The outsourcing dilemma

Where do you stand on network outsourcing? Definitely not something you'd look at?

We recently conducted our own survey on network outsourcing, which showed about 50 percent of companies would (or do) outsource, and 50 percent wouldn't. (I should clarify that by outsourcing I refer to both whole of business outsourcing and selective outsourcing, where specific network functions are managed by a third party). Although a small sample size means that these results are not statistically accurate, they are thought provoking in the broader context of looking at the general outsourcing argument.

The strongest proponents of outsourcing were legal (83 percent), manufacturing/construction (72 percent) and government (75 percent). Conversely, media/publishing (17 percent), hospitality (33 percent) and education (33 percent) were the least likely to outsource or consider outsourcing. By company size, it was the larger companiesââ,¬"100 to 500 employeesââ,¬"that were most open to outsourcing.

So, what factors do organisations consider in deciding whether to outsource? While outsourcing may not always yield the expected or desired results, three critical requirements must be met for the outsourcing argument to make sense:

• Business imperatives. The fundamental question is, if I outsource this part of my network, am I giving up control of something that is critical to my competitive advantage? Typically, the more important information (data) is to the business, the more important the network is. In some cases, not only is the data important to the business, but the network itself provides a competitive advantage.

  For example, the network forms part of the content delivery mechanism for media/publishing organisations, and is a critical contributor both to the business operationally and competitively. There would need to be very high level of trust before entrusting this to a third party! Conversely a manufacturing organisation is far happier to outsource, as the network is much less critical to the business.

• Technical considerations. The fundamental question is: am I outsourcing something that is so immature or tightly integrated into my business that managing the service levels will be complex and time consuming? As the WAN/LAN becomes increasingly mature and Cisco-centric, it becomes a stronger candidate for outsourcing. Security is fairly immatureââ,¬"smaller organisations typically have a firewall but not IDS and response mechanisms, but this is changing. Voiceââ,¬"PABX or IP telephonyââ,¬"are often tightly integrated into business processes and applications such as help desks or call centres.

  Typically the largest organisations see outsourcing as useful, where the technology is mature and well understood. Outsourcing telephonyââ,¬"and often securityââ,¬"is less likely as these are seen as critical and integrated into the business, while the LAN/WAN is easy to outsource from a technical perspective and often supports business-critical processes.

• Market comparison. The fundamental question is: can I get it better elsewhere? Will I get better cost and capability by performing an IT function in-house or outsourcing? Large companies may be able to manage their IT environment more competitively themselves (they are more likely to outsource the entire IT operation). Conversely, smaller companies find it hard to match the service levels of an outsourcer using their own, often stretched, resources.

  In practice, smaller companies (especially if the network is not business-critical) accept lower service levels for a lower cost result. It is the medium-size companies that place more importance on the network, and can justify outsourcing specific functions to obtain a higher level of service. Government departmentsââ,¬"of all sizesââ,¬"see value in outsourcing, which provides them with a higher level of service (cost not being as important).

This doesn't address or explain all the statistics. It does, however, explain many of the significant differences in attitudes to outsourcing among different companies of a similar size. It's also a reminder that every customer has a unique IT cost/benefit equilibrium, which no single approach will meet!

Oliver Descoeudres is marketing manager at network IP/Internet network infrastructure builder and solutions provider NetStar Australia. He can be contacted at marketing@netstarnetworks.com or on 02 9805 9759.

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