Data Center Outsourcing More Common, More Volatile

Data center outsourcing remained relatively stable over the course of the recession, but now appears to be rising in a manner that suggests organizations are experimenting with on-demand capacity.

Figure 2 from our study, Data Center Outsourcing Trends and Customer Experience, shows only 31% of organizations practiced data center outsourcing in 2009. That number remained at about that level through 2011, when it was at 32%. In fact, our data shows that even prior to the recession, in 2006, the frequency of data center outsourcing remained at about the same level.

However, beginning in 2012 we see an increase in data center outsourcing, with a jump to 41% in 2012 and then a retrenchment to 35% the next year. The rising frequency and volatility of data center outsourcing suggests experimentation with cloud computing is beginning to influence the data. It also suggests some organizations are adding data center capacity through outsourcing rather than building their own infrastructure as the economy improves.

The decision as to whether to outsource data center operations is an important one for today’s IT executive. As data centers become more automated, virtualized, complex, and larger, service providers can leverage expertise and economies of scale to provide attractive alternatives to hosting and managing systems on-premises. On the other hand, the data center is the heart of the IT organization, and turning over data center operations to a service provider or moving applications to a service provider’s site can entail sizable risk.

Data center outsourcing is not practiced by the majority of organizations, and our study rates the frequency of this practice as very low. As business growth resumes, however, IT organizations face decisions as to how best to support that increased demand, including whether to upgrade infrastructure, turn to off-premises hosting services, or move some computing resources into the cloud.

In the full study, we examine data center outsourcing trends to provide IT executives with insight into how broadly and eagerly their peers are undertaking data center outsourcing as a strategy. We also examine the success rates organizations are having reducing cost and improving service through outsourcing this critical function. Finally, we report on the extent to which IT organization size and sector affect data center outsourcing adoption.

To measure outsourcing activity, we report the percentage of organizations outsourcing data center functions (frequency) and the average percentage of work outsourced (level). We also examine the experience organizations are having with outsourcing by reporting the cost-success rate and service-success rate of IT organizations that have outsourced data center work.

This Research Byte is a brief overview of our report on this subject, Data Center Outsourcing Trends and Customer Experience. The full report is available at no charge for Computer Economics clients, or it may be purchased by non-clients directly from our website (click for pricing).