BPO and Cloud Computing Case Study 1
PROJ 410 Contracts and Procurement

Purpose
Smith’s Information Services is in the process of implementing a corporate overhead reduction program. This is due in part to the increasing costs of operating and maintaining an in-house data center, as well as flattened sales and reduced profits. For these reasons Smith’s Information Services is looking to outsource the company’s data center to an outside vendor. The increasing overhead costs include personnel costs to operate and maintain the data center’s servers, data center cooling costs, and electrical utility costs required to run the data center. Reducing these overhead costs, by outsourcing the data center, will help Smith’s Information …show more content…

This will also limit the liability of confusion between Smith’s Information Systems and the vendors regarding the service agreements and who has control of what data. Multiple vendors may utilize different protocols and software suites that would be required to be integrated if the company decided to award the contract to multiple vendors. This could potentially open the door to data compromise as the vendors would have to be connected in some fashion through the internet. Utilizing multiple vendors could also be cost prohibitive due to duplication of efforts and the nature of the data being stored and processed at the vendor’s locations. Duplication of efforts would include paying for services such as anti-virus, anti-malware, firewall access, VPN access, data encryption, etc. Each vendor would charge a specific cost for each of these services; utilizing one vendor would ensure costs are not duplicated.
Contract Structure
There are multiple contract structures that can be utilized when outsourcing the data center’s processes. These include fixed-cost, unit-cost, and cost-reimbursable contracts. When deciding on which contract structure to use, Smith’s Information Services should consider the following questions:

* Is the scope of the project well-defined, or is the outcome of the project open-ended? * Well defined scope * Data