Data Center Outsourcing: Three Things to Consider

Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom, transportation and energy.

As more and more companies opt to outsource data center operations, the amount of overspending in this area continues to grow. Vendors are taking advantage of costly errors that some buyers make in the contracting process. Below are three of the most common mistakes that lead to overpayment:

  • Overpaying for post-implementation, steady state environment: It takes a while for a vendor to understand your unique computing environment. To account for the higher resource cost during the ramp-up phase, most vendors build a hefty "buffer" into the cost. The problem is that once you reach steady state (about 90 days in), you're paying for a cost buffer that's entirely unnecessary.
  • Not anticipating how data center supplier industry consolidation affects buyers: The industry is undergoing significant consolidation, and customers often bear the brunt. Contractually, there are terms and conditions that can be negotiated to ensure your costs and service levels are protected against the fallout from your supplier's possible acquisition or merger.
  • Contracting too much power, space and bandwidth: Vendors are great at getting you to contract too much space (and therefore power) and more bandwidth than you need. Verify and benchmark your power and bandwidth requirements internally (don't let vendors do this for you!) and set "do not exceed" limits rather than provision more than you need.

Avoiding these mistakes can make a drastic difference in your annual spend for data center outsourcing, as well as place safeguards within your agreement that protect your budget down the line.

-- Jeff Muscarella, EVP of IT, NPI

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