Dan Smith of Retail Assist discusses the benefits of outsourcing Data Centre operations in the retail sector and provides tips for success when selecting and working with a partner.

Growth in the retail sector has faltered, so many organisations try to do more with the same budget.  As retailers streamline operations and concentrate on their core competencies to improve their offer, many turn to IT outsourcing to control costs and improve service delivery.  Opting to work with smaller Outsourcing Partners (OPs) tends to result in a service that is more attentive and better calibrated to the operations of all but the largest retailers.

Getting the mindset right and preparing to outsource
Outsourcing can introduce excellence by introducing experts in non-core areas such as the Data Centre.  If you decide to take this approach:

• View outsourcing as a medium- or long-term solution and set clear and realistic targets
• Define all the expected benefits – financial, process and quality - and make sure they tie in to corporate objectives.  Look too for commercial benefits as opposed solely to cost benefits, and aim for a win-win situation that delivers success for both parties
• Clarify the relationship between inhouse and outsourced staff, keep employees informed to eliminate concerns and get buy-in from key sponsors
• Construct a simple contract that exploits the flexibility this new relationship can bring, defining accountability and building in regular review points.

Selecting a partner
Outsourcing is a critical relationship, where cultural fit is more important than anything else, and sector understanding is as necessary as technical expertise.

• Work with an OP with specialist knowledge, who understands your business challenges and can work to the processes and timetable that retail imposes
• Do thorough referencing, looking at your OP’s record with similar types and sizes of sector client
• Check too whether your OP has the ‘gold standard’ of ISO 20000 accreditation, guaranteeing they are operating to the ITIL framework.

Managing the relationship
Outsourcing IT can be life-changing for an IT Director, releasing you from the daily management of operations such as the Data Centre to guiding just a few key individuals, so aim to:

• Make the relationship of internal and external staff transparent to the business; remember, IT as a whole has to succeed
• Consider having your OP manage your 3rd-parties for commodities such as hardware maintenance and telecoms.  They are likely to be more experienced at negotiating deals and managing these services
• Establish good links from the outset with the people who will be accountable for its success, making them part of the planning process.

Measuring effectiveness
Start by agreeing what should be measured and construct the SLAs and KPIs together.  Foster a performance improvement culture where service continuously improves in ways that percolate down to the business. Some of the measures that retailers commonly apply to an outsourced Data Centre contract are:

• Achieving SLAs relevant to retail operations such as start of day, picking scheduling
• Supporting staff in ways that help them to deliver a better service
• Containing costs and delivering expected savings
• Achieving the anticipated return on investment
• Protecting the business from exposure to risk
• Scaling up and down in a flexible and cost-effective manner as your business evolves
• Providing timely and reliable reporting
• Addressing unexpected problems or issues to your satisfaction

The benefits
At the end of the contract period, verify that the relationship is still aligned with your business goals, whether the OP still offers value for money and the original motivations for outsourcing remain valid.  If both parties have been fully committed to the relationship, you should be achieving:

• Cost savings from exploiting the OP’s shared services model
• Innovation and business improvement
• Less distraction and more time to focus on your core business
• More predictable budgeting
• Flexible staffing, evening out peaks and troughs in resource demand

If you made a wise choice of partner, you’ll have enjoyed a positive working relationship and the results you sought at the outset.  If so, you are likely to renew the contract to leverage the investment that both parties have made in your business.  If not, then - as with other relationships in life - have the courage to draw a line, part friends and look for a new partner.