Net execs are bullish on outsourcing

MANSFIELD, MASSACHUSETTS (10/24/2003) - Bertucci's Inc.'s James Lux told an audience of network managers this week that he turned to outsourcing to quickly and inexpensively connect the restaurant chain's 90 locations with voice over IP, speed credit-card transaction processing and support online applications.

"IT is a hard sell in my business. Restaurant people care about good food and service, not about how to manage routers," Lux, vice president of IT, said at the local event sponsored by Vanguard Managed Solutions. "I have to make a good case to spend more money in IT."

Lux convinced upper management by detailing how outsourced network services would reduce the time it took to process transactions from about 15 seconds to more like 2 to 3 seconds. Rolling out Vanguard Group Inc.'s 340 Router and signing on for managed services with the company helped him cut long-distance charges by half and bring Bertucci's up to speed without having to add IT personnel.

"I estimated for the network expertise, I would have had to spend US$100,000 on at least one IT specialist in-house," Lux said. "If I was thinking like a larger IT-focused business, it would make sense to hire someone. But as a restaurant, it makes sense to outsource."

According to Gartner Inc., the market for outsourced IT and management services reached almost $280 billion last year and should grow to $410 billion by 2007. A study conducted by ThinkStrategies found 39 percent of companies doing some form of network outsourcing and another 17 percent considering network outsourcing.

Of those companies currently outsourcing, approximately 60 percent are doing so to reduce head count and other costs. About 20 percent of the companies are seeking to improve service quality and reliability, the study found.

Of those considering outsourcing, 40 percent say they would like to cut costs, and 30 percent want to improve service quality and reliability, according to ThinkStrategies.

Among companies not considering outsourcing, 62.5 percent are concerned that it will cost more than expected and half are afraid of losing control of network operations, says Jeff Kaplan, managing director of the IT consulting firm.

Outsourcing leaders include Computer Sciences Corp., Electronic Data Systems Corp. and IBM Corp., all of which sign multi-million dollar deals that encompass multiple technologies with enterprise customers. But service providers such as NetSolve Inc., SevenSpace Inc. and Vanguard typically sign contracts designed to fill IT skills gaps quickly for small to midsize companies such as Bertucci's.

Stephen Lynch, director of technology infrastructure at Citizens Financial Group Inc., uses Vanguard's Managed Router service. He said that when his company acquired another company in 2001, he had just two days to get 400 locations connected to Citizens' corporate network. He also needed to ensure consistency across the acquired locations and Citizens' core network. He decided to outsource the job.

"We like to say it was the Jurassic Park of technology, and we had to convert each location," he said.

Citizens' was able to get a frame relay network up and running parallel to the TDM network the company had in place. With a 12- to 15-person team, Citizens worked with Vanguard to coordinate legacy data, account information and systems. Most important to Lynch was the flexibility of working with an outsourcer.

"We were able to quickly establish communications, negotiate pricing and create a workable contract," Lynch said.

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