’s extensive investments in technology, methodologies and people
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- Make capital funds available
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- Obtain project management and implementation consulting expertise
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- Overall cost reduction and avoidance of capital investment
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- Redirect energy and personnel into the core business
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- Reduce and control operating costs
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- Reduce need for internal specialists by accessing specialist skills
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- Reduce operational overheads and control costs
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- Reduce operating and financial risks
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- Reduce the tactical management burden while retaining control of strategic decision making
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- Reduce training and recruitment costs
Future-tech have been designing, building and managing business critical data centres since 1982. The experience gained in being involved in data centre management from the outset has resulted in Future-tech sites achieved 99.999% uptime during 35+ years of operation. Future-tech has a team of experienced engineers, skilled and highly trained in-house Data Centre Engineers capable of properly maintaining and operating business critical data centre sites of all sizes. For more details please contact Richard Stacey on 0845 900 0127 or at rstacey@future-tech.co.uk