Category Archives: IT Costs

When Software Licensing Forces Your Decisions

I’ve got a story here that leaves me a little bit frustrated.

First? A little background: We are currently in the process of replacing an ageing accounting system with a newer, more modern system. (Our current system is older than my son, and he is 17)

Like most enterprise tools, this new system has a multitude, and variety, of different user licensing options. Certain levels of license give full access to the tool, other levels of license allow a device to access it, and other levels of license just allow fringe access to particular pieces.

And as you may have guessed, the more access a particular individual requires to the tool, the more expensive that license is. And that is where my frustration comes in.

For every one of our processes and requirements, we have to determine whether the task can be done as economically as possible regarding those licenses. For example, if we allow a road warrior to input his expense claim; does that mean he needs the full-boat license that costs as much as a small car? Because if it does, the hell with it, we will have to change our processes and have that expense claim submitted some other way.

This tool is an accounting package- and as such? Yes, we pay the full boat license price for the accounting team and the people need to do the deep dive into the software. But having to review each and everything we are trying to do with an eye to seeing if it escalates the price of the license required is very frustrating.

As a small to medium business, it severely changes the language of the business case to add hundreds of thousands of dollars in license costs, simply to enable somebody to submit an expense claim or other minor piece of work.

The small to medium business take away

Enterprise class software can be expensive. And having to fight through these licensing battles makes it just more so.

Have you experienced this? Let me know!

 

Order Taker or Solution Maker

A good read by by Eric Brown titled; Are you building an “order taker” or “solution maker” environment?. Now, Eric writes for IT Professionals, however for any executive or general manager in the small to medium business space, I urge you to read it as well. (And I would like to add one more thing to Mr. Brown’s post!)

The IT teams in most SME’s are Order Takers. They may not know it, and they may not really think about it, but orders come from executives or committees that provide marching orders for some new server or tool. IT just chips in and gets it done. (usually quite well too)

We can consider a spectrum, with Order Taker one one side – and primarily being in a reactive posture, then moving to the Solution Maker on the other side of the spectrum which we can be consider as being in a proactive posture. But allow me to be quite blunt, moving an IT team from Order Taker to Solution Maker is not a linear event.

Moving to the Solution Maker side of the spectrum requires organizational maturity levels that are orders of magnitude higher, perhaps even logarithmically higher than the organizational maturity required at the Order Taker side of the spectrum.

And I would argue that the first step for moving across that spectrum is for IT to have a true plan, and then be able to provide feedback and options when these Order Taker initiatives arise. Without a formal plan, you never will get beyond the Order Taker side of the spectrum.

Let me ask you a few questions, the last time you decided to purchase a large ‘IT system’ such as Service Management, Financial Management, that good ‘ole boy ‘ERP’ system, or any larger technology tool, did you….

1) Have someone draft a requirements plan?

2) Have all business units add their ‘must have’ bits and pieces that they are adamant they need?

3) Then nod sagely when a vendor describes the mysteries of a ‘gap analysis’ and listen to them solemnly state that they certainly can do all of that for you?

Oh yes, one last little question; Did your IT Team ever give you a bit of feedback (positive or negative), push back, or any other method of raising caution signs?

Here is an example that you, dear Sir or Madam have probably done yourself……

You decided to renovate one of the rooms of your home, came up with an idea or two, added in a rough budget limit…..

Ahhhh! then the real shopping begins, and upgrade after upgrade leaves that initial budget and plan  blowing in the wind….

Yes! that project that started as ‘reface the cabinetry and replace the sink’ ended up with granite counter tops, tile flooring, new cabinetry and the latest high end appliances…..

Providing feedback and even some argument that you are deviating from plan may not be critical with kitchen appliances, but it can be costly in IT.

The first improvement in your IT level of organizational maturity?

Is to get your IT team clearly articulating that those business unit ‘wish lists’ are going to cost money – lots of money, specifically if they are wandering off of your plan. As one example, when one Vice President was advised that a tiny part of one wishlist alone was six figure dollar amounts to implement:  “No damned way I’m spending that …” was the response.

Moving across the spectrum from order taker to solution maker is hard work, but to start, you need a plan, and you need your IT Teams to able to demonstrate when, and even argue, if you are beginning to deviate from that plan.

Real SMB IT: Computer Hardware Fails, Plan For It

We all know that after a certain number of years and miles that our cars will begin to break down more often. Many of us know someone who is a master do-it-yourself person that can choose to keep making repairs until that clunker becomes an antique classic. But for most of us, when the cost of repair and the risk of breakdown reach that tipping point, well – we look at replacing the car.

When it comes to your computer hardware, I don’t recommend that do-it-yourself idea, classic computer hardware belongs only in museums.

One benefit we have with cars, there are statistical references that we can base our decisions on, for example, we know the higher the mileage the more likely things are to break. Unfortunately we can’t measure our computer use in miles. Vendor marketing teams may try and convince us that the server your financial tool runs on will last forever. But it definitely won’t.

And that server holding your financial records and data is running 24 hours per day, 7 days a week.

We can debate what service life a server is. A quick search on Google shows dozens of conflicting arguments.

 The SMB Takeaway

In the last couple of weeks, three separate small businesses have told me about their computer server failing.

Gone.

Dead as the proverbial doornail

It will happen to you – it is not a question of ‘if’. It is a question of ‘when’.

Plan for it.

Photo Credit Stephen A. Wolfe via flickr

Real SMB IT: On ‘Technical Debt’

What is Technical Debt?

When you take out a loan, you understand that the money you receive today comes with a liability of repayment, and of course, that repayment comes with interest.

If you are an executive or manager in the small to medium business space, you should understand that a similar type of debt comes along with your IT spending too.

The term Technical Debt was coined several years ago, primarily as a way of demonstrating risks in the application development life cycle. (in other words when writing or modifying software programs- and before you state that you don’t write software programs, that contractor modifying your ERP or sales program? Yes, you got it…)

I believe technical debt goes beyond developers though. As soon as you have signed the check for some new piece of software or business tool, you are already incurring some technical debt. This is because you are now going to be living with that decision for a while.

As an analogy, imagine that you have recently purchased a 2012 model year car, then imagine that you visited your local auto show and you see that the upcoming 2013 model of the same car has twice the features, better fuel economy, and even a little bit less expensive.

As nice as that 2013 model may look, if you are like most of us, until you have fully paid the lease or loan payments in full, that fancier model is far out of reach.

That type of technical debt is unavoidable. Yes, you can argue that if you don’t buy anything, that debt does not exist. That is a truth, however you are also not obtaining any possible efficiency or value either.

Then, there is the interest payments due..

This next level of technical debt is both insidious and expensive. (and the reason the term was coined)

This technical debt results from poor standards, poor planning, poor or non-existing documentation as well as lax or non-existent controls.

I am not going to explain this one in detail though! Because Andrea Dallera has already done that perfectly in this post titled; On technical debt (now with chickens!)

Photo Credit Alan Levine via flickr

It Is Not My Place To Tell You What Car To Buy

As a Technology Manager In Your Business

Is it my place to tell you what car to buy?

Is it my place to tell you where, or which house to buy?

How about where, when, or what to build for a new retail point, manufacturing or distribution facility?

Is it the place of anyone in a management team to make these decisions unilaterally for you?

I don’t think any of those decisions are mine to make. And I don’t think you do either.

Decisions like this require investment, decisions like this require trade offs, decisions like this require a complete understanding of your financial state and your business goals.

And yet too often IT Leadership in small to medium enterprises present you with massive budget requests for technology based on what one person wants or recommends.

Governance

The word can be a vague, amorphous, unclear term. But at its heart, what it means is exactly what I state above, that all investments, and that includes technology, be looked at by all of your management team. That these investments have their pros, cons, risks and costs held up to the light of day and compared with other options for that money.

A quick definition from Wikipedia states;

…relates to consistent management, cohesive policies, guidance, processes and decision-rights for a given area of responsibility

The challenge?

Governance needs to start at the top.

You, as an Executive or General Manager need to understand that there is value in taking some time to ensure that investments in areas that contain a business technology component meet strategic and operational goals. If you do not see that value, you are simply abdicating responsibility – that leaves you spending in technology based on whim, fancy, and someones personal preference.

Software & Asset Management (or Butts in Seats)

I was going to try and cover the below referenced article in one post – length has relegated that to two! this is part 1….

A thought provoking article by Isaac Sacolick Writing at the Engineering News Record, titled; Tablets, Laptops and Virtual Desktops: Trends for CIOs to Watch

The era of planning a simple replacement of corporate computers every three years is over. Alternative devices and technologies need to be considered by IT leadership within their strategic planning processes – and soon. These devices have the ability to effect improvements in everything from productivity to employee engagement.

To contribute my own point of view, I actually want to start at the bottom of Mr. Sacolik’s work; at something many managers at the larger end of the small to medium enterprise rarely consider;

..it’s an ideal time to develop an application asset database, segment users based on usage patterns and then catalog platform requirements on the more critical applications

One Tech To Bind Them?

Within our business technology, one size does not fit all.  The technology assets required by engineering professionals, which could include development environments for software engineering or CAD (computer aided design) in other realms of engineering, is not the same as technology assets required by mobileiPad Device professionals, which again is not the same as the technology assets needed by administrative staff who may be using primarily office productivity software.

Asset And Service Catalogs…. & Roles?

If you catalog all IT assets, which includes software, and the computing resources, platforms and tools required for each – and then add in the services required to support them, you have now given yourself the ability to create workforce asset and service ‘seats’ or roles. And these roles can be a powerful management tool;

Ask yourself from a management and financial standpoint;

I have 400 computing devices scattered around? Or all my computing devices are managed via 6 roles, or seat types.

Which sounds easier?

From IT asset acquisition, deployment, through on boarding new employees, to supporting service levels, throughout your IT asset life-cycle, dealing with these roles or seat types can tremendously reduce time and cost.

To give one example; you have defined one seat or role as ‘Mobile-Executive’. Through your research and planning, you have determined that all persons that meet this criteria, or role, require ultra mobile computing power, general office productivity tools, secure remote access capability, general reporting from key corporate applications, cellular provisioning, and critical support turnaround for device failure while travelling.

The Seat

You are hiring a new executive to fill the Senior Vice President, Sales, seat starting in two weeks, which of the following most likely describes the current process in your business?

a) Sales and IT negotiate everything listed above one by one via meetings or email, hoping nothing is omitted or;

b) We usually perform the productivity loss method of trial and error, having our SVP spending his time on the phone with IT getting resources – versus on the phone with prospective customers or;

c) Our IT team receives an IT Service request that simply states; ‘..all requirements for role ‘Mobile-Executive’ for …….’

(as a side note, for organizations with a higher IT maturity level the services portion can support your IT SLA costing or billing initiatives as well.)

Defining your IT Asset catalog, and defining the roles required in your business, will let you improve your understanding of exactly what roles can be improved by the different assets or technologies Mr. Sacolik writes about, and will assist you in looking strategically where these assets would be most suitable for, as;

Each can open up several new options in outfitting the organization to do work faster, better and with fewer costs.

Note: this concept is not new – global IT outsourcing firms have used this concept for years, as ‘per seat’ margins would be totally devastated if for every one of 10,000 managed devices hours of meetings were required for configuration and deployment.

Update, Part 2  is here

Be IT Educated

In your role as an executive or general manager in the small to medium enterprise, here is a small story to demonstrate how critical it can be to understand the basics of technology. Not be an expert, but to be IT educated to the relevant level of detail.

One of our larger customers asked us to collaborate with another of their suppliers to work with some software code. The idea was simple enough, we supply software product ‘A’, the other business supplied product ‘B’. The general idea was that some of our customers data could be manipulated via our product, or the other organizations product.

A few hours of meetings and some more hours of research later, we identified a major issue that would cause a high level of risk, and excess costs. (and who knows what else)

And – as two independent suppliers to this customer, it took both of us to convince our “non tech savvy” customer of this issue.

A poor analogy

Anyone who has been following along with this blog will know that I try to use non technology analogies to explain technology, Although I confess that I am having a difficult time doing that with that in this post! (If someone has a better one, chime in here!)

As imperfect as this analogy is – imagine that you are handed a piece of paper, written in English and simply asked to re-type this document into a computer document. (assuming you are in an English speaking part of the world) That is easy enough – read the original and type.

Next, now lets also imagine being given the same document except that it is written in French, Italian or Spanish. and you cannot speak or understand any of these languages! This could be more difficult – you don’t speak the languages, but you realize that you can still type the document.  Because French, Italian or Spanish still use our familiar Latin alphabet, the letter ‘e’ or the letter ‘t’ is still on your computer keyboard, and if the original document has the letter ‘e’ in a word, simply typing it is not an problem.

So let me call this use of the Latin alphabet; a framework, or an engine.

Here is where a problem comes in, now consider; if I hand you the same printed document, except this time it is written in Japanese pictographs, Arabic script, or perhaps Cyrillic, or Hebrew scripts.  Now what do you have? You still cannot speak or understand the language, but as an added difficulty, now you don’t even have the appropriate characters on your computer keyboard!

The alphabet, or characters of these non Latin based languages use a different framework, or engine, that the Latin alphabet does not have. Sure, there are tools that would map our Latin keyboard to these characters, to be able to physically type these characters, but it won’t be easy, or fast!

Application Frameworks

Similar to my admittedly poor analogy, within the software development realm, there are different application code frameworks or engines.

And as suppliers to this customer, this is where our problem came in. And this is also where you as a small to medium enterprise general manager or executive have to be educated enough about technology to understand the risks.

As one supplier to this customer, our application development framework consists of a platform and servers running a framework called .Net (simply pronounced dot net) The other supplier was using a development and server framework called Java.

To each of these frameworks, or engines, software code written in the ‘language’ the other framework expects and understands is as alien as my analogy of trying to type a document with an alphabet that is not even on our computer keyboard. And as I stated earlier – sure you can find other tools or workarounds to force your computer servers to understand both frameworks, but again it is not fast, and not easy – and not fast, not easy means more time and expense in maintainability, management and software development time.

And time is money.

The SMB Takeaway

As an executive or general manager in the SMB space, you do not need to be a expert in understanding the plumbing of software code and the development life cycle, but you need to understand at the relevant level of detail. To be educated about technology to a level where when you are advised of this type of issue, you can go into it with your eyes open regarding cost, risk, and effort.

Learning ‘Cloud Computing’ From Historical Microsoft

The Term  ‘Cloud Computing’

Over hyped, often misunderstood, and definitely sensationalized in some cases. That being said – the concept of simply renting your technology needs is going to be a large factor within the realm of IT over the next few years.

Epitomized by Salesforce.com, this model of sourcing computing resources draws much debate, but I believe this debate often overlooks what I believe is one important issue. And we already have a road map that outlines how that issue was finally resolved. To see that road map, there is a lesson we can learn if we travel back in time to the early 1990′s to Redmond and visit Microsoft Corp.

The Bottom of the Pyramid

During a debate on twitter, Mark Thiele pointed out an article he had written describing what he describes as a pyramid concept in the business and technology context of small vs. large organizations. I won’t repeat the post, but as a summary, consider that Fortune 1000 sized business (the thin pyramid tip) have multiple persons dedicated to single roles and responsibilities, and that as you move down to the thicker base of the pyramid, in the Small to Medium enterprise we probably don’t have these dedicated experts.

I am going to borrow Mr. Thiele’s pyramid concept and paraphrase, that the closer to the bottom of the pyramid, the smaller the organization, and the more hats we wear.

Back to Microsoft

If you could travel back to the early 1990′s the leading organization for providing networking services (or LAN’s) to business was Novell with their Netware product. Novell Netware was the 800 pound gorilla of its day, but it had a weakness. Netware was a product that required dedicated specialists to do the the most basic configuration changes. To print your document meant arcane commands and menus to provide ‘captured‘ print queues. Lets not get into ‘binding‘ the network cards so your computer was actually connected to the network.

During this same period, the early versions of Microsoft Windows were not used in the same sentence as Netware when it came to LAN technology. With the release of Microsoft Windows For Workgroups, Netware Administrators laughed at what they considered a half baked product. In many ways it was half baked.

But at the same time, as half baked as it may have been, a person that wore more than one hat (not a Netware specialist) could put their computer onto the corporate network. A person could set up a printer without help from ‘Certified Netware Administrators’. Within a few years, the Introduction of Windows NT, and other Microsoft tools allowed the small to medium business to perform more, and then even more duties with a mouse point and click, and without the need for arcane expert commands by specialists.

In a classic description of a Disruptive Innovation Microsoft grew from the bottom of the pyramid along with may of their customers from a PC based operating system that needed certified experts to add networking capability to a position where they are now the 800 lb gorilla and the top of the pyramid.

But Cloud?

In our lesson, there is one thing still missing; ‘Big’ software was still different. What I call ‘Big’ software were those line of business or enterprise class tools that include Resource Planning, Customer Relationship Management, Service or Supply chain management etc. For these products, you bought complex software and once again, needed dedicated experts to get the thing running. The larger the business, and larger the software, the more experts you needed. At the extreme, experts in the ABAP programming language used by SAP AG can pull in consulting contracts at a $1000.00 or more – and that is Per Diem….

Smaller organizations? Those of us closer the wide base at the bottom of the pyramid? Similar to those early versions of Windows for Workgroups, we are going to use these tools, because we can do it ourselves, while wearing one of our many hats. And as we grow? Yes, the tools will have matured a bit, and we are comfortable growing with them. As we grow larger? same thing. And each step of the way, we may not be wearing as many hats any more, but the tools improve, more people view the advantages and reduced costs and have progressed through the learning curves.

I will let the pundits continue to debate whether or not these ‘Cloud‘ or Software as a Service (SaaS) tools are ready for prime time, or ‘enterprise’ ready. Because as far as I am concerned the writing is on the wall to be read.

Today you are using these tools as a smaller business with no internal IT support, in a few years you are larger with perhaps limited IT support, and as you get larger, these tools are going to grow with you.

To me its simple, if you have grown from a 5 million business to a 100 million business using these tools, then you hit 900 million. the tools have matured, you have matured, and why in hell would change? why would you install racks of servers and software and spend millions to do on your own when you already  have it?

Like Microsoft vs. Netware circa 1993-94. I don’t believe you will.

 

Renovations, And IT?

A Brief Story

A few years ago, a fiber glass shower unit in our en suite bathroom developed a crack. It seemed simple enough at the time, we called our trusted contractor of choice and asked for it to be replaced.

Of course, that is when the proverbial crap hit the fan.

The shower insert? it had been custom built, and was not a standard size ‘off the shelf’ unit that could be directly replaced. We also found out that custom ordering a replacement unit would be more expensive than just building a custom ceramic tile shower.

But of course! the added width of the new tile side wall of the shower meant that about six inches of bathroom counter top had to be removed, which did not work due to the counter placement of the two sinks. So, next we add new a counter and new sinks.

Next, what about the existing ceramic tile on the floor of the bathroom, can we match the new tile shower with it? No – that tile was discontinued a decade ago, plus there was 12 inches or so of the floor tile that needed to be cut out to build the new tile shower….. So lets add new floor tile as well.

A cracked shower unit meant a complete bathroom renovation.

And in Small Business Technology?

It happens there too. This device won’t work with that software. Or that software can be used if this thing is added.

You try and plan as carefully as you can, but it still comes around once in a while and bites you in the backside. This is a reason that large organizations have definite standards in their network architecture and dedicated interoperability requirements.

For us in smaller businesses – it is a good reason to have a dedicated relationship with your vendors. You really want to know these issues up front. Because you don’t want to get caught half way through what you thought was a walk in the park.

On Total Cost of Ownership (TCO)

Several times I have used the term Total Cost of Ownership or TCO in posts on this blog. For this particular post, I want to define it a little better, and show how it can affect SMB’s in their IT Costs.

Technology research firm Gartner Group coined the term back in the ’80′s as a cost analysis model for measuring the costs of an IT asset over its entire lifecycle. At one point they even had a Compact Disk based program that allowed businesses to plug in their IT costing numbers and the tool would assist in qauntifying this TCO.

I have generally used the term TCO only in reference to purchasing physical devices such as computer hardware, although the original TCO toolsets were designed to support acquisition of larger IT ‘systems’ such as complex software that consist of both software and hardware components etc. For these larger, more complex systems, the tools were not perfect, as they do not account for true derived value (eg one system may have a significantly higher cost, but also a significantly higher benefit) and they also could not account for time value of money and other quantitative financial measures.

So does TCO matter?

The answer is yes. The concept of Total Cost of Ownership is still key for managers in the small to medium business because it forces us to stop thinking that the initial purchase price (one direct cost) of any IT asset is the actual price that you are going to pay.

Your purchase price does not include the ongoing and often hidden costs (indirect costs) that accrue with an asset over that assets lifecycle. When purchasing any IT asset. (including something as simple as a single personal computer) These direct and indirect costs will include both dollars and time in;

• Planning and acquisition
• Deployment
• Management and support
• Retirement/replacement

Direct Costs

The direct costs are the easiest to understand and at least some of them are the costs we usually associate as the common expenses of the IT asset purchase. These can include capital expenditures or lease fees for servers, or other IT assets. The labor required for deployment or any potential professional services or outsourcing fees. Direct costs can also include budgeting for help desk labor hours, training labor etc.

Indirect Costs

Indirect costs are generally a little more difficult to categorize. These type of costs include assumed costs for providing ongoing support through a concept called “shadow” support. (when advanced and skilled users provide support) For example, the mail-merge expert helps out other staff members get mail-merges working correctly. And secondly there is the calculation of downtime. This refers to the lost productivity due to planned and unplanned system unavailability.And it is this hidden downtime factor that I have written about.

The quick note takeaway

The actual calculations in the TCO toolsets will vary by large amounts depending upon your industry, and your level of IT maturity – in other words, the more automation in your IT operations, the less expensive this total cost of ownership can be.

But as a general average, Gartner provided this little rule of thumb; On average, consider your indirect costs to be approximately five (5) times the direct asset purchase price – per year. (yes – annually!)

The Danger!

Here is the danger. Using the above rule of thumb, you calculate that the powerful business class name brand laptop with lots of processing power, RAM, DVD-R, and huge disk space at $2400.00 will have a full TCO cost over five years of about $12,000.00

So you look at the Bill & Teds computer Co. No-Name special unit at $400.00, which over the same five years would only be about $2000.00

However, if you do this, you actually risk increasing the TCO cost due to the indirect costs listed above. Lack of productivity, downtime as substandard componenets fail, upgrades trying to get the device to improve. (see this previous article) All of these indirect and hidden costs can dramatically increase the cost of that asset over its lifecycle.

Update: Some newer numbers on TCO by Gartner are referenced here