Critical Success Factors in Selecting an IT Infrastructure Provider

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1 white paper: IT solutions Critical Success Factors in Selecting an IT Infrastructure Provider Start by Doing Your Homework One Last Thing to Consider Provider Selection Criteria Profile of a Market Differentiator Account Management Revolves Around Customer s Business Pricing and Flexibility Best Practices Data Center Methodologies The Differentiation Recognized By Vinay Nagpal Senior Product Manager IT Solutions Verizon Business Conclusion About the Author: Vinay Nagpal Page of 7

2 How do you find the right IT infrastructure provider to outsource to? How do you realize business efficiencies you want to see? What qualities make an excellent outsourcing provider? IT infrastructure outsourcing is a topic of interest to any company that wants to lower costs and risk levels, and at the same time, maintain operational excellence. If you take the time to do your homework up front to assess and identify the best provider to meet your business objectives, IT infrastructure outsourcing can provide competitive advantages in addition to cost advantages. This white paper outlines the homework and assessment enterprises need to perform before looking for an IT infrastructure provider. It lists specific characteristics along with key differentiators the leaders in this space exhibit, and the criteria for selecting a provider that will add value to your business. Outsourcing is not just about the hardware, software, licenses, and your data. IT infrastructure outsourcing affects your business processes, workflows, and SLA s. When you are trying to decide whether to outsource, you need to consider all of the above in order to build a solid plan and select the right provider to outsource to. Start by Doing Your Homework It s easy to make a decision too quickly to outsource and find one of the many IT infrastructure providers ready to win your business. This, however, is a pitfall many companies can fall into and end up in disappointment. It s important to first pause and evaluate the compelling reasons to outsource your IT infrastructure. Before you even engage potential providers for IT infrastructure outsourcing and build a game plan, it is important to identify clear business objectives. This will help set the expectations on your side, as well as with the IT infrastructure provider. Ask yourself the critical question: What is the reason for outsourcing my IT infrastructure? IT infrastructure is outsourced most often for the following reasons: Reduce costs Overcome resource shortage Lack of IT expertise in your organization, IT is not your core competency In your case it may be one, or a combination of two or more of the above. For each of the reasons listed above, the following examples illustrate an approach to establishing measurable business objectives that will help you see the value of outsourcing and also the returns. Cost reduction. Identify the amount you want to reduce costs by and identify the timeframes in which you wish to realize the cost reductions. For example, target a 30% cost reduction at the end of first year, 50% in the second year, and 20% in the third year. Overcoming resource shortage. It is recommended not to set objectives in terms of number of people to add, rather measure in terms of business performance. An example would be a situation where you have an average order fulfillment backlog of two weeks and you lack the resources to scale the IT infrastructure to meet that goal. You would want to list this objective as scale IT capacity to reduce backlog by seven times within six months. If your objective is to bring in expertise you do not have in-house, it helps to list exactly what expertise you lack and the business impact the outsourcing will bring. It may be that you do not have expertise to build disaster recovery infrastructure that includes a warm site in a different geographic region. This can be listed as need business continuity for the ERP and manufacturing applications. Page of 7

3 Now, you can quantify the costs, performance, and other metrics related to your IT infrastructure, enabling you to compare the cost of operating the IT infrastructure in-house with the pricing provided by the potential IT infrastructure provider. One Last Thing to Consider Look at your organization and the processes in place today. All functions operate under one company, one umbrella. The processes, accountability, and communications between people running IT infrastructure internally and the rest of the company are different from an outsourced scenario. It s important to reorganize and sharpen the delineation point between IT infrastructure operations and the rest of the company with solid accountability. Then your organization is aligned to outsource. If the organization structure is not clearly partitioned, outsourcing the IT infrastructure can result in disaster even if the IT Infrastructure provider is the world s best. Provider Selection Criteria Once you have decided to outsource, the next phase is evaluation of the IT infrastructure providers. There are many IT infrastructure providers in the market today. Here is a list of criteria to assist in successfully selecting a qualified IT infrastructure provider to meet your business objectives. At a high level, initial provider-selection criteria should include: Technical expertise and experience in a broad range of IT services is essential. The provider needs to have access to a wide range of skilled technical experts. This is a critical factor that influences almost all the activities and results. Namely, the time it takes to transition, the execution, and the ability to avoid getting trapped into technical barriers that stop you from solving your business problems. In summary, a technically superior team can help reduce risk in terms of time, money and frustration. Reputation for high levels of customer satisfaction with a customer-centric approach is a strong indicator of future success. The provider needs to have a track record of exceeding service levels and treating each client as the critical customer they are. It s all about expectations the key is communicating your expectations to the outsourcing provider. What is the history of online availability and performance? Is it consistent? Are there any processes in place to measure thresholds against commitments made? Is there an escalation process defined and followed? How does the outsourcing provider communicate with clients? Is the strategy focused on a customercentric approach? Request references to validate information provided to you. Secure facilities with industry s best practices, quality people, and the internal drive to continually improve service while controlling internal costs. What policies are in place to ensure the security and confidentiality of your data s integrity? You want to be at ease in knowing that not only your data is secure, but the provider s network and the facilities themselves are protected as well. Recognize that providers might compare fairly easily on paper. Visit potential providers, see their operations center, meet the people who are in operations (not only in sales) and get a good understanding of who they are. Find out exactly who will be performing the daily functions. Will certain responsibilities be subcontracted out? Is the provider able to scale operations on short notice due to business demands? If the provider cannot scale, your business is at risk. As your business grows and as you venture into new geographies and markets, your provider needs to be ready with adaptable solutions. A provider should have sufficient financial stability to deliver service in a cost effective manner. Enterprises should be leery of deals where the provider s price can t support the operation because the total contract price appears to be less than what it would cost to perform the service. In this case, the provider may be assuming there will be future business to make up for the shortfall in the beginning of the contract. If this type of deal is a way of doing business for the provider, recognize there is a potential risk of financial instability that may lead to the provider going out of business. The other risk is the quality of service may be compromised. Page 3 of 7

4 A provider who understands your IT Infrastructure outsourcing business objectives and internal processes, as well as issues faced by client IT organizations. A successful outsourcing arrangement is indicative of the outsourcing provider who is customer-centric, functioning as an extension of the client s team, forging strong relationships with them. The provider should demonstrate a willingness to operate in an integrated fashion, acting as a team in order to achieve the client s IT Infrastructure outsourcing objectives. The provider s service delivery methodology is rooted in a perspective of finding mutually beneficial solutions rather than affixing blame. The provider s operating model includes information sharing and a perspective of shared risks and rewards for mutually beneficial outcomes. Make sure the Request For Information (RFI) asks providers to consider how they would solve key IT Infrastructure outsourcing business problems and objectives, rather than just asking for technical details. The response from the provider should focus on solutions to your business problems and results. The provider s response to the above criteria should be assessed from the standpoint of the provider s ability to deliver a total solution, not one requirement over another. Then it is easy to see how they satisfy the objectives you set for yourself and which ones are relevant for your business. Profile of a Market Differentiator Verizon Business is a leading IT infrastructure provider. It has experience providing service to run massive organizations internally. Through it s Data Center Outsourcing solution, Verizon Business helps customers address their IT infrastructure needs. The depth and breadth of its IT infrastructure and the need to keep it all up and running 24x7 has enabled Verizon Business to build extremely reliable delivery capabilities. Let s take a look at three components Verizon Business focuses on in order to help make its customers outsourcing decision result in a competitive advantage rather than just savings. 1. Accountable customer service management 2. Pricing models and flexibility 3. Best practices data center methodologies and executive visibility These three components enable Verizon Business to maintain a proactive position in client relationships. 1. Account Management Revolves Around Customer s Business Verizon s Account Management Model supports our clients with a personalized and interactive account management team. It is designed to provide clients with a high quality of service from engagement through the life of the contract. A personalized account management team is designed to serve as the champion for the customer for business and technical issues. The team consists of the following: The IT account manager is the single point of contact for a customers business needs. The account manager is a proactive team player and an extended team member of the customer who understands the customer s business thoroughly. This leads to a better understanding of customers needs and allows Verizon Business to respond swiftly. In addition to the IT account manager; the team includes a transition manager and a customer technical advocate. The transition manager is responsible for all the customer activities and facilitation of a smooth migration into Verizon Business s data center including due diligence activities and testing. The customer technical advocate works in the data center and is the account manager s day-today technical point of contact to handle a customer s technology needs or concerns. This advocate is responsible and accountable for ensuring that the client s needs are taken into consideration during day-to-day operations. Page 4 of 7

5 Here is a real world example that illustrates the value of such advocacy. In this particular situation, Verizon Business s operations team had planned to implement a change management process on a particular day that required downtime. As you would expect in a mature data center organization with quality management systems in place, the preparation, authorizations, and scheduling required to deploy the changes were not trivial. Through standard processes, the customer technical advocates were alerted of the pending change. One customer technical advocate who supported a client from the retail industry indicated that the particular day would not work for his client because it was a major sale day. The change would have slowed down the client s business on a critical day. Verizon Business rescheduled the change for a future date. The key to the model is the fact that customers have direct impact on this team s individual performance reviews and career growth. A third party conducts surveys with customers. Account managers are measured and compensated on customer satisfaction rather than increased revenue. Technical advocates are measured based on systems availability and customer satisfaction. Transition managers performance are evaluated on smoothness and success of transitions completed on time. The key to this model is that all members of the personalized account management team are measured by and compensated based on customer satisfaction. In addition, a structured communications and review process is put in place with an extensive customer contact framework and a solid escalation plan is laid out for handling unexpected events. 2. Pricing and Flexibility The Verizon Business pricing model builds on future market changes. Verizon Business prices per usage or per business unit, and annual discounts can be built into the pricing (if cost reductions are realized). Demonstrating flexibility for a healthcare client, for example, services were priced on a perclaim basis, as it facilitated the client s ability to show the value of IT to its business units. Service level agreements (SLAs) and measurements are negotiated according to the client s requirement (tiered, scorecard, etc.) and can change, if mutually agreed upon, should the business needs change. 3. Best Practices Data Center Methodologies Industry best practices, as well as a provider s internal initiatives, are the key to realizing a client s requirements and both parties objectives. Verizon IT s quality management system is ISO 9001:2000 certified and has been for seven consecutive years. Other industry best practices include SAS 70 Level II compliant commercial data centers and use of IT Infrastructure Library (ITIL) best practices. Continual Improvement. Many of Verizon Business s internal practices for improving service delivery while controlling costs are ongoing annual objectives. As the IT outsourcing market has matured and become somewhat commoditized, these internal practices are essential to achieving continual cost control, improved service delivery, innovation and business transformation. Verizon Business s data center management has an annual objective for consolidation, and it has become highly knowledgeable on what can practically be improved for additional efficiencies. There is an emphasis on creating oneness, which is the standardization of systems, networks, applications, etc. where it makes sense in order to improve operational performance. Verizon Business maintains a leadership role in technology and has facilities, methodologies, and processes to test new market products and solutions. Verizon Business has centers of expertise in each technical support area. Verizon Business maintains strong relationships with hardware and software vendors to keep current on new functionalities, utilities and software. In many cases, vendors have dedicated teams to support Verizon Business. Security and Business Continuity. Verizon Business employs a multi-level approach to security, which includes physical security, logical security and network security. Its world-class data center facilities are well protected and hardened to protect against natural disasters. Page 5 of 7

6 Some of Verizon Business s business continuity features include: Power from two separate electricity substations Network connectivity from two separate telephone central office locations Independent banks of uninterrupted power supplies with battery backup unit Diesel generators that allow the data centers to continue operating in the event of a power failure In addition to other best practices, Verizon Business, runs a disaster recovery test on each data center annually and tests the transfer of command control to one of two locations to help ensure that all of Verizon Business s data centers can be run via one management team from either of the two locations. Proactive Monitoring. Verizon Business utilizes industry-standard tools to monitor systems at a technical level by having developed and implemented: A real-time reporting system that is an enterprise availability portal that can be viewed by Verizon IT management, and is displayed real time in the CIO s office on a large plasma screen. It updates every 3 minutes and displays metrics, trends, analysis on 300 mission-critical Verizon applications and for our commercial data center outsourcing customers. A real-time monitoring system that performs automated daily health checks. This system simulates client activity to help ensure that applications run properly and posts proactive monitoring alerts. Response time and availability are monitored as follows: (a) 1st level: hardware and operating software, (b) 2nd level: CPU usage, response time, etc. and (c) 3rd level: application. These are tools specifically designed to help reduce problems for clients and system disruption. Verizon Business executives, along with account management, are kept informed and communicate progress with clients. In addition, Verizon Business executives meet with clients on a regular basis to review progress and performance, and to ensure that Verizon Business is providing the services required to effectively support the client s business today and into the future. The Differentiation Recognized Verizon Business was included in Gartner s 2006 Marketscope* for Data Center Outsourcing (Marketscope for Data Center Outsourcing, North America, 2006, July 26, 2006, Rich Matlus and William Mauer) which analyzes the state of the data center outsourcing market in North America, and 15 vendors who met the criteria of more than $50 million in annual revenue. The overall market was rated, in addition to each vendor. Verizon Business received a rating of Positive, defined as demonstrating strength in specific areas, but largely opportunistic. Existing customers should continue incremental investments while potential customers should put the vendor on a shortlist of tactical alternatives. The criteria to participate in Marketscope included a skills and capabilities presentation against Gartner s criteria, along with the feedback given by three references regarding their experience with the vendor. Data center outsourcing is one of the most mature markets for IT services. The Uptime Institute recognized and awarded Verizon Business with its 2006 Continuous Availability Award in Fall 2006 recognizing companies with data centers that have not had a facilities-related outage for at least one year. Verizon Business tops the list of 16 companies, having six centers on the list, more than any other company. In addition, Verizon Business s Burlington, Mass., center was one of only two centers honored for not having had an outage in 10 years, the longest period in the institute s history. *MarketScope Disclaimer The MarketScope is copyrighted July 26, 2006 by Gartner, Inc. and is reused with permission. The MarketScope is an evaluation of a marketplace at and for a specific time period. It depicts Gartner s analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the MarketScope, and does not advise technology users to select only those vendors with the highest rating. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. Page 6 of 7

7 For some businesses, an hour of downtime can result in millions of dollars of lost revenue. It s critical that large enterprise customers can depend on the networks their business applications are supported by and are continuously up and running at peak efficiency. This has been the most successful year overall for our members, and it shows the benefits of industry leaders coming together to share best practices and success stories, said Ken Brill, executive director of The Uptime Institute. Conclusion Choosing the right provider is the key to ensuring both parties anticipated value of an outsourcing arrangement is actually achieved. Achieving an IT edge in a competitive marketplace goes beyond finding a provider with expertise in keeping IT infrastructure current across major computing platforms and operating environments. Change is inevitable in a long-term relationship, and success will depend on continual alignment of both parties objectives. By selecting a provider with a customer-centric culture, a proven account management model, and a track record for delivering excellent IT services, an enterprise can achieve a competitive advantage from IT outsourcing. About the Author: Vinay Nagpal, Senior Product Manager, IT Solutions, Verizon Business Vinay began his career with UUNET in 2000 and has served in several positions spanning product marketing, product management, and product development responsibilities in the Colocation, Managed Hosting, and IT Solutions product set at UUNET/WorldCom/MCI/Digex/Verizon Business. Before joining UUNET, Vinay was the Internet Technologies Manager at Canada.com online network (part of CanWest MediaWorks Publications, Inc.), where he led a team of systems and networking professionals and managed the Web Hosting and Internet infrastructure of Canada.com s online network and their Internet Data Center. visit our website at to learn more about verizon business s products suite Vinay has an MBA with a specialization in Information Systems and a Bachelor in Computer Science Verizon. All Rights Reserved. WP /07 The Verizon and Verizon Business names and logos and all other names, logos, and slogans identifying Verizon s products and services are trademarks and service marks or registered trademarks and service marks of Verizon Trademark Services LLC or its affiliates in the United States and/or other countries. All other trademarks and service marks are the property of their respective owners. Page 7 of 7