Outsourcing: the dating game: as many organizations have learned, choosing to outsource your IT infrastructure to a hosting partner is a complex task that is really more a journey than a destination. Two customers talk about how they selected a provider and how relationships develop
In February we invited industry leaders to participate in a roundtable discussion on outsourcing Internet infrastructure and the lessons that can be learned when looking for a hosting partner. Joining Computing Canada editor Patricia MacInnis and assistant editor Jennifer Brown were (from left) Doug Caldwell, chief technology officer, Indigo Books and Music and Albert Bird, senior engagement manager, program management office, MFXchange U.S. Inc. a subsidiary of Fairfax Financial Holdings Ltd. MFX was formed as an independent technology company to support insurers, reinsurers, risk managers and brokers with technological solutions designed specifically for the insurance industry. Denis Chamberland is a partner with the legal firm Gowlings Lafleur Henderson LLP. He writes a monthly column on outsourcing in Canadian Corporate Counsel; Osama Arafat, CEO, Q9 Networks, a managed Internet infrastructure service provider; and, Robert Offley, CEO, Fusepoint which provides managed and hosting services to Canadian business.
CC: Can we begin by having Doug and Albert of Indigo and MFX describe what your current hosting situation is?
Caldwell: We outsourced our computing environment to Q9 Networks in the April to June time frame of last year. We have both our online environment and our corporate back end services running at the Q9 facility.
BIRD: We outsource to Fusepoint Managed Services as well, and we have two other data centres in the U.S. We are a business solutions provider, primarily focusing on financial and insurance verticals. Our core expertise is infrastructure and managed services.(MFX's solution with Fusepoint includes managed infrastructure services (14 servers housed in Fusepoint's data centre), data backup and a wide area network. They are collapsing four networks into one and Fusepoint's facility will be the central point for all of Canada.)
CC: Explain the process you went through prior to moving to a request for proposals. What business units were involved in the legwork leading up to it, and did you have a detailed costing of what your expenses were prior to moving to outsourcing?
CALDWELL: We had come through a merger of four different companies so one of the goals was consolidation of the data centre facilities. The other was that we are a retail organization with about $800 million in annual revenues.
We had looked at the cost of running a data centre and it can get pretty prohibitive when you look at being able to provide the high level of availability. The online environment demands the 7/24 enterprise class data centre environment and to build it yourself is just prohibitive. So we looked at a couple of things: high availability, secure environment and consolidation of the infrastructure itself.
In planning for the RFP itself, the first step we took was to ask: What do we need? The answer is an inventory of equipment. You need to provide the bidding vendors with an inventory of what you have, which is everything from space to power to networking requirements as well as what your expectations are from a service-level perspective.
The facility itself is something that became very important to us. The real test was the power outage we had last summer. From a power standpoint you need to make sure you have redundant power coming in to the data centre itself and from multiple power grids. You need to make sure you have battery backup and diesel backup. Once you have diesel backup the question is how long the generators run for? How do you replenish fuel in those diesel generators? Where is the physical facility located and how accessible is it to those types of things? Everything from normal operation to crisis mode is really what you need to look at in terms of your requirements.
Looking at space and power helps those responding to the RFP determine whether it is a house or a mouse. The other thing that's important is to determine your growth requirements. When you're looking at going into a facility you need to be able to share with the vendor whether you're going to grow five, 10, 50, 100 per cent.
The other area we looked at was billing requirements. I need to break it down across different parts of the organization, so whether it be the online business, retail, finance or whatever, can you help me break down the elements of the cost?
Finally, what is the reporting you want to have out of the facility? The kind of reporting they provide is important in terms of being able to prove they are delivering against the service level you have.
CC: Did you have a good idea of what your expenses were before you went into the arrangement?
CALDWELL: We looked at the physical rent of the facilities we had so we knew how much it was costing in terms of maintenance on UPS (uninterrupted power supply) and network connections coming into the facility. In terms of just the pure rent of the physical floor space itself we were able to have a good baseline of what it was costing. The one thing we had to make sure we took into account was that we were providing an inferior service to date to our business and paying a premium or it.
In terms of the business units that were involved, the project very much came from the audit committee and the executive team. The original requirements were that we needed to be able to sustain a crisis-type environment, be it fire or whatever, and our current facility was not meeting the standards of what the senior management of the organization needed to provide. We had to step up to that.
The second business unit we worked with was from a legal standpoint, in terms of our internal and external counsel, to understand what would be the components of getting them involved early on from scheduling of their resources to the parameters of the framework needed.
BIRD: Some of the decision to move to Fusepoint was based on us looking for an alternate hosting vendor. Key aspects for us were 9/11, certainly in the U.S., and how secure the data centre facilities were. We had a power outage similar to what happened here and we had one that happened that was not related to any other event, but related to a transformer power outage in our building, so we lost the ability to trade on the stock exchange. We also wanted to look at the overall hosting needs as a business for MFX as well as disaster recovery and business continuity. So when we looked at the combination of those things we really focused on finding something that was not in the downtown corridor Fusepoint matched that parameter (Fusepoint's data centre is located in Mississauga, west of the Toronto core) and we could grow our infrastructure. MFX has seen tremendous growth and we wanted to have a place where we could grow our business and host it in a stable and redundant environment while we were going out and soliciting business from customers. We needed to know we were matching their customer service level agreements and we needed a data centre that could have 24/7 365 redundancy that was robust, stable and secure.
One of our key parameters was security. Some of the goals we had in mind were to reduce some of the infrastructure spend we had. Building out redundant infrastructure is (expensive). We have two data centres in the U.S. and we were looking to leverage along the price point to create a northeast hub. Where we were hosting at the time was downtown and it was not serving our needs.
When we looked at the disaster recovery model we were trying to achieve, it was about getting outside the city limits, and looking at a provider we could partner with and grow. Fusepoint seemed to have the people and the process, in terms of service level agreements and operating environments. If we were just looking for a hot pipe to the Internet and some backup power we could find that in several places. What we didn't want to do is have the same staff having to manage the hosting facility as well as managing our key clients. So we handed that over to our partners at Fusepoint and we focused on our core competencies--bringing our products to market and servicing our current clientele.
CC: Was cost a big issue?
BIRD: Yes, it was.
CC: Had you been doing comparisons as to what it had been costing you?
BIRD: Yes. And there are obviously economies of scale--the more infrastructure you're hosting, the better price point you're reaching.
CC: What are the main things companies need to do in terms of homework to be ready to make a decision to go to hosting?