Mainframe Outsourcing Misconception #9: Outsourcing is a Political Decision, Bound to Create Controversy that We Don’t Need

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There is some truth in this statement.  Most outsourcing contracts tend to be assigned to the vendor of the platform that is being outsourced, raising potential concerns about bid competitiveness.   Even in cases where there are few qualified bidders for outsourcing work, creating a formal requirements definition to guide the outsourcing arrangement – with work reviewed each step of the way by a team representing key business stakeholders, audit, and tech-savvy IT staff or advisors, will help take the politics out of the choice.

Another political dimension of the outsourcing process is the fact that outsourcing is usually accompanied by a reduction in IT staff.  That can be true and you should consider whether there are some staff, who are nearing retirement age, who may be delighted to accept an early retirement, and in many cases, outsourcing vendors may be willing (and enthusiastic) to hire part of your staff to continue serving your needs and those of other customers.  Finally, core staff can (and often should) be retained to continue working with software applications or to explore new technologies that might benefit the company in innovative ways in the future.

Invariably, given the negative press that outsourcing has received against a backdrop of a recessionary economy, the term itself is “politicized.”  Truth be told, most mainframe outsourcing arrangements do not involve off-shoring jobs to foreign locales, but to in-country providers of technology services.  Under the circumstances, framing the strategy in strictly business terms – or as an optimization strategy with payoffs in terms of greater systems availability at a lower cost – is the best course of action.

Posted by Adrian

Mainframe Outsourcing Misconception #8: We Have Never Outsourced Any Important Function of IT, So We Really Have No Idea About What We Can Expect

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The unfamiliar always has a frightening dimension.  But the truth is that virtually every business has outsourced important aspects of its IT operations since the dawn of contemporary computing.

Consider that Wide Area Networks and voice communications networks, and the Internet itself, are all components of modern IT.  Neither the maintenance nor the operation of these services is completely under the direct control of the typical business user.  We outsource those responsibilities to the Internet Service Provider and the voice and data network service provider.  On most hardware deployed in our internal IT departments today, we leverage maintenance and support contracts from vendors and their surrogates:  that is also a form of outsourcing.  And, of course, software is licensed, not purchased, from vendors.  That is also outsourcing.

Truth is, most companies use a lot of outsourced services to support their IT operations today.  The outsourcing of mainframe infrastructure is a continuation of the same model.  You can apply many of the same principles of consideration and reliability to outsourcing your environment as you do to the other services you have been outsourcing all along.

Posted by Adrian

Mainframe Outsourcing Misconception #7: Selecting the Right Outsourcing Vendor is an Exercise in Futility

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Perhaps the greatest fear expressed by business planners is that they don’t know what they are doing when it comes to identifying, vetting or selecting a mainframe outsourcing vendor.  Often, those seeking to explore the outsourcing option do not know the lay of the land in the outsourcing world.  They believe that a meticulous request for proposal, thousands of pages in length, is required to elicit proposals that contain enough differentiating information to make an informed choice between options.  And even with that information, there is always a risk of vendor misrepresentation.

To make an effective evaluation of competitive vendor offerings, it helps to have an advisor that knows the capabilities of members of the outsourcing service provider community.  At a minimum, you need to obtain enough information to establish tangible differentiators between services.  These include:

(1)        The vendor’s experience with mainframe outsourcing

(2)        The vendor’s financial viability

(3)        The vendor’s business culture

(4)        The strength and security of a vendor’s data center(s)

(5)        The number and location of the vendor’s data center(s)

(6)        The vendor’s size (revenue, staff and number of clients)

(7)        The vendor’s standard SLAs

(8)        The vendor’s support model (on-shore vs. off-shore)

(9)        The pricing structure of the arrangement

(10)      The vendor’s core competency

(11)      The vendor’s reputation

(12)      The vendor’s certifications

(13)      The vendor’s tenure

(14)      The vendor’s third party software offering

(15)      The vendor’s customer satisfaction rating

(16)      The vendor’s transition methodology and transition experience

Other factors, closely related to those listed above, include the vendor’s flexibility in providing service (can they respond quickly in emergencies and turn on a dime to meet changing business requirements).  You may also want to establish whether the vendor actually provides all services, or subs out some activities to third party providers.

In addition to these tangible considerations, you should also pay attention to some intangible factors. That will go a long way toward ensuring the solvency of the relationship over time.  Questions to ask yourself after interviewing a vendor include:

(1)        Do I trust them?

(2)        Do I feel comfortable with these people?

(3)        Are they easy to work with?

(4)        Are they responsive?

(5)        Do they have a positive attitude?

(6)        Do I have good chemistry between my staff and the vendor’s key staff?

(7)        Will this be a good cultural fit?

Selecting the right mainframe vendor doesn’t need to be a futile endeavor.  You just need to know the right questions to ask and which vendors to ask.  A trusted advisor can help.

Posted by Adrian

Mainframe Outsourcing Misconception #6: Outsourcing will Not Improve our Service Levels Beyond What We Could Achieve Ourselves

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Another common fear that planners admit to having about mainframe outsourcing is that the arrangement may be based on unrealistic service level expectations.  In fact, service levels are metrics keyed to a complex set of factors.  When personnel, applications and infrastructure are all inside the business, the availability, accuracy and throughput of systems may seem to be under direct control of management.  Truth be told, however, service levels are imperfect tools.  Productivity can, of course, be impaired by infrastructure issues and downtime, but it is more likely the case that business processes and application issues are behind service level shortfalls.

When you outsource mainframe infrastructure to a qualified vendor, the service provider’s expertise should mitigate most infrastructure and IT operations-related impediments to achieving desired service levels, but this won’t fix business process inefficiencies or business application software foibles.  The near elimination of infrastructure problems should result in a net gain in productivity, but it won’t enable you to achieve off-the-charts improvements in overall business process efficiency.

In many cases, the seeds of failed outsourcing arrangements are sewn at the time that contracts are formulated.  Some vendors will promise to achieve virtually any service level sought by a client just to get the deal.  Those are the vendors you need to avoid.  A realistic set of service levels covering service availability, security and consistency are important, just as avoiding unrealistic expectations that could never be achieved whether the IT infrastructure was outsourced or not.

Posted by Adrian

Mainframe Outsourcing Misconception #5: Outsourcing Results in a Loss of Control over My Data and Applications

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Most mainframe outsourcing arrangements do result in the transition of IT hardware from the client facility to the vendor facility.  All too often, this engenders an all-to-common fear that outsourcing equals a loss of control.

This concern, however, is not supported by the facts.  In many outsourcing arrangements, your infrastructure will be hosted in a dedicated environment, on your own or comparable equipment or in dedicated logical partitions.  You will retain full control over software levels, schedules of production, disaster recovery testing and other aspects of production just as if the applications and workload were hosted in your own environment.

Concerns about a loss of physical control of mainframe hardware are often coupled with concerns about service levels:  What vendor could run my environment as well as I can?  Closely related to this concern:  The vendor doesn’t understand my business, they are not in my industry, so how can I depend on them to deliver the agility I need?

These concerns can be readily addressed by understanding the typical outsourcing agreement.  Vendors probably can’t run your business as well as you could, but that is rarely the objective of outsourcing.  Instead, you can construct a relationship in which the vendor handles the maintenance, support and operation of infrastructure components, insulating you from the cost and complexity of the myriad decisions that go into daily IT operations, while you maintain full control over the mainframe applications and data that support your business initiatives.

A competent mainframe outsourcing vendor rarely touts expertise in their clients’ businesses.  They have deep experience in operating and maintaining infrastructure.  Their job is to keep systems operating efficiently and consistently, while performing the “grunt work” of doing upgrades, patching software, applying fixes and performing routine operational processes.  The best mainframe outsourcing vendors also bring a depth and level of technical experience and expertise that will benefit your firm in terms of better uptime and greater operational efficiency than you may have been able to deliver in your own environment.

Posted by Adrian

Mainframe Outsourcing Misconception #4: Cost-Savings from Outsourcing are Short-Lived or Never Realized

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In addition to misconceptions, some executives express fears about the outcome of mainframe outsourcing that can delay decisions.  The number one fear is that expected cost-savings will not materialize.

Some businesses report that outsourcing enabled them to realize only short-lived cost-savings from the arrangement – usually in the form of OPEX reductions – that disappeared after the first 12 to 24 months.  However, such outcomes are not the norm, and often suffer from insufficient facts about the impact of increasing technology costs, staffing shortages or other factors that could significantly drive up internal costs for in-house IT.

It is important to keep in mind that the business model of the mainframe outsourcing service provider depends, fundamentally, on their ability to deliver lower cost of operations to clients based on economies of scale.  By sharing personnel, hardware, software and infrastructure costs across many customers, vendors realize lower costs in their own environment.  Passing these savings along to clients typically yields customers savings of 21% from outsourced IT operations versus in-house.

In the final analysis, your cost savings will depend on the vendor you choose, the details of the contract that you negotiate, and the future strategy for your mainframe applications.  An outsourcing advisor can be of service in all aspects of your outsourcing journey.

Posted by Adrian

Mainframe Outsourcing Misconception #3: The Transition is Risky and My Business Can’t Afford the Downtime

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Misperception #3 is that implementing the mainframe outsourcing arrangement entails a protracted period of downtime: an understandable concern.  In these days of doing more with less, it is usually the case that businesses are more dependent than ever before on the continuous operation of their information systems.  An interruption of any length is a possibility that needs to be considered carefully.

Moreover, transitions to an outsourcing arrangement typically set the tone for the entire outsourcing arrangement.  Disruptions can alienate users, of course, but an uneventful – some would say “transparent” – implementation of the strategy will reassure them about continued or improved service levels.

One way to think about the mainframe transition to a vendor is to liken it to a disaster recovery test.  Production equipment and processes will continue to be executed in your in-house setting while outsourced infrastructure and processes are being tested and validated.  Only after high confidence is reached in the new operating environment should a cutover be scheduled and executed.

For companies that have absolutely no window for downtime, high availability, or mirroring strategies can be used.  These support a seamless transfer of workload to the outsourcing vendor, with instantaneous reversal if any problems are detected.  Though more costly, such a high availability strategy, can eliminate any significant downtime.

Posted by Adrian

Mainframe Outsourcing Misconception #2: My Staff Doesn’t Have the Time, Objectivity or Skills to Plan and Implement the Outsourcing Decision

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Another popular misconception about outsourcing, this one often has some basis in fact.  These days, staffing in IT departments, especially in mainframe and midrange systems, is very lean.  Technical staffers are often carrying the workload that was once supported by a greater number of personnel and, as a result, lack the time to do the important work of transition planning.  Some staff may even feel threatened by the outsourcing strategy or conflicted about supporting the decision.

Truth be told, experienced and professional mainframe outsourcing vendors understand the implementation hurdles and can perform the preponderance of the work preparing for and implementing the outsourcing arrangement.  Your staff’s involvement in planning and transitioning workload to the outsourcing arrangement may well be limited.  They may need to help collect technical details for defining the workload, be involved in the planning of the migration, and of course, they will be required to test the systems during the migration process.  Taken together, these activities may represent less than 10% of the overall transition workload.

Posted by Adrian

Mainframe Outsourcing Misconception #1: Outsourcing Will Solve All My IT Problems

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This is the number 1 misconception about mainframe outsourcing.  Contrary to what you might read in a service provider’s marketing brochure, IT outsourcing is rarely a silver bullet solution to containing costs, reducing risks and ensuring top line growth for organizations.  It is, at best, a strategy arrived at after careful consideration of factors ranging from budgetary priorities, staff availability, facility and space issues, and operational performance.

Pressures to reduce cost alone generally do not justify the outsourcing decision.  As a rule, the best arrangements involve the outsourcing of mainframe operations and processes that are routine and can be delivered more cost-effectively by a service provider.  That said, other factors that may influence the outsourcing decision may have a legitimate basis in business priorities and budgetary pressures.  A clear-headed analysis of both the rewards and the risks of the decision must be made, and objectives must be set that can be used to evaluate options and to ensure that the expected benefits are being realized.

Posted by Adrian