How to Manage an

By Larry Dignan  |  Posted 2003-07-01 Print this article Print

Deals with computing service providers are still murky. The best negotiators are insisting on performance goals.

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Fluor's Barnard, who inked a $375 million on-demand computing deal with IBM last December, says it pays to manage an outsourcing arrangement just as you would your own people.

"In some of the deals the customer says, 'I've outsourced and now I don't have to worry about it anymore,'" says Barnard. "It's still your business and you still have the responsibility to ensure that service levels are being provided."

Barnard has a 35-person project-management team that measures IBM's progress as it takes 18 months to transition Fluor to an on-demand system.

Among the 40 projects: Collapsing 14,000 servers to 400, redesigning network architecture and migrating e-mail systems. This team monitors 72 different measurements in a "dashboard" that tracks network capacity, help-desk calls and usage. Fluor's project-management team and Barnard review performance data monthly and quarterly, respectively.

It's important to determine why you want to outsource. Is it to save money? If so, there's a chance that it won't. Is it to improve service? Be sure to benchmark the current service. Is it to unload assets such as a customer-service center? If so, don't prevent the vendor from restructuring it to make a buck.

"You have to think everything out because once you sign that contract all of your leverage is gone," says Jack Benton, director of marketing for Technology Partners International (TPI), a Woodlands, Texas, firm that advised Procter & Gamble on the HP deal.

Christopher O'Brien, CIO for the city of Chicago, says he chose to outsource the city's technology infrastructure because his staff couldn't provide adequate service. "We also had no idea what we were spending," says O'Brien. Chicago outsources network management, help-desk asset management training and server support to Unisys. O'Brien's technology staff hovers around 80 people, down from more than 200 in 1997.

Chicago, in its second contract with Unisys, pays $11 million a year, a fixed sum that helps O'Brien set his technology budget. The first contract was $13.5 million, but Unisys was able to cut costs and workers once Chicago's infrastructure was running efficiently. Although O'Brien says he's satisfied with Unisys, the first six months didn't deliver efficiency gains due to a loss of people with knowledge of the systems. Unisys is currently meeting its service goals.

Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.

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