by Greg Hall

5 costly mistakes in infrastructure outsourcing

Sep 15, 2020
IT LeadershipOutsourcing

Consider yourself warned. These mistakes can derail your efforts, erode your business case, and start you off on the wrong foot with your chosen provider. Here's how to avoid them.

outsourcing international workers
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Outsourcing your infrastructure to a managed service provider (MSP) has its benefits.  Lower support costs, variable resource unit costs, and reduced cycle times for provisioning project resources are among the benefits most valued by companies who make the shift.

But outsourcing infrastructure also comes with the risk that an MSP will give you exactly what you ask for, not what you need, and it could come at a higher cost than you expected. 

Here are five common and very costly mistakes organizations make when outsourcing infrastructure to MSPs and how to avoid them. Being aware of these risks and taking proactive steps to mitigate them will position you to obtain the benefits of outsourcing while preserving and even enhancing the business case of your decision to outsource.

1. Not knowing your base footprint before going to market

Organizations often go into their outsourcing initiatives feeling confident that they have a clear and accurate understanding of their base footprint only to find surprises when they have someone come in later to audit or inventory what is physically there.

It is critically important that you do these inventories yourself so that you’re going to market with the right quantities, which will help get you the best support prices and unit metrics associated with that support.  If you fail to look on the backend prior to going to market, you could end up selecting a vendor thinking you understand the cost only to find you were wrong in your assumptions of the base footprint and that the costs will be higher than expected.

You also lose leverage related to how you can affect your price points for the support of that footprint when you need to add to your previously quoted quantities.  You don’t want to immediately apply additional resource charge/reduced resource credit (ARC/RRC) cost adjustments after you selected your vendor because you’ll end up potentially putting your business case at risk and challenging yourself with questions like, “Do I still have an appropriate business case with these updated baseline numbers and the related cost changes?”

It’s always best to establish your base footprint upfront so that you can validate your business case and carry that forward without material change as you mature your process and ultimately select your vendor.

2. Putting too little energy into forecasting your demand

Properly forecasting your demand is critical from a series of vantage points, but most specifically, you want to be able to understand in advance what your costs are with your base footprint and be able to apply the changes in that cost structure over the term based on your forecasted demand.

Leveraging that baseline plus forecasted demand empowers MSPs with visibility into the base revenue and incremental revenue tied to that forecasted demand.  When providers have this visibility, they will be more aggressive with their price points and concessions.

Understanding and providing that visibility to your provider will help establish the right price points initially that then become the anchors for establishing the right ARC/RRC model for deviations from your baselines over the term.  Not properly forecasting your demand will erode your business case over time.

3. Ignoring past performance metrics

Whether you are supporting your infrastructure today or have another third party supporting it and are looking to switch, don’t make the mistake of going to market with only anticipated performance expectations.  Come armed with current as well as past performance metrics for at least six months of history.

Going to market with objective data that shows the performance of your systems, incident response times, and service request performance for at least the previous six months, will ease the negotiation and acceptance of current state of performance and future performance expectations with your selected or evaluated providers.  It also establishes the ability to get you quicker to this baseline where there is a limited ramp-up period when the service level agreements themselves are free of penalties as it relates to the support and assurance of service.

4. Forgetting to update your documentation of current services

Just like you should know your base footprint before going to market, you should also make sure you update your documentation of all services currently being performed prior to going forward.  Inventorying the full suite of services performed today, reviewing them and getting them approved goes a long way in appropriately scoping the cost of your service.

Take the time now to identify what other tasks or services you want to add to your scope of outsourced services that you don’t do today or want done differently.  It is not always necessary or even practical to list out all possible day-to-day tasks you want your provider to perform.  As you document your scope of outsourced services, look to use phrases like “including but not limited to the following” or “a sample of the activities entailed in this responsibility include.”   Getting the scope of services on paper upfront is critical because whatever you miss will be an opportunity for your provider to introduce a change order down the road.

5. Letting MSPs control the narrative throughout the evaluation process

You can mitigate the majority of risks associated with scope creep or with inconsistent proposal responses by managing and controlling the narrative around the scope of services and how you’re going to cost/associate fluctuations in that service to pre-defined metrics.  This is why it’s so important to manage, capture, quantify and normalize the state of your infrastructure in terms of number of servers, how you classify them, number of router switches by series, tier (small, medium, or large routers), wireless access points, and other things of that nature.

By knowing what those metrics are and being able to create the alignment to your demand forecast, you can go to market in a way that you’re asking for specific price points against your metrics and your quantification of your environment.  Providing all potential vendors with comprehensive and specific request for proposal requirements, baseline metrics, and forecasted demand will allow you to get normalized proposals back that you can then compare apples-to-apples across providers.  This will help you make more informed decisions about who is the best fit for you, not just in terms of commitment to service but also in terms of cost of service.

When it comes to infrastructure managed services, beginning your journey with this type of planning before you go to market is critical to avoid costly mistakes after you award and contract for services.  There is truth to the saying that preparation is the best form of prevention.  In this case, preparation will help you mitigate some of the risks associated with outsourced infrastructure managed services.