Estimation Models For IT Infrastructure Outsourcing Providers

The need for estimation models when proposing cost elements in large IT Infrastructure Services contracts plays an important role. The models need to cover all aspects of delivering service which impact cost:

• Manpower
• Tools
• Connectivity and enabling infrastructure
• Administrative costs like travel and communication
• Corporate overheads like physical space and air/light/water etc.

Often companies may use composite rates which combine some of the above into a single unit of rate. These then need to be linked to the volume of work to develop a costing solution with sufficient elasticity but at the same time optimal and competitive.

In the absence of standard models, these have lend a competitive edge to some of the leaders while other companies are trying to find theirs. Since many companies evolved from the application services space, which were typically Time & Material contracts, they find it difficult to have a solid estimation model for fixed priced, managed services contract.

Where to Find Dollars in an IT environment

Where are those hidden dollars, those waiting-to-be-unchained values in an IT department? There are numerous nooks and corners where there are hidden opportunities to save. Bad times like these throw lot of opportunities to bring cost efficiency. The role of an outsourced provider is so much more critical in such situations. Of course there has to be the right level of motivation as part of the contract to motivate the provider to help the customer find oppportunities to save.

Outsourced providers present themselves with this opportunity by having a view across their engagements of common such opportunities, plus themselves running the operations of a particular customer, having the requisite information to enable such cost saving.

There can be numerous such opportunities but here is a start to list some of them. Can't cover all in this post but will take a beginning:

• Unused licenses lying in the enterprise (and many find themselves getting budgets to buy more of the same for new requirements). These are more for end user software like MS Project, Visio etc.
• Underutilized hardware in parts or whole
• Spare network bandwidth in tier-2 or tier-3 of the networks off the central network topology which is more closely monitored
• Groups of support teams (in-house and or outsourced teams) providing services very similar in nature as part of different businesses
• Multiple data centers or server rooms
• De-centralized environments making it necessary to have lumpy teams across the country or globe doing pretty much the same stuff.
• De-centralized purchasing of IT assets

This is just the beginning and more are sure to follow.