The Credit Crunch Is Leading Many Organizations To Outsource Asset-Intensive Legacy Processes
Market conditions are always a driving force in organizational spending, and the current environment is no exception. But in 2009, in addition to cost reduction, companies are now evaluating whether they can maximize their scarce credit availability by outsourcing capital-intensive IT functions that were traditionally “off limits” to these sorts of exercises or simply not technologically feasible.
Now, leading organizations are addressing not just the effective use of a third party expense platform, but also are evaluating the use of OPA — Other People’s Assets.
As with everything in business, outsourcing moves in cycles. In the early days of enterprise computing, when mainframes and huge computer systems were the only option and the cost to purchase was high, the only model that made sense was to outsource. However, as technology changed and developed — and as credit became more readily available — many organizations spent large amounts of capital to build and manage their IT infrastructure.
IT infrastructure comprises the data center, servers, routers, switches, firewalls and more — all of the components that make up the back end of your e-mail, CRM, ERP, Web sites, Blackberry servers, file servers, print servers, etc. IT infrastructure is core to every organization and it is not cheap, especially when you want to ensure you are doing it right.
Technology is a powerful enabler of these considerations, and nowhere can this more clearly be seen than in industry of outsourced IT infrastructure and hosted IT infrastructure. Technology has developed to a point where now the highest performance infrastructure can be allocated to multiple users. Companies such as VMware and Cisco have pioneered virtualization. This technology now allows hosting to go to the next level. No longer are hosting companies providing low-end servers and storage to their customers. With virtualization hosting, companies are now providing Fortune 100 quality infrastructure. Access to this type of technology can be a game changer, but at a minimum provides end users with the best opportunity to leverage their IT infrastructure.
Hosted infrastructure is very simply utilizing the above mentioned resources that are owned by someone else. There are multiple benefits to hosted infrastructure, including: specialization by your hosting provider (hosting is their core business), access to typically better infrastructure, newer infrastructure, higher performance, etc. And in times like these, perhaps the most relevant benefit is no capital outlay. In a time when capital is scarce, spending on only what you need and not making a major asset investment in infrastructure could be the difference between being buried in debt and fighting to the top of your market.
Emotion is perhaps the most difficult obstacle to overcome when evaluating an outsourcing decision. Wehave already touched on the fact that the job can be done internally. But another emotional aspect is tied to a person’s job, and if something isoutsourced then someone, maybe even the person doing the analysis, might put themselves out of work.Outsourcing has always been associated with people losing their jobs. But in reality, just the opposite istrue. If an organization is using capital to grow instead of building its IT infrastructure, more people will have opportunities and more jobs will be available.
Outsourcing of IT infrastructure and the use of hosted infrastructure are being utilized by nearly every large organization, and it is growing in the small and medium business sector. In the next five years, nearly every organization will benefit from outsourcing, whether it is their Web sites, e-mail, file servers, offsite storage or their entire data center. Organizations are realizing very quickly that it is more efficient to allocate their capital to grow their business than to buy servers and routers.