Network Management / Managed Services / Outsourcing / IT Infrastructure

1. Lessons learned: Outsourcing managed network services
Driven by financialneeds, a competitive managed services market, enhanced remote netw orkmanagement tools and
demanding business requirements, organizations are increasingly delegating controlof their netw ork -- including carrier
services and service management -- to third-party providers.
The potential benefits of implementing fully outsourced managed services include reduced cost of ownership (COO), accessto
externalexpertise/intellectualproperty, improved operationalperformance and abstracted management. A holistic outsourced
model can also allow organizations to better allocate internal resources on strategic projects and core businessactivities.
How ever, relinquishing end-to-end responsibility for the netw orkinfrastructure without systematically addressing the service
delivery model exposes the organization to significant financial, operational and strategic risks. To mitigate these risks and
maximize results, organizations should consider the follow ing best practices:
1. Simplify the process for provider and service tower termination. First, structure the contract with minimal bundling so
specific services can be terminated w ithout impacting others. For example, in a recent project involving an offshore provider,
the contract was designed with separate service towers, e.g., Managed Router Services, Netw orkSupport Services (LAN,
telephony, w ireless infrastructure), Dedicated on-site support, Data Center Management Services and Contact Center
Management Services.
Second, retain broad rights for termination for cause, and allow for termination due to provider performance issues.
Third, establish specific termination processesduring contract negotiations and build them into the agreement. Explicitly
address all aspects of termination, including termination-related charges, provider wind-down support, providerobligations after
termination, and the transfer of assets(equipment, software), contracts and even provider personnel. It is alw ays best to
negotiate termination details w hile you still have leverage (i.e., before the contract is signed), as it w illmake termination easier
w ith fewer costsand operational/legaldifficulties. Waiting to negotiate these terms until you're seriously contemplating or
initiating termination is too late as the provider w illlikely be less disposed to cooperate.
Know ing that w ell-defined termination processes are in place w ith service towersthat can be peeled off (reducing provider
revenue) makes termination a more effective and credible stickto use if the provider is not performing.
2. Establish clear SLAs with credits defined in the contract. SLAs should ramp up based on the service issue duration,
severity and number of defaults. Additionally, they should have both financialand non-financialremedies requiring:
• Rapid escalation processesto the provider's senior/executive management levels.
• Formal quarterly and annual review swith the provider's executive management level.
• Root cause analysis for every "Severity 1" incident.
• Detailed remediation plans.
• Performance improvement plans.
• New customer reference everysix months.
To enforce SLAs, the enterprise must dedicate internal resources to monitor provider performance (i.e., IT provider
management), address defaults, and consistently escalate chronic issues using predefined processesto hold the provider
accountable. [Also read: "Cloud computing and the truth about SLAs"]
3. Avoid pushing too hard on price to the exclusionof all else. Aspricing decreasesbelow an appropriate level, the overall
service and provider relationship becomes less tenable, risking inflexibility and "w orkto rule," substandard resource
assignment, and a poor overall experience. Squeezing the provider too hard on price creates the riskof having the provider
look for opportunities to gain back margins after the contract is signed. For example, they may eliminate promised resources,
sw ap dedicated/on-site roles for cheapershared/off-site resources (e.g., project management), or persistently demand change
orders for services not explicitly covered by the contract.
Still, if cost reduction is the main driver and a company plans to push hard during price negotiations, it w illneed to establish
provider management once the deal is done to strictly enforce SLAsand monitor performance; otherwise it can expect "nickel-
and-diming" and performance erosion fromproviders.
4. Engage vendor management early and throughoutthe engagement. In general, vendor management involves
delivering:
• Support in developing sourcing/termination strategies.
• Contract management (T&C/SLA/KPI compliance, performance reviews).
• Customer-vendor relationship management (fromonboarding to divesting).
• Financial management.
• Risk management.
With fully outsourced agreements, organizations are highly dependent on the provider and the quality of service delivery. Still,
companies often underestimate the value of vendor management. As a result, investment in and commitment to this critical
function is frequently lacking w ith the consequence being poor service delivery, chronic service issues, misallocation of
financialresources and unhappy users.

2. Keeping vendor management involved during each step of the sourcing/contracting processis essentialgiven their vital role in
managing provider performance and value creation during the contract term. This includes involving them in sourcing and
termination strategies before starting down the road to a fully outsourced network.
5. Think operationally when developingyour sourcingstrategy and negotiatingthe agreement. For example, document
the lifecycle of a circuit/service fromordering to expiration/termination, including every permutation (escalations, early
cancelation, non-acceptance, poor performance); then, askthe provider to identify and confirmtime frames for each process
step.
Keep in mind that not all process steps are necessarily key performance indicators (KPIs), nor must they carry financialcredits.
How ever, allsteps should be clearly documented in the contract. Formally documenting and monitoring KPIs w illencourage
provider performance and keep each process step moving. Of course, this chain of events is only as good as its w eakest link,
and the provider w illlikely exploit any action w ithout an explicit and w ell-documented KPI to "pad" the other process time
frames.
6. Maintain internal ownership of IT network architecture/design services. Ownership of these operationalfunctions better
positions IT to align the netw orkwith businessrequirements. Further, ownership builds criticalinternalexpertise that can aid
w ith networkand processoptimization, infrastructure refresh decisionsand, if needed, support the transition of the netw ork and
managed services to another provider.
Finding the right balance betw een leveraging the provider's resources/expertise while developing institutionalknow ledge may
be difficult, but it can be accomplished, for example, by assigning IT responsibility for managing documentation requirements
(e.g., as builts, configuration, netw orkdiagrams), negotiating the ability to hire provider staff assigned to the account, or
requiring asset transfer at contract termination.
7. Carefully consider assetownership. Fully outsourced deals historically use an "asset-heavy" modelw herein asset
ow nership is either transferred by the customer to the provider or provided directly by the provider. This model is leveraged by
both customer and provider for many reasons, including:
• One-time cash payment fromprovider to customer for existing assets.
• Reduced capital funding in favor of operating expenditures.
• Predictable cost streamand improved return on asset (ROA).
• Eliminates need for separate maintenance agreements; fewer providers may simplify provider management.
• Provider organizational scale/expertise/remote tools to drive ongoing operationalefficiencies and cost reductions.
• CPE capacity planning responsibility assumed by provider (e.g., if circuit upgrade requires router upgrade).
• Providers encourage it -- asset ow nership is a perfect way to create "stickiness"; once the provider services are in place, the
effort/cost to take backasset ow nership is perceived by the customer (correctly or not) to be prohibitive.
Despite these benefits, there is a grow ing preference foran asset-light model because of alternative lease-backfinancing,
w hich allow san organization to ow n the asset without significant capitaloutlay or giving up asset control. Further, improvement
in remote infrastructure management (RIM) tools and virtualization technologies mean customers can more easily deploy and
use these technologies. These enhanced RIM tools also allow offshore providersto compete more effectivelyagainst onshore
providers. [Also read: "Pros, cons of remote infrastructure management"]
If asset ow nership is the provider's responsibility, asset refresh commitments by the provider must be established during
contract negotiations. Keeping criticalIT assets current during contract termis an important to include in the finalagreement.
Additionally, companies should restrict the provider frompurchasing or leasing assets fromits affiliates or subsidiaries; s uch
relationships can obscure the underlying cost of assets, limit visibility into asset inventories and services billing, and make
service termination more difficult.
Ultimately, the pros and cons of asset ow nership must be carefully w eighed by both IT and finance to determine w hich asset
model makes the most sense.
8. Bundle transport services or negotiate a separate transportagreement? Bundling transport with the managed services
has the upside of giving responsibility for these time-consuming tasks to externalparties (e.g., orders, disconnects, billing
management, troubleshooting). Transport contract negotiations are also avoided w ith "only" the managed services contract to
w orryabout.
The dow nside? Bundling transport w ith managed servicesmeans carrier costs are no longer transparent. Cost visibility and
financialcontrolare diminished as transport billing becomes a lump-charge on the managed service invoice.
In addition, bundling often means the IT organization becomes further removed fromnetw orkservices. Asa result, internal
expertise about transport erodes further, thereby increasing IT's dependence on the provider. As with ownership of IT netw ork
architecture/design, maintaining an intimate know ledge of the netw orkis criticalto delivering real value to the business units.
9. Plan extensively before migratingto a fully outsourced environment. Numerous activities must take place before
executing the plan. In-depth discussions with the business units are needed to understand their requirements and future plans.
Developing detailed site migration schedules, financialmanagement processes, data center/site readinessplans, resource
plans, communication plans and process management (incident, problem, change, asset management, etc.) must be ready
before rolling out managed services.
Ongoing real estate activity, including pending M&A, must be understood and factored into the migration plan. Transition to a
fully outsourced model requires significant planning to properly execute by both the enterprise and provider partner(s)for the
ramp-up (and as needed w ind-down)to a 100% outsourced environment.

3. Migrating criticalIT netw orkinfrastructure and servicesto a fully outsourced environment is complex and risky but also has the
potential for significant cost and efficiencybenefits. Mitigating the risks requires preparing for and looking beyond the sourcing
event by developing a sound sourcing strategy, negotiating strong, flexible contract terms, having appropriate provider
management, and continuous involvement by IT. By taking these steps, organizations can help ensure the managed services
provider delivers realvalue to their business and customers.
Source : Netw orkworld
Recommended By Rick Moreno, GLOBAL INFORMATION TECHNOLOGY DIRECTOR, AT&T
Netw orkManagement / Managed Services / Outsourcing / IT Infrastructure
rick.moreno2015@gmail.com
rick (dot) moreno2015 (at) gmail (dot) com
https://www.linkedin.com/pub/rick-moreno/6/79a/850