When selecting providers of outsourced services, is size an advantage?

The short answer is yes, but… What is the right size? For who? And when?

Over the past 10 years, I’ve run a business that has been through many stages as it’s grown organically from a micro business to a medium business over time. I have been able to observe who the right clients are, and so I have a very good sense of who is the right provider for each business. It’s similar to looking at the supplier from the client’s eyes.

My first client, other than my uncle’s business run from home, was a small not-for-profit where my sister worked. I was new to the idea of running a business, and wanted to gain experience. I had spent the previous five years working as an IT manager with Accenture so my technical skills were a bit rusty. I set my rate at $40 per hour as I knew they didn’t have a lot of money but needed help. They were horrified, and quickly moved back to voluntary labour, accusing me of being ruthless.

So, for small organisations with no funds, the best solution is to do it yourself, or use volunteers. This isn’t a great use of anyone’s time but it won’t use up any of the organisation’s cash reserves. (In this case, the organisation was in the drug rehab space and an employee had allegedly embezzled the cash to fund their own habit).

We then took on the local real estate agent, who was a loyal client for many years, and to their credit, increased what they paid for our services as our business grew. There was a prompt change in fees when I started hiring staff, and had to pay them a wage out of company earnings. So commercial reality got underway, and we sought larger organisations who could afford to pay for our services.

As any of us who have grown a business know, larger businesses have higher overheads. While working from home with a couple of staff at the office, rent can be absorbed by the household (even if our tax advisors would suggest otherwise), but running an office changes that. So, as the support business grows, fees must also increase to cover overheads.

Larger overheads demand larger and more affluent clients but larger clients demand more complex IT systems, which requires more capable (and expensive) staff. Again, the fees must go up to cover the additional salaries to provide a higher level of technical service to the client.

So from the client’s perspective, the small relatively cheap provider might seem ideal. If it’s a very smart one or two person provider, it may be very cost effective. However, if the technical people are good, they will attract more clients. At some point they must either offer slow response times, rushed solutions, or hire more staff. Thus, as your business grows and needs increase, you’re almost forced to find a larger and more responsive service provider.

You will also require breadth and depth within your solution provider. Technical services are typically split into level one, two, and three support, and then strategic consultancy and project management/delivery. To find individuals who can work across this range of levels with multiple technologies is simply impossible. The technical field is too diverse to attempt this, even for a genius.

Typically throughout their careers, technical people progress through different levels and stages, and move through different jobs to achieve this. Sometimes people retain their technical skills as they become competent project managers, but it’s only a matter of a few years before they fall behind the latest technologies and become pure project managers – and somewhat dangerous in a hands-on tactical task.

My other observation is on the quality of people attracted to a business. We all know that it’s hard to find good technical staff today – unemployment is running at under 1% in the IT industry. So attracting good staff is important, and this comes down to company profile and size. A larger company with a better reputation will attract a higher quality of staff. At least until the company gets too big and the personal connection is lost. So assessing the culture of your support organisation is an important step towards selecting the right team too.

Clearly it’s important that as the complexity of your business systems grow you have access to a larger team to deliver the solutions. At some point, the larger support companies will also establish productivity tools and automation within their company which will lead to a plateau in escalating costs, and a flattening out of the increasing fees. When you find a company that has good systems in place, you’ll get a higher value return on the dollars you invest. You may even get the opportunity to pay a fixed rate for an unlimited service as efficiencies of scale lead to predictable costs from the supplier.

How do you know when you have the right team? It will come down to the quality of advice, quality of service, responsiveness and price.

If you need more of any of these factors, it may be time to seek a more capable support arrangement, but perhaps at a higher price.

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.

Look out for fire season

As summer warms up and the grasses dry out, it’s time to reflect on our disaster readiness and ask ourselves – is our data safe?

In the Victorian Black Saturday fires of 2009, 173 people sadly lost their lives, 414 people were injured, and a large number of homes and businesses were destroyed.

These fires destroyed countless computers and backup tapes. People lost both personal and business records, and in some cases organisations were unable to recover records of debtors – resulting in them struggling to get paid. This year, with the fire season now upon us, it’s time to consider how technology has advanced to help us protect our assets – everything from family photos to business accounting systems.

In nature, it’s the water that falls from clouds that puts out fires, but in the case of technology, the benefits come from storing our data in the clouds.

Many of us still doubt the validity and safety of cloud solutions, wondering where our data is stored, and if it’s secure. Certainly governments have big decisions to make about the sovereignty of data, with some big questions to be answered. Who owns it? Can sensitive, national data be stored off-shore? Will it be data mined to create new forms of intelligence about people, companies, technology secrets and so forth?

However, my focus is on the individual, and the SMEs who struggle to deploy and manage systems that suitably protect their data. Often people believe they have a reasonable level of protection up to the point that their data is gone because, really, they had insufficient protection all along. While we can create systems that copy our local data to the cloud, for both PCs and servers, this is an extra step that adds cost and complexity – often slowing down systems when we most need them to perform. I know the systems that start backing up my home PC just drive me to distraction.

So the next step is to move our data to the clouds and use cloud applications to access the data. Technology has advanced to ensure we can access that data from just about anywhere via wireless networks. Telstra’s new 4G network, which fails back to the 3G network should the 4G signal be unavailable, is one of the fastest wireless networks in the world, and offers excellent coverage to most parts of Australia. This allows us to access our applications in the cloud from anywhere in the country. Many public areas from cafes to airports offer free, wireless networks, so we can access our cloud systems while travelling as well.

We can now use tools such as Office 365 from Microsoft to store our personal or company email in the cloud – giving us the benefits of shared calendars, central management with archiving and backup, and all provided at very reasonable rates. Given that it includes spam filtering, which many of us already pay a monthly fee for, the additional cost is easily justified by the reduction in infrastructure and maintenance costs. Imagine no more shuffling of backup tapes or hard drives, and knowing that a large company like Microsoft has your back. Love them or hate them, they can afford to invest in systems and infrastructure most companies (including publicly-listed businesses) can only dream about.

As for security, large companies such as Microsoft have a team of people dynamically monitoring their digital perimeter to ensure hackers are stopped at the gate. Of course, even 24-hour-a-day monitoring and constant security action is not enough to be 100% secure – but it’s a lot better than the effort most SMEs go to for managing, patching, and monitoring their firewalls. So as long as we stick to major brands of providers, we are probably safer in the clouds.

On the accounting front, we are seeing each of the software companies come to market with a cloud version of their tools – MYOB and Quicken already have products out there. Xero has come from nowhere to be a key player in the cloud-based application space and they seem to have a competitive product that can offer innovative solutions and improved reporting functions. Microsoft Dynamics has its online offering, and SAP (along with many others) are not far behind.

Photos can be stored in online albums from Facebook to SharePoint online. For each land-based data technology, we are seeing a cloud version appearing. We have SkyDrive and DropBox competing for mindshare by offering free or cheap online file storage.

For applications that are not available via software as a service solutions such as the ones mentioned above there are private cloud solutions whereby we can make use of part of a large system run by a hosting company such as Telstra with their Infrastructure as a Service product offering (IaaS). This platform will allow us to move proprietary server based software to their data center system and cease worrying about managing the infrastructure layer. This service is making it possible to run a business without servers.

This emerging technology is now changing the face of IT support, which is no longer about selling and supporting servers, but about assisting people to connect with their information systems and integrate the solutions they need to run their business. Finding advisers who understand this new technology area, and don’t want to sell you the latest server, is a challenge but is the new age of IT support.

So as summer approaches, think about the security of your data, and how safe it really is. How will you get to it after your computer and local storage systems – including backups – have been destroyed?

The more you have in the cloud, the less you have to worry about – and the more you can enjoy your holidays.

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 don't our technologies get used?

One of the unfortunate truths in the IT industry is that IT systems get implemented by technical teams. If the change is well managed the organisation can find productivity gains and motivation that drives massive benefit to the business’s bottom line.

Or, as happens all too often, some of the staff don’t cope with the new system, resulting in the need for new staff to drive the advantages of the change, with a high cost of staff churn.

However, there is another scenario that leads to even higher costs and no step forward. This is when the system goes live, and people simply don’t adopt it and use it.

So, what should small businesses do to minimise the damage caused by poor change management?

• Careful planning to align IT with business objectives before implementing new IT systems is critical.
• Involving the entire team of people who will work with the system will improve the likelihood of success.
• Understanding and planning for change management as part of the process will help.
• Wherever trials of the tools are available, run them. And, have a plan for the trials to ensure they mimic real life.
• Be committed to changing work processes to gain the benefits of the new system. Plan the change as part of the implementation.
• Provide ample training just before, and well after, implementation.

There are other key messages and cautions around application selection, but they are for another day. Here I want to focus on the human factor of uptake of new systems.

What we don’t want to do is spend our money implementing new systems to find the staff won’t, or can’t, use them.

Understand why you are changing the system as this will inform your plan – and ensure you are in the right mindset for change. Simply replacing a system that sits behind a job role without improving work flow and process may improve productivity slightly, but redesigning the job around new capabilities in the system could significantly improve the return on investment.

To get your staff excited about using the new system, get more of them involved in testing phases and selection phases to give them the opportunity to use the new application features. If you leave your people out of the process and then hit them with a big change when you go live, you can expect significant resistance and lots of stress. After years of using a system, many of your workers will do their work like a robot. No matter how good the new system is, it will involve re-learning old skills and this will lead to frustration in the first few weeks.

So running trials and having a significant number of your staff do a proof-of-concept will encourage the staff to feel like they’ve been involved in the decision. Also, it will show up faults, limitations and restrictions before significant investment has been made.

IT departments rarely contain a psychologist, especially not a change management expert, so the human factors are usually glossed over or completely forgotten. The best IT system implementation teams in large organisations have a change management expert on board as it is known that managing the process well will lead to better outcomes. In small business, we can’t have such a diverse team and so it’s up to the business leaders to do the thinking for the tech team, and make sure some change management principles have been considered.

Trial applications are not always possible as the platforms need to be built before they can be run. Cloud computing is changing this and products such as Office 365 or Dynamics CRM from Microsoft offer trial accounts. If you can’t run a trial, try to visit a business already using the tool.

Write a plan for your trial. Just looking at a few screens containing data or reports will not inform you of the functionality or user experience of the application. It’s best to design a test that will demonstrate the key functions you will use – this will give you more value out of your test phase. If the testing is too hard or stressful, who will implementation work for you?

Changing work processes is not a trivial activity but it is interesting to see the inefficiencies that we have built into our work practice. We had a classic redesign recently. When our business was only a few people, there was a rule that any ringing phone had to be answered within three rings – by whoever was free. The rule was still silently in place after we grew to 25 staff. Clearly, having the finance team answering calls for the help desk was not ideal so a better process was required. There are lots of ways to improve work flow and process but it takes an active eye and mind to change. The time we change our software tools is ideal for adopting new work flow rules and practices to ensure productivity is improved. Running a few workshops around the implementation of the new tools may have a far reaching impact.

Once you have made use of your team in redesigning the processes and getting the new tools implemented, it’s essential that suitable levels of communication and training happen to ensure the team is empowered to use the new tools. Training just before, and a little while after, implementation tends to work well – talk to training experts to ensure you get the most out of your new applications.

There is no guarantee that the new systems will go in well and be accepted, but if you really think in terms of managing the change, not just the technology, your odds will improve significantly.

Good luck with your improvements; I really hope it’s the best possible experience for your staff and business, and that the upgrade is as good as it can be.

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.