I have a somewhat love/hate relationship with cloud services and outsource providers. In my day job, we provide a few cloud services, resell a couple more, and use a handful to support some backoffice systems. Some services make complete sense to outsource, to the point you wonder why anyone ever bothered to do it for themselves. However, outsourcing critical business functions (or anything which could be considered “core”) gives me a major case of the fear. To some extent I am howling into the wind; I could throw a rock in Central London and hit three CxO’s who have adopted an “outsource to the cloud” strategy for their Corporate IT.
The Value of PR
This is a classic case of business understanding the cost of IT, but not the value. Perhaps it is a failure of IT itself to make itself indispensable or make a decent fist of internal public relations.
Enter the Administrator
In the UK, a major provider of Cloud and Outsource IT Services, 2e2, has entered administration (a team of professional accountants appointed to run the business whilst it is insolvent). In a set of extraordinary circumstances, the administrators have demanded from existing customers a large quantity of cash to keep the lights on in the data centres (Link to PDF). I can only imagine the stone-cold terror of the residual IT manager who has their entire infrastructure locked in a 2e2 data centre. Service level agreements have gone in the bin; contracts in effect have been torn up. You can’t meet a service level if you’ve made your IT operations staff redundant with immediate effect. Companies fail all the time, but 2e2 is and was a big fish in the UK IT market with over 1600 employees and many, many contracts and responsibilities. What is perhaps most alarming is that the administrators appear to be taking a scorched earth approach to the dissolution of the company. Rather than a period of business as usual followed by a either a sale or gradual winding down, from the outside the business appears to be rather spectacularly going up in flames. Very shortly, I believe there will be nothing left but ashes and no graceful transition for customers with assets locked into the data centre.
Triggering a shift
Whilst I feel for the individuals who have turned up to work every day and done their job, the failure of 2e2 is going to have profound impact on the IT industry, ripples of which are already lapping at our feet. Tragic though it was, the Hindenburg disaster spawned a cultural shift. The public fell out of love with airships and more than 75 years later, the industry still struggles to free itself from the image of an almighty machine defying gravity and burning in the sky. The public instead chose “safer” private transport and fixed wing aircraft en masse. When a cloud provider such as 2e2 fails so spectacularly and swiftly, it will be a courageous CxO who will put their name on a new IT outsource contract in the next couple of months. Remember, this is not an individual data centre going off the air for 24 hours or large integrator botching an upgrade; this is total failure of the business. When the existing 2e2 customers signed up, you can bet they did their due diligence on the company, had the legal department check the contracts, and generally satisfy themselves that there were doing business with a reputable organisation. For all intents and purposes, they were.
Organisations lose critical suppliers all the time, and any half-decent business continuity plan will include provisions for just these circumstances. However, losing your primary supplier of widgets is a world away from losing your data centre provider entirely. If you cannot sell stuff on your web store, interrogate your inventory or access your accounts, you are likely to be going out of business very quickly. Despite big leaps in network and server deployment automation, building and deploying application services takes time, as many Packet Pushers readers will attest. With the best will in the world and even a proverbial gun to the head, setting up a new data centre takes time and planning…something I fear that many 2e2 customers do not have.
With major internal systems under your own roof, you have an element of control of over all over these circumstances. Certainly you’d never be in a position where you’d be under the unexpected threat of being permanently locked out of your own data centre.
So where do we go from here? Well the story on 2e2 is by no means over; many people are trying their hardest to keep the lights on for themselves and their beleaguered customers. There may yet be an 11th hour rescue and graceful return to service for customers who could not cut and run. However, the fact that such a large provider could be consumed so fast and hard is going to make life difficult for CxOs and those in business of providing cloud services. IT tends to work in cycles; perhaps this is the watershed moment were will start to see a return to insourcing. Frankly, the alternative isn’t particularly appealing.
For further reading, the ChannelWeb’s coverage of the debacle has been excellent.