February we invited industry leaders to participate
in a roundtable discussion on outsourcing Internet infrastructure
and the lessons that can be learned when looking for
a hosting partner. Joining Computing Canada editor Patricia
MacInnis and assistant editor Jennifer Brown were (from
left) Doug Caldwell, chief technology officer, Indigo
Books and Music and Albert Bird, senior engagement manager,
program management office, MFXchange U.S. Inc. a subsidiary
of Fairfax Financial Holdings Ltd. MFX was formed as
an independent technology company to support insurers,
reinsurers, risk managers and brokers with technological
solutions designed specifically for the insurance industry.
Denis Chamberland is a partner with the legal firm Gowlings
Lafleur Henderson LLP. He writes a monthly column on
outsourcing in Canadian Corporate Counsel; Osama Arafat,
CEO, Q9 Networks, a managed Internet infrastructure
service provider; and, Robert Offley, CEO, Fusepoint
which provides managed and hosting services to Canadian
CC: Can we begin by having Doug and Albert of Indigo
and MFX describe what your current hosting situation
Caldwell: We outsourced our computing environment to
Q9 Networks in the April to June time frame of last
year. We have both our online environment and our corporate
back end services running at the Q9 facility.
BIRD: We outsource to Fusepoint Managed Services as
well, and we have two other data centres in the U.S.
We are a business solutions provider, primarily focusing
on financial and insurance verticals. Our core expertise
is infrastructure and managed services.(MFX's solution
with Fusepoint includes managed infrastructure services
(14 servers housed in Fusepoint's data centre), data
backup and a wide area network. They are collapsing
four networks into one and Fusepoint's facility will
be the central point for all of Canada.)
CC: Explain the process you went through prior to moving
to a request for proposals. What business units were
involved in the legwork leading up to it, and did you
have a detailed costing of what your expenses were prior
to moving to outsourcing?
CALDWELL: We had come through a merger of four different
companies so one of the goals was consolidation of the
data centre facilities. The other was that we are a
retail organization with about $800 million in annual
We had looked at the cost of running a data centre
and it can get pretty prohibitive when you look at being
able to provide the high level of availability. The
online environment demands the 7/24 enterprise class
data centre environment and to build it yourself is
just prohibitive. So we looked at a couple of things:
high availability, secure environment and consolidation
of the infrastructure itself.
In planning for the RFP itself, the first step we took
was to ask: What do we need? The answer is an inventory
of equipment. You need to provide the bidding vendors
with an inventory of what you have, which is everything
from space to power to networking requirements as well
as what your expectations are from a service-level perspective.
The facility itself is something that became very important
to us. The real test was the power outage we had last
summer. From a power standpoint you need to make sure
you have redundant power coming in to the data centre
itself and from multiple power grids. You need to make
sure you have battery backup and diesel backup. Once
you have diesel backup the question is how long the
generators run for? How do you replenish fuel in those
diesel generators? Where is the physical facility located
and how accessible is it to those types of things? Everything
from normal operation to crisis mode is really what
you need to look at in terms of your requirements.
Looking at space and power helps those responding to
the RFP determine whether it is a house or a mouse.
The other thing that's important is to determine your
growth requirements. When you're looking at going into
a facility you need to be able to share with the vendor
whether you're going to grow five, 10, 50, 100 per cent.
The other area we looked at was billing requirements.
I need to break it down across different parts of the
organization, so whether it be the online business,
retail, finance or whatever, can you help me break down
the elements of the cost?
Finally, what is the reporting you want to have out
of the facility? The kind of reporting they provide
is important in terms of being able to prove they are
delivering against the service level you have.
CC: Did you have a good idea of what your expenses
were before you went into the arrangement?
CALDWELL: We looked at the physical rent of the facilities
we had so we knew how much it was costing in terms of
maintenance on UPS (uninterrupted power supply) and
network connections coming into the facility. In terms
of just the pure rent of the physical floor space itself
we were able to have a good baseline of what it was
costing. The one thing we had to make sure we took into
account was that we were providing an inferior service
to date to our business and paying a premium or it.
In terms of the business units that were involved,
the project very much came from the audit committee
and the executive team. The original requirements were
that we needed to be able to sustain a crisis-type environment,
be it fire or whatever, and our current facility was
not meeting the standards of what the senior management
of the organization needed to provide. We had to step
up to that.
The second business unit we worked with was from a
legal standpoint, in terms of our internal and external
counsel, to understand what would be the components
of getting them involved early on from scheduling of
their resources to the parameters of the framework needed.
BIRD: Some of the decision to move to Fusepoint was
based on us looking for an alternate hosting vendor.
Key aspects for us were 9/11, certainly in the U.S.,
and how secure the data centre facilities were. We had
a power outage similar to what happened here and we
had one that happened that was not related to any other
event, but related to a transformer power outage in
our building, so we lost the ability to trade on the
stock exchange. We also wanted to look at the overall
hosting needs as a business for MFX as well as disaster
recovery and business continuity. So when we looked
at the combination of those things we really focused
on finding something that was not in the downtown corridor
Fusepoint matched that parameter (Fusepoint's data centre
is located in Mississauga, west of the Toronto core)
and we could grow our infrastructure. MFX has seen tremendous
growth and we wanted to have a place where we could
grow our business and host it in a stable and redundant
environment while we were going out and soliciting business
from customers. We needed to know we were matching their
customer service level agreements and we needed a data
centre that could have 24/7 365 redundancy that was
robust, stable and secure.
One of our key parameters was security. Some of the
goals we had in mind were to reduce some of the infrastructure
spend we had. Building out redundant infrastructure
is (expensive). We have two data centres in the U.S.
and we were looking to leverage along the price point
to create a northeast hub. Where we were hosting at
the time was downtown and it was not serving our needs.
When we looked at the disaster recovery model we were
trying to achieve, it was about getting outside the
city limits, and looking at a provider we could partner
with and grow. Fusepoint seemed to have the people and
the process, in terms of service level agreements and
operating environments. If we were just looking for
a hot pipe to the Internet and some backup power we
could find that in several places. What we didn't want
to do is have the same staff having to manage the hosting
facility as well as managing our key clients. So we
handed that over to our partners at Fusepoint and we
focused on our core competencies--bringing our products
to market and servicing our current clientele.
CC: Was cost a big issue?
BIRD: Yes, it was.
CC: Had you been doing comparisons as to what it had
been costing you?
BIRD: Yes. And there are obviously economies of scale--the
more infrastructure you're hosting, the better price
point you're reaching.