Sometimes the best way to get things done is to do them yourself.
At a time when companies are carving out part or all of their IT services, Shaw Communications Inc. is taking its infrastructure back in-house. This fall, the company began switching customers over to a brand-new data centre, run entirely by Shaw.
About two and a half years ago, the cable firm made the switch to becoming a high-speed Internet service provider (ISP), teaming up with @Home (now Excite@Home). Poor service, however, led Shaw to take direct control over its resources.
“Essentially, we were fed up,” says Shaw president Peter Bissonnette.
Clogged bandwidth, slow responses to user inquiries, and overall poor customer service emerged as serious problems almost immediately after partnering with @Home, he says. “We found that with e-mail service there were all sorts of single points of failure.”
So Shaw switched the commercial ISP service to its own backbone, using @Home for content provision. The company’s experience in distributing cable television to thousands of consumers bolstered its efforts to manage growing demand for high-speed Internet access, Bissonnette says.
Shaw’s subscriber base has grown from about 240,000 in mid-2000, to more than 600,000 today. Bissonnette says he hopes to reach the million mark in 2002. In all, the company will spend about $250 million to build two data centres in Calgary, as well as a series of fibre nodes in the areas it services. The first centre is up and running, and the second facility will open in 2002.
Longer-term business plans also played a key role in Shaw taking its IT services in-house, says Bret Quist, a senior engagement manager for Sun Microsystems Inc., in Dallas. In mid 2000, Shaw hired Sun to help revamp its technical infrastructure. After consulting with Shaw staff for several weeks, Sun ended up with a list of core business requirements, including scalability, reliability, different e-mail services and anti-virus screening for subscribers, Quist says.
To help make the best use of its network resources, Shaw also rolled out a series of “nodes” to other cities, consisting of scaled-down caching equipment, Quist says. “It’s kind of like a post office. You have one in your city and all the mail goes to a distribution centre.” The nodes add security for users, offer mail caching and improve the predictability of service levels, he adds.
Currently, the centre can handle more than 60 terabytes of data, managed through a Sun-built storage-area network (SAN). The setup makes for a more flexible operation, Quist says. Equipment can be added or replaced without interrupting service, while resources can be managed based on use. “They can actually allocate storage on the fly,” he says.
Shaw’s switch to do-it-yourself infrastructure bucks a larger trend towards outsourcing. Industry analysts say that companies are continuing to look to third parties to help manage their IT resources, in whole or in part, albeit for a variety of reasons. Cost-cutting, flexible packages and shared risks are all part of the attraction, observers say.
“Even though outsourcing can have a lot of risk, there is a great potential reward,” says Sharon Botwinik, a senior analyst with Forrester Research Inc. in Cambridge, Mass.
In a recent electronic survey, Forrester found that 46 per cent of more than 450 executives at large U.S. firms expected to increase their reliance on service providers. Thirty-one per cent said they would remain at current levels.
Budget cuts and new business models have made outsourcing a viable option for many companies — despite the collapse of e-commerce players like MarchFirst, according to Botwinik.
(Excite@Home has also filed for bankruptcy and has sold its broadband network to AT&T Corp.)
The key may be to work with larger, established players, such as IBM Corp. or Electronic Data Systems Corp. (EDS), Botwinik says. Shared profits and losses — for providers and clients alike — may also become more attractive than traditional service-level agreements, she says.
For Dean Davison, the distinction between in-house and outsourcing is often artificial. Most firms already contract out some of their IT business, says the vice-president of Meta Group Inc. in Los Angeles.
“I would say that what has primarily changed is that it’s not an all-or-nothing proposition anymore,” Davison says.
Gone are the days of contracting our work with the sole purpose of cutting staff.
“Today, people look to outsourcing as a strategic decision,” he says.
Firms can also now choose between handing over “the whole enchilada” or select pieces of their business, says Dan McLean, an analyst with IDC Canada in Toronto. Outsourcing vendors have tailored their pitch to attract small and medium-sized business, allowing for the greater use of what McLean calls “out-tasking” or “discrete services.”
Still, not everyone will want to hand over the keys to their IT kingdoms just yet, Quist says. He points to the recent failure of Exodus Communications, a Web-hosting company, as a sign that planners may want to reconsider their outsourcing strategies. “I think a lot of customers are starting to think about owning physical equipment.”
Access to data is also vital, Quist says. For instance, Shaw will have complete control over its directory, based on lightweight directory access protocol (LDAP). That gives the company access to a wealth of user information and can help it tailor content and marketing tools accordingly, he says.
“If you own the directory, you own the customers.”
Bissonnette says that whatever happens with Excite@Home (he was interviewed before the company filed for bankruptcy), Shaw’s plans won’t change.
“Essentially, we’re going to be selling Shaw high-speed Internet,” he says. “When you’re dealing with our own internal capabilities, you have a good deal more control.”