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A CIO explains how to make a data center outsourcing decision

Our CIO columnist The Real Niel discusses his criteria for making a data center outsourcing decision. Hint: It's not about the servers.

To outsource data center services or not, that is the question. Is it nobler to have and manage our own data center, or is it better to outsource such services? Like most of the really interesting questions we face in our lives, the answer to this question is: It depends.

Niel Nickolaisen
The Real Niel
Niel Nickolaisen

"It depends?" That seems like a weasel of an answer. Why not a simple yes or no? Because the answer depends on a pretty wide range of variables. When sorting through such questions and their options, I rely on my Purpose Alignment Model.

I have written about this model before, but, as a refresher, Purpose Alignment looks at business processes, activities and questions about data center outsourcing (or any other business decision) in two dimensions. First, the extent to which this process, activity or decision will differentiate us in the marketplace. Second, the extent to which the process, activity or decision is mission-critical to our organization.

If the process, activity or decision is both differentiating and mission critical, we need to perform the process or activity or make the decision better than our competitors. If the process, activity or decision is mission-critical but not differentiating, then we need to be content to perform the process or activity or make the decision in a parity way -- in other words, streamline, simplify and standardize the process, activity and decision.

Now, let's frame our data center outsourcing decision from the Purpose Alignment perspective. How many of us rely on exceptional data center services to differentiate our organizations in the marketplace? How many of us have a sales force that wins new customers by touting how great our IT department is at data center management? How many of us win customers by explaining that we use HP/UX rather than Linux, or Oracle rather than DB2? Probably not too many. In fact, probably only those of us who run data center management companies.

However, while our data center services might not differentiate us in the marketplace, they are almost certainly mission critical. That means we need to deliver our data center services in a parity way. While we do not generate value by performing data center services better than anyone else, we hurt the business if we perform them in a substandard way.

How does this thought process help us make data center outsourcing decisions? Since data center management is a parity activity (not one that differentiates us), we need to assess what gaps we have in providing data center services. If we have gaps, we need to fill them to get to the level of parity.

What is the best way to fill parity gaps? For data center services and management, outsourcing the services to someone that can get us to parity -- quickly -- is one potential way. But, we should never outsource mission-critical activities to someone that will perform the services in a subparity way. Remember, data center services are mission-critical.

This thought process changes how I approach my outsourcing/insourcing decision. The decision now depends on what gaps I have among my current data center services and what is considered best practices in the marketplace. I might have a cost gap I need to fill. I might have a service-level gap I need to fill. I might have a technology gap I need to fill (those DEC Alpha 64 servers won't last forever). I might have a management focus gap I need to fill -- I might be spending so much time on data center management that I cannot spend time on the IT services that will differentiate my organization in the marketplace.

If I have such gaps, outsourcing might be the best way to fill the gap. My data center outsourcing strategy will then depend (there is that word again) on what outsourced services are available and how they compare with my insourced options.

So, there it is. Not a canned, certain answer. Instead, a thought process that I have found usually yields a very good answer.

Niel Nickolaisen is CIO at Western Governors University in Salt Lake City. He is a frequent speaker, presenter and writer on IT's dual role enabling strategy and delivering operational excellence. Write to him at

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