Sandy Mass

Tuesday, 27 April 2004 14:52

Maximizing the value of IT dollars

Productivity gains due to advances in information technology have helped, but cutbacks in IT budgets are forcing employers to ask their employees to do more with less. At the same time, demands on IT departments are increasing.

There are several options for dealing with this situation: Use existing resources, hire or train new resources, outsource to a third party to develop a solution or rely on a consulting partner's recommendations.

Existing resources

It may seem that using existing resources is your most cost-effective option. And in some cases, it is. But before you tackle a major project with your in-house staff, consider your employees' expertise level.

We all like to think our employees are resourceful and competent, but staying abreast of changes in technology can be a full-time job -- and employees are often unwilling or unable to admit a lack of expertise.

Hiring new employees or training yours to bring them up to speed is an option. But make sure you are hiring or building skills that can be used for more than one project. And remember that absorbing new skills takes time.

Be realistic about what can be accomplished, and don't let your expectations be raised to levels your employees will have difficulty meeting.

Outsourcing to a third party

Relying on a third party to develop a solution is one of the most common ways to meet an internal need.

Think about all of the software you have purchased from third party vendors, from your desktop applications to your Web browser. Using each has saved you considerable time because you didn't have to design, debug and rollout a different application for each administrative task. But outsourcing can have its drawbacks.

When you're outsourcing, the meter is running. Teams of employees work for you at a substantially higher rate than your in-house employees. Off-site employees also need time to learn your company's methods, processes and terminology, which translates into more time to manage the project. And since the team is off-site, this can be difficult.

Some companies respond by out-tasking -- instead of turning over entire jobs to third parties, you assign specific tasks to external sources. Out-tasking makes certain parts of a project easier to manage, but third-party management issues can still arise.


When companies consider hiring a consultant, it's often difficult for them to look past expenses. Expert advice can be expensive, but more often than not, hiring a consultant is one of the most cost-efficient ways to meet a need, provided the consultant offers good advice that is implemented.

Consultants are normally brought in to increase profits by reducing fixed expenses. They can offer expertise not found in the organization, skills that may only be required for a specific project or for a short period. And because they are not employees of the company, consultants bring objectivity and balance to a project, which can be priceless.

Choosing the best solution

Identifying a project need is often a straightforward task, but justifying the budget is not. Most companies make the mistake of directly equating a consultant or an outsourced team to the per-hour cost of a salaried employee. But an employee's salary is not the total cost of employment.

Employee benefits, training and specialized equipment can add 30 percent to 50 percent to the cost of having an employee, not to mention periods of inactivity when the employee doesn't have much to do but is still on salary. When these indirect costs are figured, hiring consultants and trainers or outsourcing key tasks can be more economical than using your in-house team.

Once you've determined the true cost of using employees to accomplish a task, you can begin to evaluate your options -- training, outsourcing or consulting. Here are questions to ask.

* How urgent is my need? If you need to meet a government or client regulation, or if your production line has gone down, the need may be immediate.

* How specific or unique is the skill set? The more specialized the task, the more expensive a solution may be.

* What proficiency level am I willing to work with? An expert costs more per hour, but can typically complete the task in less time -- and do it correctly.

* Am I willing to pay travel expenses? If your expert must travel more than 50 miles, consider lodging and transportation expenses.

Answering these questions will help you determine your budget -- but how will you evaluate your solution? Sandy Mass is technical manager at BravePoint, a supplier of e-business and enterprise IT solutions to mid-market companies. Reach him at (770) 449-9696, ext. 3045.

Tuesday, 25 May 2004 07:24

Maximizing the value of IT dollars

Last month, we identified several important questions to ask when deciding if you should outsource key components of your company's IT operation. They were: What is our budget? What is the duration of the project? How urgent is the need? How unique are the skills we require? What experience level are we looking for?

Jumping into a relationship with a consultant or application developer without clearly identifying your goals can lead to disorganization and wasted resources. Ask questions to determine your need, and when you have them answered, ask another round of questions to choose a solution provider.


Choosing your provider

There are several characteristics to look for when selecting your solution provider. The questions are the same whether you are looking for an individual to help with a few days-long EDI project or for an offshore company for outsourcing your entire IT development team.

Finding a provider for larger undertakings generally requires more research, but do the research, because changing vendors mid-project can be expensive, time-consuming and counter-productive. When choosing your provider, look for the following.


* Expertise. Select vendors that have proven their expertise in the skills you need. Ask to see samples of work that relate to the project they will do for you. Ask for references, then talk to them. If possible, visit a customer site to see the proposed system or application in action.


* Longevity. The last thing you want to do is tie your prosperity to a company that may go out of business in a few years. If you're depending on your vendor to assist with mission-critical technology, make sure it will be with you for the long haul. If it has been in business for several years, ask how long it has been using the technology you are hiring it to provide.


* Stability. Check your potential provider's stability. Just because a company has been in business for 20 years does not mean it is stable. Check its Dunn & Bradstreet rating and ask for a turnover rate of key personnel. A low D&B rating is a red flag, but turnover is also important. If the company has a high churn, there may be underlying issues that impact your project.


* Objectivity. Honesty is crucial if you are to view your solution provider as a partner. You want a partner that won't let its eagerness to sell products or services impact the recommendations it is making. You also want a vendor that will tell you bad news as well as good, a trait most often found in companies with stated organizational ethics. Ask references how the vendor dealt with tough issues.


Turning vendors into partners

Many long-term projects can be viewed as mutually beneficial partnerships. You depend on your vendor to help you address technical issues you don't have the internal resources to meet, and your vendor depends on your happiness to keep you as a customer.

Before choosing your vendor, make sure it is easy to work with. Find out what its track record is when working with others and try to anticipate how its staff will interact with yours.


Narrowing down the short list

With clearly defined project deliverables and attention to vendor selection requirements, the final list of contenders should be relatively small.

When you select your solution provider, don't be surprised if it does not commit to your exact budget. Unless you have a perfect set of specifications, it is difficult to estimate how long a project will take. Nevertheless, it should be able to tell you if your budget is reasonable.

When negotiating your contract, insist on regular milestone meetings with individuals on both sides to ensure that the project progresses and the relationship is maintained. If you ask the right questions upfront and maintain the relationship during the project, you should not only find a great, reliable fit for your needs, but also find yourself in a very enjoyable working relationship. Sandy Mass is technical manager at BravePoint, a supplier of e-business and enterprise IT solutions to mid-market companies. Reach her at (770) 449-9696, ext. 3045.