Paper presented at Australian Computer Society NSW branch conference - December 1996
In June 1996 my client had anecdotal evidence that the Internet Services being provided by the internal IT department could be obtained at 60% of the current price and offer better functionality.
I was asked to investigate the outsourcing of the function and manage the outsourcing including the establishment of Administrative procedures within a time frame of three months.
To identify a suitable service provider it was first necessary to identify the requirements. There were three options:
The Facilities Management options provided dedicated equipment but would require in-house technical capability. The third option required no technical skills and left the management of the equipment to the service provider - this would mean that the contract would be couched in terms of services rather than equipment.
To successfully out source the function a relationship needed to be established which clearly defined the role of the internal IT department, the external service provider, internal IT department and the client needed to be established.
The Functional Requirements were broadly as follows however, they had to be much more clearly defined and quantified, so that the service providers ability to deliver as well as the costs could be determined.
The process was determined by the value of the contract the Time Frame and the Stake holders. The value of the contract was not huge so a quotation was sought along general requirements. The requirements were then refined and a firm offer was sought. It was expected that for the amount of money involved the services would be part of the standard offerings of the service provider.
The selection criteria was the current and future technical requirements, the services versus products and the costs. A service is one that is defined and negotiated once of to a customer as opposed to a product which involves the delivery of a defined item for a specified cost.
In the case of Internet services there are a range of solutions available and each provider had its strengths and weaknesses. Would the consumer electronic mail provider be geared to meet the needs of a corporate client? The initial costs of Facilities Management were higher because of the outlay for dedicated equipment. A good understanding of the current usage and projected usage is required,though it mustn't be forgotten that over time services will change as will costs. Future enhancements may require a more powerful machine anyway.
The cost assessment required the careful analysis of current usage and functionality and an accurate assessment of future requirements as with new technology this is difficult in the medium (1 year) let alone in the longer term. A costing on a one year basis is advisable especially in order to compare with internal costs.
With the facts and figures at hand the decision to out source can finally be made. Issues such as the true cost (as opposed to price) to the organisation of the In-house option, the service levels and strategic issues such as investment in technical expertise all need to be considered.
The outcome of the process was, much more clearly defined requirements, which could be provided at a lower cost than the original set of services being offered. These refined requirements could be met more cost effectively by the internal IT department.
A service agreement was set out which defined services, charges, response times and the channels for dispute resolution.