While IT outsourcing is a growing industry, high-profile examples of relationships not working out or suppliers failing to deliver suggest it is a more complex business than it seems. Organisations realise the benefits to be gained from outsourcing but continued caution from buyers is holding back the industry.
Technical know-how and state-of-the-art equipment is not enough. Human and service elements are rising up the agenda. Both in traditional outsourcing and even in colocation, buyers are demanding more value. IT services providers have to respond to this and not rely on IT skills to win and keep business - the answer lies in delivering top-quality service.
As Internet traffic increases and broadband stimulates the use of multimedia content, the datacentre industry should be set for a boom. However, before this happens, important issues need to be resolved. Many organisations are still unwilling to hand over critical and commercially-sensitive aspects of their business to services providers. Gartner predicts that 50% of IT outsourcing arrangements will fail in the next 12 months because of bad management. IT buyers are being unrealistic about what can be delivered within a set timeframe and price.
Colocation providers are very aware of the bridges that need to be crossed before getting companies to outsource their network or data servers to a third party. Ensuring zero downtime is a primary concern for any organisation with an Internet presence or a dependence on electronic communications (which pretty much covers all businesses these days) and is an excellent example of a business-critical operation. Earlier this year, the Yankee Group predicted that Web site downtime alone would cost UK business £715m in 2002.
Post KPNQwest and WorldCom, the financial stability of any business service provider will be carefully examined before outsourcing decisions are made. Security breaches are also a major concern - in addition to the cost of losing confidential information, the damage to a company's reputation can often outweigh years of investment in branding.
Surprisingly though, it is not the financial stability or even the level of security but the quality of people and engineering support that came out as the most pressing factor when choosing a colocation provider in a recent survey conducted by Vanson Bourne.
Colocation is often perceived as "space" in a datacentre, but colocation buyers now want to know that their infrastructure will be managed by experts.
When organisations outsource anything, it is imperative that they can focus on core competencies, safe in the knowledge that their IT partner is looking after everything else. As well as the appropriate security levels and guaranteed network stability through multihome services, organisations want to trust their colocation provider on a personal level.
So 24x7 support should be provided by skilled in-house engineering staff. Operations managers should have a passion for ensuring that their datacentres are supporting the optimum service with zero downtime.
The confidence of organisations outsourcing data or network servers which manage mission-critical software, applications and networking processes, can also be developed by the provision of a single point of contact for post-sales support and regular reporting. As well as service level agreements guaranteeing zero downtime, customer support staff need to be trusted to deal with ad hoc enquiries, from billing to outage reporting, efficiently.
It is important that any IT supplier (whether hardware, software or services) brings value to its customers by focusing on the human factor. Putting a face on the service and highlighting the expertise provided by the workforce is a vital differentiator in an industry too often labelled as a "commoditised" market. It amounts to a more appealing offering for organisations happy to have one less thing to worry about.
Rick Hudson is chief executive at colocation provider TeleCity