A Canadian startup wants to act as an agent that checks out potential outsourcing companies for corporate enterprises — but it’s the outsourcers who pay the agent’s fee.
five people in Toronto. The firm conducts technology audits of the telecommunications, Internet infrastructure and colocation costs of various suppliers on behalf of its clients. It then recommends the best supplier or identifies ways of reducing the costs of an agreement. This is done free of charge to the client, however. Borrowing from a model commonly used in the real estate, insurance and mortgage industries, CanXCentral makes its money through a commission fee paid by the supplier.
Chris Ridabock Jr., who founded CanXCentral, learned the agent model from his experiences in setting up the Emerging Technologies Group at J. Barnicke Ltd., a special practice unit that focused on providing real estate solutions to technology firms. Ridabock said agents are a good fit for the IT outsourcing market because they give enterprises a new way of handling the business process and due diligence that is required when they are evaluating a number of different providers.
“”They’re probably not going to get complete research,”” he said. “”And they’ll most likely get it from a local perspective, not a national and international perspective. They only have time to make so many phone calls.””
CanXCentral is specializing in location, managed hosting, and bandwidth for Internet or telecommunications. This puts it in a complementary position to consulting firms that don’t have niche skills and have to pull someone off with cross-over skills for a given project, Ridabock said. The firm Wednesday added to its expertise with the appointment of Doug Kaye, who founded early Web hosting provider CoSite and authored Strategy for Web Hosting and Managed Services. Apart from one large telco who went unnamed, Ridabock said outsourcers have been highly receptive to the model.
One of CanXCentral’s first customers is Swift Trade Securities, a direct access electronic day trader based in Toronto. Randy Bucking, the company’s senior network architect and IT planner, said CanXCentral has been helping the company find cost reductions in carrier pricing for telcos and CLECs, as well as finding colocation spaces. He said the primary value of the service is in the time saved.
“”Wading through the paperwork — Bell Canada, for example, has five different divisions,”” he said. “”It’s a little bit intimidating, especially if you don’t know the business. I used to work for Bell Canada, and I still find things that are intimidating about them.””
Ridabock admitted that being paid through suppliers has raised some questions about the objectivity of the firm’s recommendations.
“”Even though people are very familiar with the model in other industries, whether it’s an insurance agent or a mortgage agent, we have bumped into that,”” he said. “”We answer that with full disclosure to the client of which providers we’re dealing with at all times. We’re totally vendor-neutral: our position and mandate is to sit next to the client and act only in their best interests.””
Jason Bremner, an outsourcing analyst with IDC Canada, said he didn’t see much conflict of interest in the agent model. “”I don’t really see any difference between CanX doing what they’re doing and acting as a consultant,”” he said, adding that even traditional third-party advisors like Compass Management Consultants sometimes get paid by suppliers. “”This model is not necessarily new; it is new for this application.””
Bucking, meanwhile, said that it would be hard to fool a customer.
“”A lot of the contacts we have are similar,”” he said. “”They’re not so much a middleman but someone who can be a liaison to cut the corners in the paperwork.””
Ridabock said CanXCentral will maintain relationships with clients even after the match is made in order to foresee where obstacles might occur and to limit its own liability. “”We’re not trying to get clients to outsource an entire IT staff to us,”” he said. “”Our role is to help take the strain off an already overburdened staff in doing the market research and securing the ideal provider.””
Bucking said there was a limited degree to which an agent could be held accountable if an outsourcing deal went awry.
“”The final service delivery is from the carriers themselves,”” he said. “”If I did, it wouldn’t be much.””