Practical Research that Drives Measurable Results

Company: Hosting.com

Industry: Cloud hosting & recovery services

Region: Denver, Colorado

Company Size: Over 300, privately held.

Technology Profile: Microsoft Dynamics (Great Plains)

Business Situation: The financial department chose Great Plains (GP) for their accounting application. When the program was implemented, the IT team used an accounting firm that had GP subject matter experts to assist them. The initial implementation was successful, but eventually, the IT team found the program had functionality it was not familiar with, and the needs of the organization exceeded what the accounting firm could deliver in terms of administration and maintenance.

Complication: Determine whether to outsource GP maintenance and administration to a third-party organization, or hire another employee to focus solely on GP without overspending or destabilizing operations.

Solution: Outsourcing GP’s maintenance and administration to a third-party organization has saved Hosting.com $40,000 a year. Hiring an individual would have been no less than $80,000 plus training time. The IT team also determined that it only spends 20-30 hours a month on GP support, so spending that much on a salary for someone who wouldn’t even be focusing on it full time would be poor spending.

Benefits: The team saves $40,000 on support a year, and it did not have to devote resources recruiting and hiring a new employee. They optimized their spending by outsourcing to a third party expert that can also deliver systems analyst value, in addition to maintenance and administration.

Best Practice Case StudyOutsourcing ensures performance and functionality while saving money.

Hosting.com900 S. Broadway, Ste 400

Denver, CO80209

http://hosting.com

Info-Tech Research Group 2

As the Chief Technology Officer of Hosting.com, Craig McLellan is responsible for the Product Management and Engineering function, as well as the design and development of the company’s business and operational support systems.  Craig has emerged as a thought leader in the Cloud and Disaster Recovery space. His organization has introduced geographically-dispersed cloud solutions, the industry-first cloud recovery and replication service, along with an unparalleled customer experience.  Prior to joining Hosting.com Craig led SunGard’s managed service business in Canada. Prior to SunGard, Craig directed Inflow Inc.'s product development and business continuity practices.

Executive Bio

“I could invest real dollars for someone to become excellent, but they can’t maintain knowledge unless they’re doing it full time, so I end up losing them anyways.”

- Craig McLellan, Hosting.com

• The team decided to outsource the GP maintenance and administration tasks to a third-party organization.

• How the team reached that decision:

• The team decided that hiring someone to spend 20-30 hours a month on GP support would be a waste of money. The new hire would likely be inexperienced, require training, and cost the company no less than $80,000. IT would be spending money on a hew hire who would not be using the software long enough to display skills improvements. Therefore, IT would be investing in a person whose skill set would erode over time.

SolutionCase Study:Hosting.com

• The company did not have extensive service needs because its technical environment was stable. Outsourcing was the cheaper option. With their first third-party provider, they secured 24/7 access, but only had to pay for work when the IT group actually used them. The team’s needs were initially met, but eventually they decided to change providers because this particular vendor was not proactive in improving the environment, a quality the IT team realized they wanted in a vendor.

• Three months ago, the team switched to a new outsourced organization, without disruption from a day-to-day operational perspective. IT required that the third-party group act as an outsourced analyst, as well as outsourced support engine making recommendations on how to optimize GP. This option offered more value at an affordable price, so Hosting.com was able to save money in the long run.

Info-Tech Research Group 3

“The fact that we’ve changed vendors is indicative of a pitfall. It didn’t cost us great grief, but it opened our eyes to a couple of things. We wanted a proactive, analyst role from the vendor. Outsourcing is often times about moving costs off our books. The finance department was not driven by minimizing cost requirements, but maximizing the value of money we’re spending. Without having that analyst function, we would not be able to optimize the money we’re spending.

An outsourcer that can deliver systems analyst value is more valuable to the company than an outsourcer determined to reduce the cost.”

- Craig McLellan, Hosting.com

Key Pitfalls

• Go grassroots. The IT team spoke with similar enterprises about their recommendations for outsourcing before turning to vendors.

• Use a decision matrix. The team created a list of criteria to evaluate vendors, and also gave vendors the option to evaluate themselves. After that was completed, weighting was applied to each criteria. Interviews with the candidates who scored the highest were finalized, and then scored. Scores were calculated, and negotiation began with the highest scoring vendor(s).

• Top criteria in the search for an outsourcing partner included: Overall cost of doing business, and ability to demonstrate an understanding of how the business worked and the impact of GP on its success. Impact refers to how the company will use the outsourced party.

• The decision matrix helped the IT group establish the criteria that was important to them, keep emotions and brand loyalty off the table, and helped justify their decision to the business in the future, if necessary

Critical Steps to Success and Implementation

“The finance folks – they aren’t going to call them a lot, but when they do, they’d better know what they’re talking about.”

- Craig McLellan, Hosting.com

Case Study:Hosting.com

Info-Tech Research Group 4

• The IT department now saves $40,000 on GP support a year.

• Mutually beneficial relationship with outsourced third party. IT department found a group that could offer analysis along with support, and the third-party has the company committed to a minimum number of monthly hours.

• Overall approach saved them money, and the choice of vendor was made on a more balanced set of criteria to ensure quality.

• The IT department focuses on what they know, and doesn’t have to schedule time to train and hire a new employee, who would cost about $80,000 a year.

BenefitsCase Study:Hosting.com

Decision Matrix

Weighting Vendor 1 Vendor 2 Vendor 3 Vendor 4Decision Factor Factor Raw Weighted Raw Weighted Raw Weighted Raw Weighted

 

Project Management Methodology 5 3 15 4 20 4 20 1 5Schedule Availability 3 3 9 3 9 4 12 1 3MS Dynamics GP Expertise 5 4 20 4 20 4 20 3 15Microsoft Dynamics Expertise 3 2 6 3 9 3 9 4 12

Application Architecture & Dev Capabilities 5 3 15 4 20 4 20 4 20

Application Integration Capabilities 5 3 15 4 20 4 20 4 20Helpdesk Support Capabilities 4 2 8 3 12 3 12 1 4User Training 4 3 12 4 16 4 16 1 4Customer References 3 4 12 3 9 3 9 1 3HDC Location Presence / Support 3 4 12 4 12 4 12 1 3Project Costs 5 2 10 3 15 4 20 1 5On-Going Costs 5 2 10 3 15 4 20 1 5Financial Stability 2 4 8 3 6 4 8 4 8

Overall Response Through the Process 4 4 16 3 12 3 12 1 4                   

Overall Score     12.0   13.9   15.0   7.9

Notes:

- Weighting Factor is based on a 1-5 ranking for each Decision Factor- Raw scale is based on a 1-4 ranking, with 1 being the worst and 4 being the best.

- Weighted factor is NOT MODIFIABLE, but is calculated based on the input factors and scales

Info-Tech Research Group 5

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• Hosting.com secured a high-value third-party organization to outsource their application maintenance and administration through diligent research and evaluation. Other enterprises would be well served in leveraging this process by establishing clear accountability driven by SLAs, and tracking performance to ensure quality service, as they develop a relationship with their third-party organization.

• Don’t waste time trying to create an App Maintenance and Outsourcing (AMO) SLA from scratch, as this can cause small enterprises to miss key elements that should be included in the agreement.

To establish clear expectations through effective application maintenance outsourcing (AMO) service levels, refer to Info-Tech’s Small Enterprise SLA Template for App Maintenance Outsourcing.

• It’s important for small enterprises to track provider performance in AMO initiatives. One effective way to establish whether or not a provider is meeting the service levels outlined in the AMO service level agreement is by using a performance scorecard.

Refer to Info-Tech’s Performance Scorecard Template for Application Maintenance Outsourcing.

Future Resources

Set expectations early

Case Study:Hosting.com

Keep track to ensure service success