Outsourcing's Flexible Nature

"We're finding, particularly in this economic cycle, a lot of our customers are interested in flexibility. They want to outsource pieces of their infrastructure," said David Henry, CTO of Alltel Information Services, a Little Rock, Ark.-based service provider that offers outsourcing and consulting services to the financial, mortgage and telecommunications industries.

Clients can also benefit from transformational outsourcing, the process of temporarily outsourcing IT with the goal of taming infrastructure that has grown too complex, particularly in industries that are consolidating, Henry said.

"[Customers want to reduce complexity because during the boom years, they kept adding technology. . . . They outsource to break apart the empire and gain control," he said.

IT directors and CIOs are turning to outsourcing as they continue to experience intense budget pressure, said Brian Winter, vice president of marketing and alliances at SevenSpace, an MSP based in Chantilly, Va.

"They are challenged to have resources for applications they have made investments in over the years during the boom," Winter said. "Their companies are increasingly global, and they can't staff all those locales around the clock.

"We're seeing more and more customers focus on outsourcing discreet applications within the enterprise [because they've come to recognize that even if they have the staff to develop and implement the applications, they can't sustain managing them 24x7," he said.

Customers can use managed services to plug holes in the skill sets of in-house IT departments, Winter said. "They pick the applications that they don't have experience in today and don't intend to bring in-house in the near future," he said.

Service providers should help potential clients understand that the importance of the IT function is not the determining factor in whether it should be outsourced, said Iain J.S. Black, president and CEO of The Electric Mail Co., an e-mail ASP based in Burnaby, British Columbia.

"The question should be whether [a customer can do it better, cheaper and implement it faster than a third party," Black said.

Customers traditionally tend to outsource IT functions that are considered to be unimportant while keeping mission-critical technology in-house, he said.

To ease customer fears over utilizing managed services and applications, service providers should take more responsibility for meeting service-level agreements (SLAs), said Carolyn Holden, executive director of the Strategic Sourcing Advisory Council (SSAC), formerly the MSP Association.

"MSPs have to put the onus back on themselves to meet SLAs. Right now, [standard policy is, 'We'll pay if you catch me in violation,' " Holden said.

However, service providers do need to establish realistic SLA expectations among their client base, Black said. "We're an ASP so people are getting to us through the Internet," he said. "A backhoe takes out a line, an upstream router explodes,there's only so much within our control."

Through its Service Management Quality Initiative, launched earlier this year, SSAC, a non-profit consortium of MSPs and outsourcing companies, encourages service providers to adopt the Information Technology Infrastructure Library (ITIL) standards.

ITIL is a series of best practices developed in the United Kingdom to create repeatable and reliable services by developing operational processes in 10 core IT areas, including configuration and change management, disaster recovery and service-level management.

The standards are increasingly important as MSPs need to integrate their management services with the legacy infrastructure customers choose to keep in-house, Holden said. "ITIL is critical to making services work for clients," she said.