What should we expect from our IT company?

The short, flippant answer to this question is: “Exactly what you pay for”. The longer answer is a commentary on how the IT industry makes money and why you have to pay for the things you get.

I’m frequently faced with potential clients who want to upgrade their IT systems, and many of them are realistic and easy to get along with – but, unfortunately, many people in small business have interesting misconceptions about what one needs to pay for.

Just last week I was discussing this topic with others in my industry who were saying we need a professional body that sets the standards for this, so that the general business world can seek support over the issues that arise. Really they just want their clients to understand why they have to charge for their design and installation services.

I thought writing about it here might be a good place to start…

Many years ago, selling PCs and servers was a very lucrative business to be in. When PCs were not well understood and one PC cost $5,000, it was easy to make a 30% profit on the sale of a PC, and so PC sales companies developed the reputation of being very wealthy. There was also some expectation that with the sale of the box would come some level of free support that went beyond the industry warranty.

Today, PCs are a commodity item sold at prices so close to the distributor or manufacturer’s price that retailers frequently go broke just for holding too much stock. The fact that our Australian distributors are holding the local prices artificially high compared to US distributors of the same product is a different matter, and not a subject for this article.

Today, the sale price of PCs is being driven down by interest dealers who work on skinny margins and high turnover. The implication being that you get the PC and manufacturer’s warranty, and the only service is delivery. There is no helpdesk to call or onsite installation.

Many IT companies offer hardware sales as part of the service they provide, but the old days of service to go with the sale are truly over. The service that comes with the sale are the services paid for. It would be nice if the manufacturer’s warranty could be extended to include all the support computers need, but the truth is that this is a very different business proposition, and best provided by the local IT support company.

When an IT services firm is “giving away free services” it is typically the loss leader for what they hope will be a sale or a project, or an ongoing services relationship. With the ever-increasing cost of IT staff in our marketplace where there is no unemployment, the cost of each hour must be recovered somewhere in the business.

A recent benchmarking exercise of IT service providers to the SME sector, run by Corelytics in the US, showed an industry average EBITDA of 6% of total revenue, with a decrease of 4.3% across the managed services component over the past two years (to December 2010), due to pressure on margins. The alarming part was that it shows the EBITDA of the managed services component at 2%. So, the industry has been forced to change and pre-sales service must come at a price.

So, if you’re wondering why you’re getting poor service on your request to scope the equipment your business needs, consider the risk each of the vendors you call is taking with the hours of work they must do to furbish you with a free quote for the right solution. Each of them knows they have a one in three or four chance of winning the deal, but that the decision may have been made before they were invited into the mix. They can’t afford to do hours (sometimes days!) of design work to solve your problem.

My recommendation to anyone who is in this situation is to form a partnership with a reputable IT company, and once they know your business, have them design the best solution – even pay them for the work. This will lead to the time being put into design the right solution without shortcuts being taken. You may still shop around the design to confirm you have a good price for the resulting project, but if the company is reasonable, the prices will not vary much and you will do well to remain with your trusted advisors.

Most technical companies want to do a good job, but there is real cost involved, and as margins are squeezed there will be less and less free service to go with the sale. As buyers, it is good to know how the industry works and make sure you get the best solution.

Remember – the best solution is the one that aligns your IT systems with your business plans so that IT does not impede your growth.

David Markus is the founder of Combo – the IT services company that ensures IT is never an impediment to growth. We win awards for the service we offer, so if your IT environment is slowing you down, contact Combo on 1300 726 626 to organise a complimentary consultation with David.

Will we still want our PCs in the brave new world?

We may well be looking at the decline of the PC, as our applications move to the cloud, and our devices become tablets and smartphones.

In fact, in a recent article from Gartner, it is predicted that 94% of PCs will ship with Windows 7 in 2011, and that by the end of the year Windows 7 will be the leading operating system worldwide – with an install base of some 635,000,000 PCs. And all this despite the turmoil in global financial markets!

Windows XP has clearly been surpassed as it’s slipped below the 50% threshold, and has less than 1,000 days before support from Microsoft ceases.

However, Windows 7 may well be the last dominant desktop operating system as Macs, tablets and smartphones take over from the PC, and as applications move to the cloud and do not require a desktop environment anymore.

My prediction is that the next big deal in the IT world will be collaborative applications that let us all work on the same object at the same time, allowing us to think and create together in real time. The access method will be irrelevant, and all that will matter will be the capability of the tool and the speed of access to the information. It may be a digital image being drawn, a formula being developed, or the genetic design of a new cure for a virus – the possibilities are pretty much endless.

The only thing that’s certain in this new world is that it will all be easier to use when it’s working, and harder than ever to support when it’s not. There will be multiple standards, and lots of choices for every piece of technology. This means that support companies will need to be more nimble than ever before to stay abreast of the solutions to the mass of problems that will inevitably arise.

It certainly is an interesting life for the technology support experts of our time, and no doubt will only get more interesting!

David Markus is the founder of Combo – the IT services company that ensures IT is never an impediment to growth. We win awards for the service we offer, so if your IT environment is slowing you down, contact Combo on 1300 726 626 to organise a complimentary consultation with David.

How can we get IT to drive profit?

If your business model is sound, and you’ve developed the business and management to reach a point of profit, you already know that good systems add value.

Of course, IT systems are just part of the formula, but – according to the Harvard Business Review – businesses that manage IT well have profits 40% higher than others.

The suggestion by Ross and Weill in their article, Six IT Decisions Your IT People Shouldn’t Make is that there are a number of factors that contribute to higher profits (not just IT), but that the common theme is around senior business executives being involved in the IT decision-making process. Essentially, abdicating responsibility for these business decisions to an IT executive does not lead to winning outcomes.

I’m sure we’re all familiar with senior executives in business who claim to have no idea about IT, and leave that entire part of the business to technical people to look after. The position of Ross and Weill is that this assumes that it is the implementation of IT systems that goes astray, and leads to poor adoption and performance of the systems.

Their advice is that implementing a CRM or ERP system, or other business intelligence solution, requires business process redesign and so requires management to get involved in organisational and process-change management to improve adoption and functionality.

More importantly, if we go back a step, clearly defining the business problem before the technologists get involved is key to product design and/or selection. This is a step all too often missed when aligning technology with the business plan.

The key message here is that IT needs to take its lead from the business leaders, and work closely in partnership to achieve valuable outcomes.

The gap is not so much a knowledge gap as a communication gap that must be closed. The business leaders hold the knowledge of the business strategy, and must include technical advisors in their planning conversations to ensure the business leaders understand the role of IT in the future of the organisation.

If senior management is unable to communicate with the technical people supporting the business, it is a recipe for high expense and poor returns. Clearly, the first step is to find IT people who can assist in the strategic conversation and engage those technologists to work with the leadership team to establish the best IT strategies to support the business plan.

David Markus is the founder of Combo – the IT services company that ensures IT is never an impediment to growth. We win awards for the service we offer, so if your IT environment is slowing you down, contact Combo on 1300 726 626 to organise a complimentary consultation with David.

Vlog: Carbon tax - driving innovation in IT

David Markus is the founder of Combo – the IT services company that ensures IT is never an impediment to growth. We win awards for the service we offer, so if your IT environment is slowing you down, contact Combo on 1300 726 626 to organise a complimentary consultation with David.

Why is an IT disaster an opportunity?

What do IT disasters and natural disasters have in common? Put simply – the destruction of infrastructure.

In the case of natural disasters like floods, earthquakes, hurricanes and the like, we see buildings damaged or destroyed, along with bridges, power lines and so on. The need to rebuild is obvious, and the opportunity exists to, “build back better”. By this I mean that with some good planning, the building code can be changed to build elevated houses in known flood districts, or build better reinforced houses in areas prone to cyclones.

With strategic planning, it’s even possible to build new infrastructure such as aged care facilities or hospitals where there were once schools, if the local demographic has changed from young families to elderly. Poor planning is likely to get you building nothing, or “building back the same”.

Similarly, when a disaster strikes and IT equipment is damaged or destroyed, the typical reaction is to get anything in quick to fill the gap. All too often this leads to, “building back worse”.

There is, however, a real opportunity to bring in an improved solution and, “build back better”.

When disasters strike, there is usually a lot of time pressure to get back to business, and so the initial reaction to this advice would typically be, “You have to be joking… right?!” Well, yes, if you have no plans for an upgrade, starting to plan while the system is down won’t be practical unless you have standby systems that buy you some breathing space.

However, if you have a reasonable IT strategy in place and it is playing out at a measured pace, the next step may be planned or very obvious – and so bringing in new, improved infrastructure to restore old systems may be a much better reaction than getting matching systems in. This will be determined in the disaster recovery planning stages.

So, the question to you is this: how well is your disaster recovery planned and will the recovery project allow you to build back better, same or worse? Will it move you forward, put you back to where you were or put you a step further back than you are today? Of course, if you have no recovery plan, the disaster may just put you out of business.

My suggestion is that you set a recovery plan in place, and use it to ensure that – in the event of a disaster – you “build back better".

David Markus is the founder of Combo – the IT services company that ensures IT is never an impediment to growth. We win awards for the service we offer, so if your IT environment is slowing you down, contact Combo on 1300 726 626 to organise a complimentary consultation with David.