New Game Plan for Managed IT Services
Posted by Bryan Maggi on Sat, Jan 14, 2012 @ 08:12 AM
To beat out your respective competitors, are you devoting 10% or more of your total capital expenditure to your Information technology resources and assets?
Chances are you're not. If not, you would be in the minority. Businesses worldwide are pumping over $2 trillion into their information technology systems each year.
Truth be told, a lot of IT Resellers, Managed IT Service firms (our industry peers), are selling this premise to small businesses that in order to gain an enduring advantage and stronger financial results, businesses must constantly spend more on IT. That is a trap. Overspending and overinvesting in IT soaks up hidden profits. If your IT partner cannot translate where IT spend improves the balance sheet, income statement, and overall financials, be skeptical.
IT is not about 'Bits and Bytes' management anymore. Rather, IT is about efficiency and economy. IT firms must think in entrepreneurial terms similar to their client's thinking. Together these two factors are the most important salient characteristics of IT management. The rules for proper IT management have changed. Below are examples of the new rules.
The new approach for managing technology:
1. Spend Less on IT (yeah we said it)
Overspending on IT can ruin profitability. Each IT investment or upgrade must be rigorously evaluated on the expected returns to the business. This weeds out indiscretionary purchases. Without an IT budget, no cost controls exists. Penalties for wasteful spending will only grow larger. Impose hard limits on upgrades and be passive with new purchases.
An Example:
- Businesses buy 100 million + PC computer each year. Computing power is outstripping the staff member and business' needs. Why purchase a turbo-charged powerhouse of a PC for a staff member that only uses basic office applications.
- Data storage is another critical area. Servers, hosted servers, and storage appliances are getting filled up with saved data such as non-business files as personal email, vidoes, music files, entertainment applications, etc. Translation - storage fills up unpredictably, business storage expenditures increase.
2. Be a follower, not a Leader
Postpone IT purchases in order to lower costs and avoid the risk of buying cutting edge, version 1.0 technology premium pricing. Wait to buy only after other manufacturers offer the same or comparable product. Once predatory pricing is introduced for a product, the product becomes a commoditiy, which inadvertently and significantly drops the sticker price. You'll get more mileage out of your dollars.
3. Avoid Vendor driven spending strategies
Many small businesses cede control of their IT direction and spending over to vendors and third parties. Most vendors are direct resellers for specific product brands. So, it is only natural for them to push their brands where they have equity stake in the game. Instead, you need an IT partner to sit on the same side of the boardroom table with you, not across from you. The focus should be on the solution not the branded logo. Make sure your IT managed services partner can quantify the proposed solution for your company.
4. Focus on the Risks
Admittedly, it is difficult for a small business to gain a distinctive advantage overcompetitors just by having a sound and mature technology infrastructure. However, a brief disruption in your technology operations can be devasting, not too mention costly. Huge Cost! Small businesses need to be prepared for technical glitches, outages, and threats. The best defense is to have a designed and tested business failover ("Plan B, C") plan to respond to such interuptions to the business. It is good policy to periodically run "fire drills" to keep the failover plan fresh and everyone in a ready state.
The above new IT management standards flies in the face of conventional thinking. But, the business climate is ever changing. Small businesses can reap significant savings by simply cutting out wasteful spending and abiding in the new rules of IT management. Let your impatient competitors shoulder the high costs associated with new product development costs and experimentation. Oracle's founder and CEO, Larry Ellison, admitted in an interview that "most companies spend too much (on IT) and get very little in return".
