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Choosing an outsourcing partner

Thu 1 Sep 2011
FYI, this story is more than a year old

The past few years have seen a dramatic increase in the number of small-to-medium sized New Zealand enterprises outsourcing their IT support. Until recently outsourcing was considered an option only for very large corporates. But with the increasing availability of affordable high speed communications links and the decreasing cost of good helpdesk and remote support systems it has become possible for a typical "New Zealand sized” business to get the economies of scale that were previously not available to them.

During the global financial crisis businesses had to closely examine their operating costs and get every last drop of value out each dollar spent. During that time we observed businesses, which had previously employed their own IT department, begin to cut costs and replace those internal staff with a contracted external provider.If this was done carefully, what followed was often a pleasant surprise. Having cut the cost of an internal full time person and instead implementing a Managed Services contract with remote support, external helpdesk and once-a-week visits from an engineer, business owners naturally expected there to be some pain caused by not having their IT support always available on site.In fact, as long as the Managed Services agreement was designed correctly for the business, what they more often observed as a result of the cost reduction was an increase in the stability of their systems and a better response time to their requests.

Driving the demand

With some apparent growth back in many sectors of the New Zealand economy we may have expected to see a swing back to a preference for internal IT staff, but instead the lessons learned during 2008-2010 are actually creating more demand for outsourced services.

What is driving that demand is quite straightforward: Business owners are looking for a partnership which can deliver more than just fixing a PC and keeping the backups up to date on the server. If anything, they’re expecting more from the outsourcing provider partially due to the way that provider simply started delivering more when it was needed two years ago.  The fear of ‘handing the baby to someone else’ was overcome when the hand-over happened out of necessity, and now the advantages realised from doing that are what drives businesses to continue to do so.

An outsourcing provider will obviously be expected to provide the basics. A helpdesk, remote management of devices, a first level of support without the need to send engineers onsite, checking of backups and anti-virus – those should all be taken for granted.

What business owners now know is that they can expect a level of involvement in their business such that their Managed Services provider can help with IT strategy, work with them on budgets, and actively introduce new technology, new processes and efficiency as it becomes available.

This is another of those ‘hidden benefits’ of involving an outsourcing company in your business. An in-house IT person, whatever level they are at, can become blinkered and somewhat cut off from what is going on in the broader commercial world. Reading magazines and web sites is no substitute for the benefit an engineer working in a Managed Services company gets simply from being involved with 6 or 8 different clients every week.

Security concerns

There are certainly security concerns for a small business owner when inviting someone to be so close to the critical, internal parts of his business. But I would argue that he’s more secure in an outsourced arrangement where non-disclosures have been signed and the outsourcing company has the ability to provide additional backup in the event of any loss or failure.Security in this context doesn’t just refer to someone stealing information. There are many more likely ways data can be at risk, and in most businesses the loss of data to a competitor is less likely to happen, and actually has much less impact than just finding the data not available to yourself.

It’s important when choosing an outsourcing partner to keep this all in mind. You need to look for someone with a track record in supporting businesses your own size and, if possible, in a similar industry to yourself. It needs to be an outsourcing company with some substance, no matter how small your business is. Jumping from one or two internal staff to an IT company with just five or six staff simply isn’t going to give you the increased security and breadth that you could enjoy.

Another thing to keep in mind is that it’s ridiculously easy to start an IT company. New IT businesses come and go in the New Zealand market all the time, as there’s a very low cost in starting up and there’s a huge demand for the services. While a group of young IT engineers can certainly rent an office and deliver and support your new mail server, but that is not all it takes to make ensure that your IT supports your business

.Selecting an outsourcing provider with substance, years in the industry and processes that have stood up for some time, not just been developed yesterday, is important if you want to make a sound investment in the technology that supports your business.

Lessons learned

There have been many important lessons learned over the turbulent times of the past few years. Businesses, which were already outsourcing before the trouble began in 2008, were certainly in the best space and found themselves able to scale their costs down to match the size of their business when a reduction was forced upon them by the economy. Companies that made the change to Managed Services IT support were able to scale their support back up easily when the lights came back on

.From the other side of that relationship, this certainly had its challenges. We saw clients whose businesses dropped by 60% during the worst of the recession and capacity planning was sometimes near impossible, but because of a commitment (both contractual and ethical) to maintain their infrastructure, we retained the business and the knowledge required when they began to experience growth again in 2011.

Changing to a Managed Services arrangement is not a decision to be taken lightly.  Particularly if it is a change from an in-house IT team, the disruption can be significant and a part of the project will always be PR to the rest of the staff – getting the message across and reassuring them of the benefits that will be realised for everyone.

Changing to a different outsourced IT provider has the same impact, so it is important to take some time to get it right first time. Meet with the team at the IT provider (not just the sales people), talk to their clients, and work out how their culture matches that of your business, because ultimately a successful Managed Services agreement should mean they are part of your business. 

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