By Steve Towns, Jan. 2006
IT outsourcing may seem like a straightforward way to
cut costs and improve efficiencies. But as a growing number
of businesses and governments contract out everything from
data center operations to networking to help desk support,
they're finding that designing these contracts can be incredibly
“You don’t have to look very far to see massive amounts of public-
and private-sector money being put into projects that never deliver the value
they promise,” says Richard Taylor, part of an HP Labs research team in
Bristol, UK, that’s using sophisticated mathematical models and scenario
planning to produce better IT service contracts.
The consequences of project failures can be costly for organizations, which may
risk alienating customers, missing deadlines or losing control of projects. The
situation isn’t any better for IT service providers, which can take a big
financial hit when revenue from these projects is tied to meeting strict performance
Project difficulties usually stem from poor understanding
among the diverse stakeholders in large technology undertakings,
says Taylor. Agency managers, operations staffs, system
engineers, policymakers, budget experts and others may
think they’re communicating their requirements — but
often they are not.
“When push comes to shove and the system goes live, they
find that none of them quite understood what the other
was talking about,” he says.
Taylor and his team have developed a concept called “open
analytics” to address the shortcomings of the contract
Open analytics integrates input from all stakeholders
in a project and uses mathematical modeling techniques
to create a clear picture of what the system will do and
what the values and costs of those functions will be. These
tools help organizations understand the relationships between
system performance levels, system capacity, flexibility
Then, through a process known as Rapid Scenario Planning
(RaSP), models are shared among stakeholders to solve design,
implementation and management challenges — reducing
the communication problems that can doom a project. With
RaSP, stakeholders plan their needs into the larger system
rather than focusing only on aspects of the project that
affect their area.
“We wrapped modeling technologies into a set of processes
that bring stakeholders together to explore the technical,
social and usage features an organization needs to meet
its goals,” Taylor says.
Open analytics remains a work in progress, but HP has
used it to craft IT services contracts for more than a
dozen projects in the past several years.
The process identifies key bottlenecks, risks and costs.
It also generates models that can be used to understand
the impact of changes over the system’s lifetime.
For example, open analytics accurately predicts the requirements
and costs involved in designing a solution that meets everyday
processing demands and yet flexibly responds to spikes
caused by seasonal deadlines.
The process lets businesses and governments realistically
project system capacity and performance demands based on
real business requirements. In practical terms, this helps
organizations determine if they really need 99 percent
reliability for a particular business function or if 95
percent reliability will satisfy requirements at a more
This information is vital for creating service level agreements
(SLAs) that form the heart of contracts between government
agencies and IT service providers. Historically SLAs have
been set somewhat arbitrarily, often because IT benefits
such as customer satisfaction and service improvement are
hard to quantify. Therefore, SLAs tend to focus on easily
measurable factors such as system availability or capacity,
regardless of their importance to what the customer actually
This can prompt a vicious scenario that strains or destroys
outsourcing relationships: Poorly designed SLAs lead to
a service that doesn’t deliver the value a customer
wants; therefore, the customer tightens the SLAs even further,
which has little effect.
With open analytics, HP can work with government agencies
to develop SLAs that reflect real-world requirements and
deliver actual business benefits.
“We’re quite happy to perform this modeling activity
through what we call rational negotiation of SLAs to develop
a solution that is successful for customers and HP,” says
Mike Yearworth, another HP Labs researcher involved in
the development of open analytics. “There is a very
fine balancing act here to make sure we don’t overprovision
and come up with an unprofitable solution, or under provision
and end up with a solution that doesn’t meet the
service level agreements.”
Open analytics derives its name from the fact that the
modeling process is exposed to everyone involved in a project,
which is key to building confidence in the results.
“One of the issues you run up against when you’re
using mathematics is the fact that people don’t necessarily
understand it, so they don’t necessarily trust what
you’ve done,” Taylor says. “You can’t
simply say, ‘I’ve got the most fantastic model
in the world that will predict everything. Trust me.’ ”
Instead, open analytics produces recommendations based
on a better, more comprehensive understanding of customer
requirements — and it clearly explains how HP arrived
at those conclusions.
“We’re presenting the customer with how HP is going
to solve the problem, and why HP believes this is the appropriate
route to a solution,” says Yearworth. “We describe
the availability and reliability of the infrastructure,
and the service organization we’ll put in place.
We give customers the models so they can have third parties
Open analytics lets HP capture the human expectations
and business requirements involved in IT services contracts,
as well as the technology capabilities needed to support
them. What’s more, the technique is designed to translate
these requirements into terms that make sense to a diverse
group of stakeholders.
“ We’ve developed a comprehensive framework,” Taylor
explains. “At one end of the spectrum, we have the
sorts of models you might see if you went into a social
sciences laboratory. And at the other end, we’ve
got the hard mathematical facts about availability and
reliability of a supercomputing system. We’re integrating
across that range.”
The IT industry has been slow to exploit the power of modeling
to improve results, notes Taylor. Modeling techniques that
do exist tend to focus on narrow aspects of system performance
“What we’ve done is different because we’ve
used a highly intuitive approach,” he says. “We
recognize that understanding reliability in isolation from
performance, service structures and customer requirements
isn’t terribly useful.”
Steve Towns is editor of HP Government Solutions magazine.