Purpose
An ongoing business expense reduction campaign may benefit from this study’s findings, which aim to uncover potential alternatives. Maintaining and administering the in-house data center will be reduced as a result of the strategy’s implementation. A data center is being sought by Smith’s Information Services, Inc. to reduce costs in the following areas: Escalating costs for servers and hard disks, among other items, increased in staffing costs to run and maintain the data center over time. In an effort to save costs, Smith’s Information Services, Inc. has been forced to increase its sales efforts, which has had a negative impact on its revenue and planned growth.
Current Situation
When it came to their overall performance, no other firm could match it for over two years. Since then, cutting costs and increasing efficiency have been primary concerns. The sales of customer data make up $2 billion of the entire revenue (Debono, 2019). The corporation has been looking into the possibility of outsourcing in order to increase production and efficiency at the plant. It was built in the middle of the 1980s and has developed considerably since then for Smith’s Information Services. Mainframes were the first to go online before AS400s and rack-mounted servers. Although disk storage was formerly expensive, it has subsequently become more affordable. As the number of computers and hard drives in the data center increased, so did the cooling requirements.
Outsourcing vs. In-house
It is possible for Smith’s Information Services, Inc. to choose from three different outsourcing options, each with its own set of advantages and disadvantages. When it comes to expenses, customer service, and information security, the question is whether outsourcing the data center will help the company and its clients, or if the company is better suited keeping its current in-house data secure. Server upgrades and data backups are handled by the subcontractor (Debono, 2019). An important selling feature for the vendor is its mastery of its maintenance program. At this point in time, outsourcing is the ideal option for them because of the rising costs of business. The outsourcing options include:
- International data center
- A well-known data center
- A local data center
Local Data Center
Advantages
As a result of their proximity to the company’s headquarters and facilities, they are able to quickly reach their clients. Additionally, there is Flexibility in contract pricing as a result of the vendor’s lower size. It also Enables top management to keep tabs on the progress of the vendor on-site.
Disadvantages
Lack of vendor infrastructure makes it difficult to manage big volumes of data. Aditionally, there may be a lower level of data protection because of a lack of financial resources from the provider.Larger accounts may be unfamiliar territory for the vendor and therefore risks can be increased if people are not protected and informed.
Well-known Data Center
Advantages
Well-known data center offers ability to resolve client difficulties and communicate effectively. Additionally, aspects such as vendor resources, such as several locations around the United States, may be easily accessed thus enabling improved data security and infrastructure. Consequently, it offers reliable and trustworthy customer service that ensures customer satisfaction and retention.
Disadvantages
If the prices are comparable or even higher than those of local data centers, the vendor may offer a service that competitors also offer thus suffering from competition. Possibly, a longer time of negotiation will be necessary to enable communication. Well-known data center is also associated with transferring existing staff which may cause HR issues.
Overseas Data Center
Advantages
Overseas data center allows offshoring, labor and overhead expenses reduction significantly. Additionally, they can afford to recruit more people for the same salary when they outsource their job to countries where labor and overhead expenses are lower. Since there will be more people working on it, the project will be done sooner thus guaranteeing faster completion.
Disadvantages
Vendors may compromise data security if they utilize a technology that is not readily available in the United States. Similarly, it is difficult to work with teams spread across the globe and time zones as communication is slowed down by time zone variations.
Service Outsourcing Concerns
Smith Information Services has a competitive advantage in the market because of outsourcing, which reduces salary and administrative costs. Another big benefit to outsource is lower labor expenses (Debono, 2019). Overhead costs at Smith’s Information Services have risen sharply in order to meet the needs of the company’s clients. However, by contracting out some functions, the company may concentrate on what it does best while the outsourcing firm concentrates on what it does best (Debono, 2019). An increase in operational efficiency and a reduction in operating expenses would follow from this. Another problem that emerges from outsourcing is the safety of the employees. When a firm is chosen to outsource, they must sign a formal quasi-contract.
Vendor Selection
Outsourcing is on the minds of Smith’s Information Services, Inc., and the company intends to look into all options before choosing on the most appropriate one. At least three Request for Proposal (RFP) will be issued by Smith’s Information Services, Inc., with a total of six RFPs, particularly for overseas suppliers to obtain all the necessary data from each bidder (Dbono, 2019). The following information, according to Smith’s Information Services, Inc., must be included in every contractor’s RPF: A communication plan, management style to be used and the quality of services to be provided (Debono, 2019). As a result of this investigation, Smith Information Services will have a better understanding of which providers offer the greatest security and safety procedures to protect their clients’ data. The following are just a few examples of things to keep an eye out for: reliability of the system and security levels of data access authority.
Type of Contract
The scope of work provided by the firm will contain a legitimate identification of every proposal. For the contract to be effective, it must have a timeframe for how long it will last, an acknowledgement of known risks and costs, financial flexibility and be governed by a plan or budget (Debono, 2019). If everything is taken into account, it appears that the Unit-cost contract is the best price structure for the proposed processes. For the seller, this pricing structure enables them to compute the cost of each individual component. The type of contact that should be selected may either be local data center, well-known center or oversea center contract.
Local, Well-known and Overseas Contracts
With the use of the Local Data Center Contract, Smith’s Information Services, Inc. will be committed to maintaining and preserving a pre-established data center service backup plan and budget. Additionally, it is possible to promote a predetermined payment plan because of the contract’s predetermined term.
On the other hand, well-Known center contract, which is the optimal sort of contract for the well-known data center would be a unit fee contract with the following features: Managing larger contracts will distinguish them as a well-known center, it may thus be simpler to provide the consumer a basic solution that can be tailored to include extra features that better meet the needs of the customer. Overseas data center contract will allow the company to set a budget for data center services.
Evaluation Criteria
In order to fulfill the corporate scope, the outsourcing team will review the following areas for RFPs provided by vendors and select the outsourcing option that best suits Smith’s Information Services, Inc.’s requirements. It will be clear which outsourced data center option is best suited based on the findings of the evaluation criteria.
- Financial Proposal/Cost– In-house data centers are popular because of the cost savings they provide; nonetheless, it is critical that any plan be both fair and transparent.
- Technical capability– The vendor should elicit robust and extensive technical help
- Experience and reputation– This serves as the most precious assets of the company
- Production capacity– Efficiency and production are critical as they will enhance high quality services
- Company size and kind– Smith’s Information Services, Inc. must evaluate its size and type to ensure that it can carry its data weight.
RFP Evaluation Criteria
When issuing an RFP, it’s important to create your RFP evaluation criteria early. In fact, it should be one of the very first steps in your RFP process. An RFP without evaluation criteria is like a ship without a rudder-it may eventually get to the destination, but the trip there will be meandering, time consuming and difficult. Clearly defining your RFP evaluation criteria gives aprocurement project focus and direction. In order to select the company that best suits our requirements, there is a need to look at a number of different kinds of contractors. Upon examination, the vendor most suited to meet your needs will be revealed (Merckx & Chaturvedi, 2020). For Smith’s Information Services goal to be completed, all suppliers must meet the RFP assessment criteria. These criteria include company size and kind, technical competence and record of accomplishment.
Timeline
Taking into account the entire process and specific issues like the need for extra time to examine and approve each vendor RFP by the outsourcing team, the organization created the recommended timetable. Below is a depiction of the timeline that was originally planned. When it comes to increasing the company facility’s production and efficiency, the organization has been researching the viability of an outsourcing program. The current data center of Smith’s Information Services was constructed in the mid-1980s and has grown rapidly since then. Before AS400s and rack-mounted servers, mainframes were the first to go live.
Conclusion
Smith’s Information Services, Inc. may benefit or suffer as a result of outsourcing the data center, as previously stated. For this reason, considerable consideration must be given to selecting a contractor that will both maximize profit and minimize security concerns. A thorough examination is also necessary since the firm risks being locked into a long-term contract, preventing us from evaluating other suppliers. In light of the most recent information, we feel that obtaining a data center in another country is the best solution. Modern technology makes key resources accessible from anywhere in the globe at a lower cost due to the cheap cost of foreign labor.
References
Debono, P. (2019). Transforming Public Procurement Contracts into Smart Contracts. International Journal of Information Technology Project Management (IJITPM), 10(2), 16-28. Web.
Lindstrom, D. L. (2014). Procurement Project Management Success: Achieving a
Higher Level of Effectiveness. J. Ross.
Merckx, G., & Chaturvedi, A. (2020). Short vs. Long-term Procurement Contracts when Suppliers can Invest in Cost Reduction. International Journal of Production Economics, 227, 107652. Web.