Outsourcing can have many advantages, be it economies of scale or
overcoming the ubiquitous skills shortage. But as Chris Youett
warns, IT managers should look before they leap.
With the latest raft of announcements from IBM, particularly
Logical Partitioning (LPAR) and V5.1 of the operating system, the
demand for outsourcing in the AS/400 market ought to be
great.
Traditionally this has been a market where outsourcing has very
much been the exception rather than the rule, so are we ready for
lift off? Many outsourcing suppliers are now licking their lips in
anticipation of the feast of orders expected to come their way over
the next two years. However, there is need for caution.
IT guru John Elsden, who is chairman of independent consultants and
trouble-shooters Allied Powers, warns against rushing out to place
orders for new yachts and fast cars.
He points out: 'Outsourcing is growing, but most new business is
being won at the top end of the market. Firms like IBM and EDS
won't normally bid for an outsourcing contract unless it is worth
millions per year.
'While about one third of AS/400 revenues come from mainframe-class
configurations, these don't even represent 10 per cent of the
machine's 750,000-strong installed base.
'This means that sites have to sit down with outsourcers and look
at the figures very carefully. I don't expect there will be a rush
to outsource everything because most sites are too small to make
any meaningful savings. However, I do see many of them seriously
considering outsourcing parts of their operations, such as
e-business,' Elsden said.
These views were echoed by Peter Thorne, an ASP specialist with
Cambridge based Cambashi. 'Outsourcing for AS/400s is helped by the
move to thin client architectures. If you look at the parameters of
an individual system such as type of application, nature of the
workloads, costs and skill levels required, you will get different
answers.
'This market is definitely horses for courses - and there are
social issues to contend with, such as perceived security problems
raised by user groups if their data and applications are accessed
over the internet. This is already forcing ASPs to beef up their
firewalls, encryption and virtual private network (VPN)
facilities,' Thorne says.
There is also the question of skills available for AS/400 sites at
outsourcing shops. Veteran Malcolm Jones, chairman of JBS Computer
Services, noted: 'Most outsourcing shops jumped onto the NT &
Unix bandwagons. I know they are having difficulties in getting the
high quality skills necessary for AS/400 outsourcing as a number
have approached JBS for help.
'Currently most outsourcing is coming from the mainframe class
sites. This is where LPAR will help greatly, particularly for
outsourcers offering ASP facilities,' he added.
A number of outsourcers are also coming to grief over service level
agreements (SLAs). With many AS/400 shops used to high levels of
service, outsourcers are having to look to their laurels.
Sorting the men from the boys
Nick King, managing
director of Apex Computers at Cirencester, Gloucs, believes that
this is the test which will sort out the men from the boys.
'In outsourcing it is how you perform against the client's SLAs
which count. I know that IBM is making some hefty investments in
outsourcing, but unless outsourcers can match tough SLAs then I see
the work coming back in-house, although I concede that in the short
term some will be outsourced via the ASP model.'
So how do sites select potential suppliers and reduce the risk of
signing up to a poor outsourcer? Jacoby Thwaites, managing director
of insurance IT specialists Michaelhouse, warned: 'Check the
reputation of potential outsourcers within the markets they operate
in. Speak to peer suppliers. When listening to presentations you
should be assessing the risk to your organisation of outsourcing,
not the price. Remember that the insurance industry is taking a
closer look at the risks posed by outsourcing.
'You should be very clear about what you are outsourcing, the real
internal and external costs, whether you are getting better value
for money and what extras the outsourcer is offering. For example,
I would expect all outsourcers to offer full disaster
recovery.'
Sites should also be clear about what the outsourcer is really
offering. Andy Rendell, a director of Midas IT Services, said:
'Most AS/400 outsourcers are usually offering either SCM, CRM or
ERP hosting. However, each site has a unique mix of all three.
Therefore you should look for a bespoke service.
'Anything which is non-mission critical is usually safe for
outsourcing; but for sensitive applications, these can be managed
at the client's site by the outsourcer.
'Outsourcing can also help avoid costly credit exposure or where an
application or technology is reaching the end of its lifecycle and
is no longer core. This allows IT to focus on new
developments.
Addressing strategies
'If you are looking at ASP or ISP
models of outsourcing, then key issues like SLAs, data ownership
across boundaries and exit strategies need to be addressed,'
Rendell adds.
These views were echoed by Trevor Simpson, pre-sales consultant
with Network Designers (NDL). He warns: 'A lot of facilities
management (FM) suppliers are trying to jump onto the ASP
bandwagon.
'AS/400 sites need to ask what happens if they move to the ASP
model and fall on hard times? Do they lose their systems because
they can't pay their monthly bills?
'Is the contract outsourcing the box and operational needs such as
dp staff as many sites won't save much? Is the site being asked to
outsource its box but retain control of applications? Can the
outsourcing contract be ring-fenced?
'A big advantage of using our software is that all your end users
and dp staffs' desktops remain the same whether you outsource or
not. If you move the work out (or back in-house) they see the same
screens. This gives the site a lot of protection,' Simpson
added.
Different flavours
Ring fencing is also important if
the site just outsources part of its operations. Terry Wilcox,
managing director of Studley, Warks, based Deliver-e, said:
'Traditional AS/400 outsourcers like Syan are mostly handling
different flavours of ERP systems.
'As most sites tend to have 50 screens or less, you can save money
on e-business by renting or leasing a pipeline. So you need to
check with your software supplier and outsourcer to see how
hardware-neutral your e-biz software is,' he says.
Dave Turner, international marketing manager at Coda, said that he
is also getting a lot of outsourcing queries for parts of the IT
operations.
'Typically it is difficult to find database administrators (DBAs)
for the salaries SME sites can offer. So if the outsourcer is
offering DBA work, is this hardware- neutral? We don't have a
problem here, as we already offer remote hosting and DBA services
to our customers.'
Case study - Wesupply
The application service provider
(ASP) Wesupply picked Nottingham-based Digica to host its best
practice supply chain applications delivered over the
Internet.
Wesupply's applications cover business processes, including
forecasting, shipping instructions, shipping confirmation, receipt
confirmation, reject processing, invoicing and supplier
performance. It wanted to ensure that both customers and suppliers
could access this information via a desktop browser 24 x 7 every
year.
John Luscombe, Wesupply's chief executive, admitted that most
companies would struggle to find the time, money or resources to
develop these applications in-house. So he looked for a hosted
supplier who would deliver this functionality for a monthly
fee.
Wesupply picked the AS/400 because of its very high reliability and
scaleability. It developed and installed the applications hosted by
Digica which run on two mirrored machines at different locations,
linked by fibre optic cabling.
Digica provides operational support in conjunction with its ISP
partner UUNET. This includes replicated servers, switches,
firewalls, hubs, routers and I/net connections. The outsourcing
contract is sufficiently flexible to allow both parties to support
offices in other time zones such as Asia-Pacific.