Decision Criteria for Hosting and Managing 3rd Party Solutions
Recently, an IMF member asked us if we had a simple decision matrix to use for the evaluation of potential third party solutions. Their question, to paraphrase, was:
“What factors should we use to determine how to host and support a third party solution? When should we keep the hosting and support in-house, when should we let the vendor provide these services, and when should we use some combination of the two?“
We don’t have a “standard” evaluation methodology because we’ve seen a variety of approaches among member companies for determining what to do in these scenarios. For that reason, an IMF Connect discussion will take place on October 3rd during which the approaches will be discussed by our members. In the meantime, I sat down and thought about what factors I would suggest an organization consider when making these decisions.
Business Criticality: If the solution is going to provide something to the business that is critical in nature, the amount of control that IT will want to have over that system should tend to increase. In situations where the business need is greater, the tendency should be to host and support the solution in-house. In cases where the functionality is for convenience, then the need for control should be less.
System Response Requirement: The location and configuration of the solution’s hosting will have a varying impact on the response time of the system. There may be cases where the dependency on response time is low, so a vendor-hosted solution may be sufficient. However, in cases where the system response time must be very low, a decision may be made to host the solution in-house where the architecture can be controlled to a greater extent. Of course, if response time SLAs are in place with the vendor, their hosting may be a good option.
Support Response Requirement: The exact arguments that apply to system response can also be made for support response. In this case, it is important for companies to also consider that the vendor may be in a better position to respond to tickets/requests faster. Therefore, their support may actually provide a better response time.
Technology Expertise: Often, the decision whether to buy or build a solution rests on the company’s technology expertise in a given area. If a solution will require a technology that is not core to what the company can do, it makes more sense to use a vendor to provide that solution. This can also apply to hosting and support. If a company lacks the expertise to manage and support the solution, then they will put themselves in a better position to allow the vendor that built the system to manage the system.
Cost: This may be the one and only deciding factor in a lot of situations. The total cost of the solution will be a combination of the solution itself PLUS the ongoing support and maintenance. If the appropriate SLAs are in place, such that the cost to host and manage the solution would be lower if the vendor is in charge, then that may be the best option. On the other hand, if the company has an efficient support model that allows them to provide a lower-cost of ownership, then the in-house support model may make the most sense.
No matter the decision criteria, it’s important to remember that each solution, along with its ongoing hosting and support model, will require careful consideration and a well-planned approach. Each company needs to create a decision framework that will provide the highest possibility of a positive outcome and then apply it to each proposed solution that may be integrated into the IT toolset.