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Is Your Company Bleeding Money?
Yes, if Your IT Isn’t Efficient and Aligned

by Charles L. Nault

 
       
   

Every two minutes two million e-mails are sent, 1,157 YouTube videos are viewed, 11,000 songs are downloaded, and 2 new blog sites are created. Those are just a few of the activities going on via the Internet. E-mail has evolved to become a mission-critical application as essential as electricity or telephone service. In fact, according to a META Group survey, 80 percent of corporate e-mail users believe that e-mail is far more valuable than the telephone for business communications. Today, 90 percent of corporate communication is driven by e-mail.

In the 20+ years that I have been working on the implementation of technology in other people’s businesses I have seen just about every level of implementation and network design and configuration that you can imagine. I’ve worked on networks for major carriers, foreign governments, Fortune 500 companies, and 10-person firms.

Organizations from multi-billion dollar corporations to the community church rely entirely on their e-mail, web access, and computer applications every moment of the working day. Any company that is going to compete and thrive in this world is going to do so through the effective use of technology. The optimal word is effective

When they cannot effectively use the computer, I’ve observed that most employees chat with other employees and accomplish little or nothing. As a small business owner, when I see idle people in a business I can’t help but think about the cost of all that idleness. In the ultra-competitive business world, the ability to leverage every hour of every worker’s time for maximum productivity is essential to the very survival of an organization. Business managers and owners go to great lengths to leverage employee’s time. There are startling statistics that show that the technology in most of these companies doesn’t work a frightening percentage of the time.

Just how effective is IT in business? The only word that comes to mind is dismal. The facts speak for themselves. 78 percent of companies rate their IT as ineffective. Over 25 percent of IT projects are completed late. Studies from KPMG estimate that less than 40 percent of implemented projects, when measured one year later, showed any of their estimated business value whether delivered on time or not. Businesses view e-mail as a mission-critical application but they're putting up with, on average, 1.6 downtime periods a month. 75 percent of businesses experienced an e-mail outage in 2005 with 72 percent of outages lasting for 4 hours or more. Poor system performance is number one on the top-five list of technology problems small businesses face, according to July 2007 information from support.com.  IT is just not effective. And downtime, as we’ll see in much greater detail, is a constant issue.

There is an even more significant problem with your network that has to do with daily performance. Total IT downtime costs companies an average of 3.6 percent of Gross Revenues according to Infonetics, one of the most respected IT research firms. Statistics show that this year you will bleed money while your workers sit idle because your network is not functioning correctly, or is not functioning at all. It will have nothing to do with any outside force attacking you. I can guaranteethat it will happen to you. Non-malicious downtime is going to cost you money this year.  The question is simply, how frequent and how bad will your network outages will be?

So how do you get it right? Much of the current banter in the IT industry focuses on the concept of alignment. Alignment is touted as the silver bullet for getting IT costs under control and for getting the most from your IT investments.  You have to first focusing on making IT effective. If you try to do alignment on a network that is ineffective, you will waste a lot of money and get extremely frustrated. 85 percent of business executives characterized their IT operations as ineffective when viewed from the perspective of how well their IT performed when aligned with their business objectives.

I am not suggesting alignment is a bad thing. I am telling you it is only a good thing if you first make your Information Technology more effective. In part of the same study, companies achieving effectiveness and alignment saw their three-year compound annual growth rate jump 37 percent, while IT spending rates dropped by more than 10 percent. Companies that achieved effectiveness but not alignment still cut IT spending by more than 17 percent and boosted growth by more than 10 percent. You simply cannot do alignment on an ineffective IT network and the statistics show that most IT networks are not effective.

How do the experts deal with these facts? They say alignment is not enough. Alignment needs to mature to the point where you don’t just align your IT to your business objectives, you synchronize your objectives with your IT strategy. Again, a great idea. To take it even further, the experts say, you get to the point where you design your own products and services, marketing plans, and delivery mechanisms in concert with your strategy for delivering IT services. This has been called convergence (though this term is also used in IT to describe the combining of voice/data/etc. on one ubiquitous network) and I’ve also seen it called Breakthrough IT. This is all so wonderful, if the network delivering all this great strategic stuff is rock solid and effective. If it is not, you will still be bleeding money.

What do IT leaders plan to do about this? Exactly the opposite of what they should be doing. A survey of IT Leaders indicates that their number one priority in 2008 is to squeeze their vendors for lower prices. This was from a survey of hundreds of top IT leaders. The total cost of ownership of any networking solution is primarily made up of the deployment and integration, regular upgrade, maintenance and support, and administration and management of that solution. The procurement cost of the equipment is widely recognized at a small fraction of the cost. The focus needs to be on reducing the on-going cost of the solutions. Most of that support is performed by IT staff in small to medium businesses.  These folks are severely overworked and perform most of their tasks manually or with a hodgepodge of band-aid solution that they have been forced to put in place because the owners/senior managers of their companies do not give them the funding they need to do things right and do not take a vested interest in their success.

The only answer is a complete mind-set change of your view of IT. Senior managers and business owners of small- to medium-sized companies see IT as a necessary evil. It is no wonder, with the results we’ve just looked at. The answers that senior managers typically come up with are cost-cutting measures. IT is just too expensive. What we have to do is find ways to cut costs.

You must gain a new perspective on the importance of your network.  The buck must stop with you for how well it performs.  You must have your finger on the pulse and know ahead of time if a problem is creeping up, so you can assure it is dealt with before it costs you money, reputation, etc.  If you really do make the effort to change, your business will benefit tremendously.  Look again at the statistics:  Companies achieving effectiveness and alignment saw their three-year compound annual growth rate jump 37 percent, while IT spending rates dropped by more than 10 percent.  Companies that achieved effectiveness but not alignment still cut IT spending by more than 17 percent and boosted growth by more than 10 percent.  I am certain the drops in IT spending were not squeezed out of their vendors.  They were the result of wisely investing in the right  solutions to reduce the total cost of ownership, as evidenced by their impressive growth rates.  Make IT more effective, and you can stop your money from bleeding.

       
   
 
       
   

The Author

Charles Nault

Risk-Free Technology

Charles L. Nault is author of the new book “Risk-Free Technology: A Simple Non-Technical Business Owner’s Guide to Stemming Huge Productivity Losses from Poor Performing Computer Systems” (Global Professional Publishing) and Chairman of the Board at Atrion Networking Corporation. A recognized expert in “network utility thinking,” his firm provides training and consulting to companies in addition to working closely with Cisco Systems on network design, implementations and support.

He can be reached at 401-736-6400 ext. 111 or cnault@atrion.net or by visiting http://riskfreetechnology.com/

 
       
   
 
       
   
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Copyright 2009 by Charles L. Nault . All rights reserved.

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