What’s the value of I.T.?
Posted at September 22, 2014 in IT
Several weeks ago I set down with a CEO of a professional services firms here in the Bay Area to talk about potentially helping his firm with IT support. The CEO, let’s call him Jack, interviewed me for about an hour. He went through an extensive list of items. It turns out that every topic was related to an issue Jack’s company has been facing for the past several years. Several times Jack referred to his current IT services provider as an “unfortunate” choice. Slowly over a period of an hour I pieced together the picture – nothing actually works.
File server, which is the only reason they keep a server in house, has been the major cost center. File server is being backed up to a cloud – the most expensive cloud backup provider out there. Of course his IT service provider is re-selling this solution.
Their VPN, whose only purpose is to support remote access to the file server, is not working. Their IT provider sold them some version of “white labeled” VPN solutions, for which Jack’s company pays monthly fee. While still paying a monthly fee this VPN solution, Jack asked for a friend of his to help. They cobbled something together.
Their IT provider upgraded them to a 2008 Windows Small Business Server a year and a half ago. Rather than talk about why this is wrong, let’s focus on the next crazy thing. The problem here is really that Jack’s company’s CRM system (a very old system whose name we will not even mention here), wouldn’t port to the new server. Decision was made to keep the CRM System on the old server – which happens to be a previous version of Windows SBS server. You can’t have two SBS servers on the same domain so they ave to reboot the old server several times per day to keep the CRM system up and running.
They just upgraded to a brand new in-house phone system and now need to get a brand new T1 to support a total of 5 phones in the office. Additional, unnecessary monthly expense.
There’s more to this horror story, but I thing you get a picture. I see this frequently – a company abused by their IT service provider.
Jack asked me how much would it cost to take care of the system. Whatever I quoted Jack, was apparently 40% more than what he was spending on his current IT “service” provider.
Jack flatly refused my quote – saying that he is not ready to pay more than what he is spending today. BTW, he is spending more on his monthly backup, phone, VPN and connectivity fees than on his IT service provider.
I understand Jack – why would pay more for something he gets no value from.
In my view this is two-fold issue. IT service provider adding no value to the business (actually taking it away) and Jack valuing his IT based on how much cash he spends on it.
IT is not and should not be a cost center. IT does have and should have a strategic value to lot of businesses. Professional services firms certainly fall into this category. Let’s focus on that for a second:
- The largest expense in professional services firms is people/time. There is about 15 people working on client’s assignments at any given time for Jack’s firm. Let’s just take a conservative estimate of 5 minutes per day that these people can’t perform their job (VPN not working, rebooted server and CRM system down, …). That is 75 minutes per day, 6.25 hours per week or about 40 work days per year. Average consultant’s salary is (conservatively $100k per year) – I will call it a loss of about $20k in cost. Let’s not even talk about lost revenues and opportunities.
- Jack consults large companies on how to improve their profitability. However, Jack is not doing what he preaches. Considering tools Jack uses at his office, I don’t believe that his consultants are very productive.
- There is lot to IT that helps retain talent. If your best people are focusing on troubleshooting IT issues rather than focusing on their core competence and things that they actually like to do, they will look for a job somewhere else.