InformationWeek

Outsourcing: Managing Pieces Of The Enterprise

IS executives are looking for help in building and maintaining their client-server systems

By Deborah Asbrand
Issue date: August 14, 1995

The information systems staff at People's Bank of Connecticut sweated out the tedious task last year of installing hundreds of 486 PCs from AT&T Global Information Solutions in many of its 79 branch offices.

For months, the staff regularly toiled late into the evening and on weekends, driving from the bank's Bridgeport headquarters to branch offices, prying new PCs from their boxes, and crawling under desks to snake cables along walls. It was a tiresome chore.

After some 200 installations, the bleary-eyed staff had become expert at the process. There was only one problem: There were still 700 more PCs to install in the rollout project.

So the $6.4 billion bank decided to outsource. Last June, armed with its new expertise, People's Bank handed off the remaining installations to Unisys Desktop Services division. Under the $1.6 million contract, Unisys will complete the bank's desktop setups by the end of September, maintain the units, and manage its Novell NetWare 3.2 network. The deal allows People's Bank to complete the installation without hiring additional IS staff or relocating existing workers.

As companies race to expand their networks and capitalize on distributed technologies, overburdened IS executives are looking for help in building and maintaining their client-server systems. They're outsourcing the installation and maintenance of both the desktop and the network.

Be Selective
But only certain tasks are being off-loaded. The credo for technology managers today is: Contract out the familiar, but don't let the strategic aspects of your operation out of sight.

"Never outsource what you don't understand," advises Adrian Holcombe, director of network services for Ascom Timeplex Ltd., a network-management service provider in Langley, England. "The goal is to outsource the things you can do, but would rather not."

That's exactly what happened at People's Bank, which had spent a year setting up networks and PCs, but had covered only one-third of its branches. The Connecticut bank was a longstanding user of outsourcing services for its mainframe, but a relative newcomer when it comes to the field of PC outsourcing. "We did the initial installations ourselves because we knew we needed to understand what it was," explains Tom Jagodzinski, People's Bank first VP of technology and communications.

More businesses are following that lead. The market for network outsourcing is on a roll th at's likely to continue for several years. According to a Dataquest Inc. research arm in Westboro, Mass., businesses will pour $22 billion this year into outside management of their network and desktop services. That's up more than 37% from $16 billion two years ago. By 1998, Dataquest anticipates that the market will grow an even healthier 68% to $37 billion.

"We've seen a greater openness to outsourcing in the last 12 months," says Brenda Vathauer, marketing manager for Hewlett-Packard's operations services division in Mountain View, Calif. "Prior to that, outsourcing was a dirty word." Companies typically outsourced legacy systems when they hit financial difficulties and needed a quick transfer of assets--and a cash infusion.

'Out-Tasking'
Businesses are selectively choosing the processes they outsource. Dataquest calls this "out-tasking." Name the service, and there's sure to be a vendor offering it ( See related story here ). Technology managers are hi ring outsiders to provide asset-management duties that keep track of corporate hardware and software resources. Or they're looking for vendors willing to shoulder the burdens of managing multivendor, multiprotocol networks so they can trash their on-call beepers and leave the 24-hour network watchdog duties to someone else. Or, like People's Bank of Connecticut, they're just looking for someone to help them install new systems.

Selective outsourcing can make for smoother relationships between businesses and their technology suppliers. The all-or-nothing style of outsourcing can be too much like a marriage: If the relationship goes bad, both parties are in for a lot of pain. With out-tasking, explains Jeff Kaplan, director of worldwide services at Dataquest, "if either party finds they don't like the risk, it's easy to pull back."

One such network-management service provider is New England System (NES). In the Waltham, Mass., systems integrator's "war room," a bank of consoles glows with names of cust omers such as New England Medical Center and Bank of Tokyo subsidiary BOT Financial Corp. If a disk-utilization problem occurs, for example, the customer's name flashes in red lights on the console, and NES technicians set out to correct the difficulty.

Even small companies are finding that these services are available to them. Motorola/ISG in Mansfield, Mass., handles networks as tiny as three nodes. Unisys takes clients with networks that have as few as 10 nodes, charging as little as $45 per node for remote network-management service.

But it doesn't matter if a business is small or large, piecemeal outsourcing demands careful planning. Electing which services to out-task is trickier than it seems.

Companies often are tempted to rid themselves of the aspects of the network and the desktop that give them the highest anxiety. After all, if you can pay someone to tame the router connections that may bedevil you for months, why not?

Because you'll get burned, says Dave Hibshman, the network man ager at Newholland North America, a $1.5-billion agricultural machinery manufacturing company in Newholland, Pa. "You'll face such an overwhelming plethora of designs and prices that you'll never know what you're getting," says Hibshman, a longtime outsourcing customer of Advantis, the networking arm of IBM's Global Network Services.

Because it chose to directly manage strategic systems, but outsource the drudgery, Ford Motor Co. in Dearborn, Mich., has been largely satisfied for the past six years with Hewlett-Packard's outsourcing arm.

Ford further cemented its HP relationship in January when it inked a three-year, multimillion-dollar contract. The agreement calls for continued support for Ford Internet, a multiprotocol network that serves as the automaker's primary data highway. The contract also covers Ford's product-development divisions. "HP owns 90% of the daily support; Ford owns 70% of strategy," says Tony Cataldo, Ford's supervisor of engineering communications systems.

Of course, compan ies find there are some tasks that shouldn't be outsourced. One of Britain's top banks, which Ascom Timeplex's Holcomb wasn't at liberty to name, was eager to relieve its limited IS staff from the tedium of answering telephones. The bank couldn't wait to hand off its help desk when it implemented a 1,000-user LAN at its headquarters. But after considering the user feedback it would lose, the bank changed its mind. "They realized that the help desk isn't just about networking problems, but about how IT itself is performing,'" says Holcombe.

Holcombe advises against outsourcing help-desk service when users first call with a problem, because such information is an important barometer of IS services. If you don't field these calls yourself, "you're reliant on outsiders to find out what people think of your services," he says.

Watch Out
There are other pitfalls to avoid. Managing complex contracts demands precision and vigilance. Trouble looms when businesses leave too much to the service prov ider. "We hold a tight rein on the Ford Internet and control all aspects of how the network is operated," says Scott Anderson, a Ford telecom specialist. "We're involved in any decision of consequence."

Newholland's Hibshman credits outsourcer IBM with helping his company construct in only four months a complex multiprotocol wide area network for voice and data. The network, which runs on leased 1.544-Mbps T1 lines, can handle Token-Ring, TCP/IP, or STLC protocols and uses voice-compression cards to keep down traffic and telecom costs. Hibshman says IBM helped slash telecom costs by more than 25%. But Hibshman never lets his outsourcer forget who's in charge. "We don't negotiate; we tell them what to do," he says.

Dee Odell, director of outsourcing sales at IBM's Global Network in White Plains, N.Y., is used to assertive customers like Hibshman. "My customers tell me, 'I want one throat to choke when things go wrong.' "

But outsourcing isn't for everyone. For most of the 1980s, the law firm of Sid ley & Austin in Chicago hired outsiders to develop and maintain billing applications and to support its PCs. By the end of the decade, the firm concluded that outsourcing had diminished its strategic control. It scrapped all such contracts. "We felt we lacked the ability to control our destiny," says Jim Lantonio, Sidley & Austin's executive director. To regain it, the 675-lawyer firm hired its own programmers and support technicians. By bringing the function back in-house, Lantonio says he saved millions of dollars by boosting programming productivity.

Still, Lantonio says he's again looking at outsourcing--but this time, it's only for portions of network. Outside developers recently wrote a fax-server application for the law firm, then sent it to in-house programmers, who polished and integrated the application into the law firm's AT&T LANManager network. "We'll always need people who are familiar with the organization working on custom applications," he says.

Indeed, in the best outsour cing partnerships, familiarity always breeds the most respect--and security. "It may make sense for us to do this in-house again someday," says Jagodzinski of People's Bank. "We know the technology well enough to know that we can do it if we need to."

You never know when you might need to bring back in-house an outsourced function.

Comments on this story?

InformationWeek http://techweb.cmp.com/iwk