Data Center Outsourcing Cost Success High

October, 2016

While the percentage of organizations outsourcing data center operations is only moderate, those that do outsource some or all of their data center generally find a very successful cost experience.

That was the key finding from our study, Data Center Outsourcing Trends and Customer Experience. The study, which compares the customer experience of data center outsourcing with the outsourcing of nine other functions, finds that cost and service success are both fairly strong, with cost success coming in as very high and service success as moderate, Figure 1 shows. However, despite the positive experience, the net growth trend in data center outsourcing is only moderate.

DCOut fig 1 - Data Center Outsourcing Cost Success High

We interpret the ratings as follows:

  • Frequency: We rate the frequency of data center outsourcing as moderate, meaning that the percentage of organizations currently availing themselves of this service is relatively average compared with other outsourcing services. That suggests barriers to data center outsourcing exist.
  • Level: At the same time, the level of data center work typically outsourced is low. When organizations do outsource this function, they engage in partial outsourcing, pushing a smaller percentage of their total workload to data center service providers.
  • Net Growth Trend: We rate the net growth trend as moderate. The percentage of organizations increasing the amount of data center operations work they outsource, minus the percentage decreasing the amount of work they outsource, is in line with the net growth trend of other services.
  • Volatility: The percentage of organizations that are changing the amount of data center operations work they outsource year over year, whether up or down, is moderate. In other words, there has been an average amount of change in the level of data center outsourcing this year.
  • Cost Success: The profile shows IT organizations experience a very high level of cost success with data center outsourcing relative to other outsourced functions in our study. That means the percentage of organizations that find cost is the same as or less than operating their own data centers is among the highest on our scale, defined by the highest and lowest cost-success values in the study.
  • Service Success: The service-success rate is very encouraging, and is in the middle third on our scale. The percentage of companies finding service levels are the same as or better than when performing the same function in-house is average. The goal of improved service alone is a valid motive for considering the outsourcing of data center infrastructure.

The decision 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 remained relatively stable over the course of the recession, but after a rise last year, it remained flat. As business growth resumes, IT organizations face decisions regarding how best to support that increased growth, including whether to upgrade infrastructure, turn to off-premises hosting service providers, or move computing resources into the cloud. Thus, we anticipate data center outsourcing will increase going forward.

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.

This Research Byte is a brief overview of our report on this subject, Data Center Operations 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).