Steve Trusty

Monday, 26 March 2007 20:00

Exploiting the underground

Your lease will expire in the next 12 to 18 months. You want the best value for your money and maybe staying in the current space is an alternative. Should you expect help from your landlord or your landlord’s broker? Will this approach bring out all of the market alternatives or just the ones that suit the best interests of the landlord … or the landlord’s broker … or the other landlord clients of that broker?

According to Mike Gallagher, vice president of Irving Hughes, there is an underground of available sublease space, much of which is quietly on the market only to those who are really in the know.

“The San Diego commercial real estate market is not much different than the New York night club scene — you have to be connected. There are 4.3 million square feet of sublease space on the market in San Diego today, and even more than that is out there that’s not listed and quietly available.”

Smart Business talked to Gallagher about the San Diego commercial real estate sublease market and what to consider as options for leasing space.

What causes sublease space to become available?

Prior to the 2000-2002 tech downturn, there was traditionally very little sublease space available and tenants and their brokers didn’t focus much on it. Initial waves of sublease space came on the market in 2001 when tech and related service companies began to downsize. Since then, the market has been filled by subleases of large companies downsizing their San Diego operations like Intel, Nokia, Merck, Pfizer and Eriksson.

A vast amount of the sublease space on the market today is the result of merger-and-acquisition activity whereby a San Diego company gets gobbled up, and the result is that the acquiring company cuts the local headcount and looks to dump the real estate. In the last year, the slowdown in residential real estate has caused several hundred thousand square feet of sub-lease space to come on the market as the result of downsized mortgage companies.

Why should a company consider a sublease opportunity?

The first is financial. You will save a ton of money relative to leasing space directly from landlords. Companies that need to sublease space will have to discount their space in order to sublease it. In most San Diego office submarkets, the average time the space has been listed for lease ranges from 11 months to 19 months, and it’s almost two years in UTC. The sublessor can’t wait that long, and cutting the bleeding quickly is the primary concern. Where a landlord is trying to maximize revenue when leasing space, a sublessor is trying to minimize losses.

Another benefit is flexibility. The majority of subleases range from one to three years but sometimes they can be longer term, or the term can be extended with the landlord. Many start-ups or tenants with softer credit find shorter-term subleases attractive. When signing a direct lease for space, landlords want to see the last two years’ tax returns and they do heavy credit checking, which can ultimately result in higher deposits or personal guarantees. We generally avoid this risk and cost with subleases.

Another benefit is that many subleases come with furniture, network cabling and phone systems available, which is generally included at no additional cost, all of which the subtenant owns at the end of the term. There is nothing like moving into a plug-and-play situation and saving hundreds of thousands of dollars on equipment.

Are subleases usually available?

As of this writing, there are 22 high-rises in downtown San Diego, all of which have multiple options available in a variety of sizes. Many subleases are available from law firms, but they are not publicly on the market due to the sensitive nature of how it would appear to employees; downsizing can be very traumatic for any professional firm.

Approximately 20 percent of our downtown clients are going into sublease space and 15 percent of our suburban clients are closing on subleases rather than leasing space directly from landlords. This is where the values are and this overhang of space is going to have to materially move off the market before landlords will be able to increase overall rental rates.

Are there pitfalls in subleases?

The biggest risk is credit. You need to know as much as possible about who you are subleasing from. You want to assure yourself that the sublessor is paying his or her rent to the landlord while you are paying the rent to the sublessor. A subtenant should also make sure that none of the furniture available is leased. Also, a subtenant will want to make sure operating expenses are not passed through, as the sublessor will have a base year that is several years old, and this can create a surprise cost.

Subleases universally come in as-is condition but we are able to negotiate free rent concessions to offset the costs of any tenant improvements or alterations. Again, it is important to work with a representative that is connected and experienced in this unique market of transactions.

MIKE GALLAGHER is vice president of Irving Hughes in San Diego. Reach him at mikeg@irvinghughes.com or (619) 238-4393.

Monday, 26 March 2007 20:00

The perfect storm?

The role of IT has always been to enable business success, yet it has become increasingly challenging to align IT with the business. Applications and users form the primary intersection between business and IT. Business today runs on applications (programs). The closest points of intersection between business and IT are applications and the users who depend on them to do their jobs, buy products, obtain support and the like.

“The more successful IT is in ensuring that all users have fast, secure, low-cost access to their applications from any location, the more likely they are to be viewed as an enabler by business executives rather than roadblocks to business strategies,” says Omar Yakar, CEO of Agile 360. “Unfortunately, most companies are facing a ‘perfect storm’ of opposing market forces separating users and applications by time, distance and organization — all of which increases the challenge of application delivery.”

Smart Business talked with Yakar about what businesses can do to address these challenges.

What is causing these shifts?

On the one side, globalization, mobility, offshoring and e-commerce are moving users farther away from headquarters. At the same time, trends such as data center consolidation, business continuity, security and regulatory pressures are making applications less accessible to users. As the velocity of change increases in the increasingly dynamic world, it is virtually impossible for IT to predict and mitigate all the variables that could impact an application’s success.

All of this is having a profoundly negative impact on the business utility of mission-critical applications at most companies. As the ‘noise’ between applications and users grows, application performance declines, security risk increases and costs go through the roof. Worse yet, IT’s ability to respond quickly to business requirements has never been under more pressure.

How should this change be addressed?

The approach that made IT successful in the past no longer solves today’s problems. The old cycle of deploying the fastest PCs, buying the fastest servers you can afford and keeping it all running efficiently with as many smart IT people as possible in each location has to end. The rate of business change is now much faster than our hard-coded infrastructures were designed to handle.

You can’t break this cycle simply by trying to reign in all the variables. Users feel locked down with increasing restrictions on their environment. And application projects are slowed down due to infrastructure limitations. What’s needed is a services-oriented mindset that enables you to loosely couple applications and users without limiting flexibility on either end.

How is this change implemented?

It starts by shifting attention away from technology-focused silos like networking, security and management systems and instead focusing on the business line of sight from applications in the data center to users — wherever they may be.

To change our way of thinking, we may also need to change our language. Most IT organizations still talk about deploying applications. When you ‘deploy’ something, it requires lots of effort, takes a long time and usually ends up costing more than you expected. The effort is so complex, rigid and slow that you often end up deploying things to people whether or not they really wanted them in the first place.

‘Delivery’ is a much more dynamic and flexible model. Cable TV providers, for example, deliver content to any user in any location, whenever it is requested. They don’t care what kind of home entertainment system you have or how often it changes. Delivery is fast, flexible, bidirectional, responsive and efficient.

How is this view different?

Instead of focusing on a technology silo (routers, servers, security), the focus is along the line of sight between applications and users, providing an infrastructure with the agility to deliver any application to any user in the best way possible, regardless of the change happening all around.

Instead of trying to control all the variables, IT shifts its focus to controlling the delivery network. This starts by controlling the initial delivery of applications at the point of origin using technologies like virtualization, optimization and streaming — all of which are designed to move each unique type of application traffic over the network in the most effective way possible. Next, you need to give users easy, secure access to applications while keeping application data protected. Third, you need to optimize all application traffic over long-distance networks. Finally, an application delivery strategy will monitor the experience from the perspective of the end-user.

Users are happy because they get the applications they want, fast and on demand. IT is happy because costs and security risks are reduced dramatically. And business is happy because IT is able to respond quickly to what the business needs.

OMAR YAKAR is CEO of Agile360 in Irvine. Reach him at (949) 253-4106 or omar.yakar@agile360.com.

Monday, 26 March 2007 20:00

Health plan compliance

Are your organization’s health and welfare plans up to date with the most current state and federal regulations? Have you properly communicated with plan participants?

“Employer-sponsored health and welfare plans are subject to complex federal and state laws and regulations, and many legislative changes have occurred over the last five years,” says Monica Toth, J.D., director of compliance for Gallagher Benefit Services, Inc., in Houston. “Compliance with these rules can be one of the most challenging and confusing tasks for HR directors and benefit managers. Non-compliance can put an organization at risk for penalties, taxes, litigation costs, judgments, and even criminal liability, in limited cases.”

Smart Business spoke with Toth about three common compliance failures that can easily be avoided.

Is the insurance booklet or the summary of benefits an SPD?

Plans that are subject to the Employee Retirement Income Security Act of 1974 (ERISA) are required to distribute a Summary Plan Description (SPD) to plan participants at specific times. An SPD must contain certain elements that are set forth in Department of Labor regulations.

Often, the insurance booklet provided by the insurance carrier, or the benefits summary provided by the third-party administrator (TPA), fall short of the SPD requirements. To remedy this situation, the plan sponsor, together with ERISA counsel, can typically develop a supplement that, together with the existing document, will meet the requirements of an SPD.

Failure to timely provide an SPD at a participant’s request can subject a plan sponsor to regulatory penalties of $110 per day. In addition, an insufficient or outdated SPD could result in the creation of unintended benefit rights, which could lead to participant lawsuits. To further complicate matters, the creation of benefit rights that are not supported by the insurance contract or the re-insurance contract (in the case of self-funded health plans) could leave the employer exposed for payment of the claim.

Do spouses receive COBRA notices?

Employers are required to provide participants and their spouses (if covered under the plan) with an initial COBRA notice within 90 days after the beginning of coverage under the plan. This usually means that notice must be sent to the home. Hand delivery of the notice to the employee at the worksite, inclusion of the notice in an SPD that is addressed to the participant, or inclusion of the notice in an employee’s ‘new hire’ packet that is distributed at work does not achieve notice to the spouse.

Further, it is important to remember that when spouses are subsequently enrolled in the plan, such as at open enrollment or where newly married, they need a COBRA notice — even if the employee has previously participated in the plan and already received his or her notice.

Employers should carefully review their notice procedures, or those of their COBRA vendor, to ensure that this common error is avoided. Failure to timely provide an initial COBRA notice can result in statutory penalties of up to $110 per day, with no maximum. Failure to provide a timely initial notice or election notice (the notice that is provided when participants or beneficiaries has a qualifying event entitling them to COBRA coverage) can also expose an employer to unintended COBRA coverage, or to an unintended extension of COBRA coverage that is not supported by the insurance contract or the re-insurance contract.

Does your plan cover non-tax dependents?

The IRS has a new definition of dependent that became effective in 2005. It does not affect who an employer can cover under its group health plan; however, certain dependents that were previously covered may no longer be covered on a tax-favored basis.

Employees cannot make plan contributions on a pretax basis for dependents who fall outside the new definition, and the value of the benefits for such dependents would be included as taxable income on the employee’s W-2 Form.

The new definition includes age, residency, relationship and support requirements. Employers should amend their Section 125 cafeteria plan documents and should review the dependent definition under their underlying benefit plans (health, dental, vision) to ensure that no payroll deduction or tax reporting adjustments are needed. In the alternative, a plan sponsor may wish to amend the plan to reflect a definition consistent with the tax rules.

Failure to comply with the new definition could cause disqualification of the employer’s Section 125 cafeteria plan, taxation to the participants of benefits provided there-under, and possible penalties for failure to withhold income tax for the employer.

MONICA TOTH, J.D., is the director of compliance for Gallagher Benefit Services, Inc.’s Houston office. Reach her at (713) 358-5232 or monica_toth@ajg.com.

Wednesday, 28 February 2007 19:00

Domestic and foreign patents

One way any size company can grow and increase assets is by developing or procuring new patents. Today, most patents are improvements on existing technologies.

Like trademarks, copyrights and trade secrets, patents are intellectual property (IP) that need to be protected. They do not give you the right to do something. Patents give you the right to prevent others from doing something. Obtaining and protecting patents can be quite time-consuming, but properly maintained and defended patents can be very valuable.

“You need to have a strategy when embarking on obtaining patents,” says Mitch Weinstein, a partner who leads the Intellectual Property Service Group at Levenfeld Pearlstein LLC. “You need to know your market and what you are trying to protect. You also have to be patient.”

Smart Business talked with Weinstein for more insight on domestic and foreign patents.

What do you mean by ‘determine a strategy’ before starting the patent process?

You need to know what you are trying to achieve before you start the process. Are you looking to protect a niche market, a whole new market or, for example, a replacement parts market? You have to see what is already out there.

What is the current ‘state of the art’? What are the key points that differentiate what you have? What are the base patents? Where is the market now and where is it going? What are competitors doing?

You need to determine if you have the funds and the time to go through the process and what the potential payback is.

How long does it take to obtain a patent?

It depends on a number of factors. Do you need more than a U.S. patent? If so, where do you need it most and first? Is the item mechanical or an emerging technology?

Some patents can be on file for four or five years before they are even examined. Others can take much less time than that. Pendency is increasing rather than decreasing, especially in faster emerging areas.

Why would some patents take longer than others?

It mostly depends on the area of technology. Mechanical applications take less time to move through the examination process. Cutting-edge technologies take longer. The number of qualified examiners and the number of applications being filed are determining factors.

With more high-technology applications being filed and fewer qualified examiners to review the applications, these applications are going to have a longer pendency.

Is anything being done to speed up the process?

Yes, the U.S. Patent Office is trying to tighten rules to decrease the pendency. A number of patent rules changes are pending that may be stalled with current changes in the Congress. For example, the Patent Office proposes to put the onus on patent applicants to do a more rigorous pre-filing search and to report the search results in a more detailed report. Other proposed rules changes cut down the size of the application or the number of patent claims in the application. One program that could prove very helpful to inventors wanting to obtain patents in multiple countries is a pilot program called the Patent Prosecution Highway (PPH).

What is the Patent Prosecution Highway?

The three largest patent offices are the U.S. Patent and Trademark Office (USPTO), the Europe Patent Office (EPO) and Japanese Patent Office (JPO). It typically takes more time to get patents through the EPO and JPO than it does through the U.S.

The PPH is a pilot program between the USPTO and the JPO. It will permit each office to benefit from work previously done by the other office by using the other patent office’s search as the basis for the search in that Office. This should reduce the examination workload, reduce pendency and improve patent quality.

Besides the exchange of information, as soon as an applicant receives a ruling from one office that at least one claim in an application is patentable he or she can request that the other office fast-track the examination of corresponding claims in corresponding applications.

If the PPH works as designed, once one country determines the legitimacy of an application, the application in the other offices can move up the queue ahead of other applications. If it works as planned and is then is expanded to Europe, it should be beneficial to all. Reduction in overall costs should thus be realized.

MITCH WEINSTEIN is partner and leader of the Intellectual Property Service Group at Levenfeld Pearlstein LLC. Reach him at (312) 476-7593 or MWeinstein@lplegal.com.

Wednesday, 31 January 2007 19:00

Business communication

Some might argue that the most important subject in an MBA program is business communication. After all, no matter how knowledgeable you are about finance, accounting, marketing, information systems or any other aspect of business, you must be able to communicate that knowledge to be successful.

“Year in and year out, we see communication skills at the top of recruiter’s lists of desirable traits in candidates,” says John Krajicek, coordinator of business communications studies at Mays Business School. “Simply put, the better you communicate, the more successful you will be in business.”

Smart Business talked with Krajicek for more insight on how to increase your proficiency in business communication.

What exactly are we talking about when we say ‘business communication’?

In a broad sense, we mean a business world communication situation, in which there is a sender, a message and a receiver. With this general definition we’re talking about anything that potentially communicates, including such things as facial expressions, font types, logos and clothing styles. But a more limited and much more useful definition would be ‘writing or talking in a business setting.’

What specific tips do you have for more successful communication?

In general, keep in mind that effective communication never happens in a vacuum. It is always and everywhere connected to a specific audience, message and situation. These three factors dictate tone, length, style and format. Always think through what would best serve this particular audience in this particular context for this particular message.

To get more specific, let’s think in terms of writing first and oral communication second.

The business world wants writing that is active, natural and concise. By active I mean verb-dominated, rather than noun-dominated passive prose. In other words, rather than write ‘the decision has been reached,’ write ‘we have decided.’ By natural I mean write in a voice that is not stilted or overly formal. Write in a style that captures the natural rhythms of speech. In other words, rather than write ‘in general, it can be said that things have a tendency to happen,’ write ‘things happen.’ And by concise I mean get to the point — no long windups, no beating around the bush. Write what you mean, and get to it quickly and clearly.

Try to write like Buffett (Warren, not Jimmy). He is an excellent model of effective, fresh, engaging, natural business writing.

How about tips for public speaking?

The same advice works here as well, with the addition of three more points.

One, make sure your audience feels as if you are talking to them, rather than regurgitating a memorized speech. Engage them. Capture the feel of a conversation.

Two, be absolutely certain that when you finish your presentation your audience is not thinking, ‘What was he talking about?’ Make sure your audience can summarize in 20 words or less the substance of what you just said.

And three, grant yourself permission to be nervous. We’ve all heard that a significant number of people fear public speaking more than they fear cancer. Being comfortable on stage isn’t easy. Too often when speakers are nervous, they get nervous about the fact that they are nervous … and then they get nervous about that. Soon you have a hall of nervous mirrors. Don’t try to deny that you are nervous — just tell yourself, ‘Yes, I’m a little nervous — and that’s okay.’ And a wonderful and ironic thing can happen if you just acknowledge it and give yourself a break — you end up being less nervous.

Any final advice?

To move back to a more general definition of business communication, one thing that I challenge my students to think about is presence.

Take the concept of stage presence and expand it. Drop the stage, and just think about presence. Think hard about how you carry yourself, how you interact with people, how you move through the world. When you stop at your usual coffee shop in the morning, how do the employees and patrons see you? How do you interact with people on the elevator in your office building? At the airport? With hotel staff when you’re traveling? If you think in these terms and become very attentive to your presence in the world — what kind of image you project, how you are communicating with those around you in every public moment of your life — then your more formal communication practices will automatically become much better. And so will your business.

JOHN KRAJICEK is coordinator of business communications studies and lecturer for the MBA and EMBA programs for Texas A&M University’s Mays Business School in College Station and Houston. Reach him at (979) 458-4323 or JKrajicek@mays.tamu.edu.

Sunday, 29 October 2006 11:07

Fewer choices?

When the Sarbanes-Oxley Act (SOX) of 2002 was passed it was heralded as the major step toward restoring the American investor’s trust in U.S companies, their boards, management and public accounting firms.

Has it been the cure-all since the Enron, Tyco International and WorldCom scandals, or was it a knee-jerk reaction that went too far? As with any new legislation, there are numerous opinions.

According to James Falter, Ph.D. and chair of the Finance Program at Franklin University, “SOX is much bigger than an accounting issue. The positive intent of SOX was to build goodwill, but some of the unintended consequences are negative and need to be considered. Also, the compliance affects shareholders and the investing public. These and other areas need to be further researched and documented as we move forward.”

Smart Business asked Falter for further insight into some of the costs and consequences of SOX.

What are some of the costs associated with SOX?
First of all, there are the compliance costs. These include setting up systems and controls required by the act and the additional accounting and auditing costs that go with that. The largest burden is on smaller companies, those with under $100 million in annual revenues. While larger firms had many of the required control and audit systems in place, there are still extra costs that they had to absorb.

The overall additional costs for compliance vary; however one piece of research estimated costs in stock markets losses to exceed $1 trillion. In March of 2005, it was estimated that it would cost a company with less than $1 billion in annual sales approximately $4 million annually to comply with SOX. Additional costs to meet SOX could force smaller, struggling corporations to consider restructuring or, possibly, bankruptcy.

What are some of the other consequences of SOX?
One of these is less choice for investors. Part of that is created by smaller companies going private rather than going through the time and expense to become SOX compliant. This is especially true of companies that were considering that option already. When they look at all the aspects, it becomes an easier decision for them.

There was a 30 percent increase in the number of firms going private from 2002 to 2003 (the year after SOX). More recently, surveys found 21 percent of corporations considered going private over the past year.

Is there more to their decision than cost?
Yes. One of the variables is the proportion of ‘insider’ ownership. For a company with a larger concentration of shares being held by its executives, going private or ‘deregistering’ is an easier transaction.

Another variable is the personal liability of certification for management and board. Some folks may become excessively risk-adverse. They’ll take the firm private rather than subject themselves to significant personal risk. Again, the fewer public companies, the fewer choices for the investing public.

Shareholders may also become concerned that scared management is spending more time on avoiding risk and less time on maximizing the value of their firm.

Are there other concerns for the American investor?
There can be a further reduction in choice if internal firms avoid the American exchanges because of SOX.

Of the 25 largest successful IPOs in 2005, 23 listed abroad. One factor given by the Bank of China last year in their decision to not list on the NYSE was the additional requirements and costs associated with SOX. Some foreign investors are also concerned that the costs of SOX compliance will affect their investments in U.S. companies.

Are there any newly realized consequences of the SOX reporting requirements?
There certainly are possibilities. Companies used to have 45 days to make quarterly reports. They now have only 35 days. They used to have 75 days after the close of the fiscal year to complete annual reports. They now have 60 days.

The effort, time and money required completing these reports in a compressed time frame and the potential personal liability for management can cause companies to spend more time looking back instead of looking and moving forward.

Do you see any changes or relief on the horizon?
As with most forms of new regulation, SOX was intended to address a problem. Since its inception, however, we must realize that there are consequences. Recently, we have seen calls to re-examine SOX and its unintended consequences. Over the next several years, we will probably see relaxing of SOX 404 compliance.

JAMES FALTER, Ph.D., holds the designation of Certified Financial Planner (CFP), is the chair of the Finance Program, and is a professor in the Vantage MBA Program at Franklin University. Reach him at falterj@franklin.edu or (614) 947-6155.

Tuesday, 19 September 2006 20:00

Your best friend?

A growing business has growing needs for credit. That means having a good relationship with your bank in order to maximize your ability to obtain required credit.

“It is extremely important to begin your relationship with your business banker as early in the lifespan of your business as possible,” says Donna Neal, chief lending officer for ViewPoint Bank in Dallas. “Ideally, you want to do that as you develop your business plan, even before the business is up and running.”

Smart Business asked Neal for additional insight on creating and maintaining a relationship with a business banker.

How thoroughly and how often should you discuss your business situation with your banker?
It depends somewhat on the type of business, how fast it is growing and your anticipated needs. At a minimum, you need to meet with your business banker once a year. Provide your year-end report, detail how you see the current year progressing, and detail any potential challenges to your plan. If you are contemplating a change in your business plan, you need to discuss that with your banker as soon as possible. If you are not meeting projections, you should discuss that with your banker. Provide your analysis of why projections are not being met along with an action plan to rectify the situation.

Your banker needs to hear about your successes and your challenges. Consider potential needs long before you have credit needs. The business banker can help you develop the required file as the need for credit approaches.

How much should be said about key employees and their contributions to the business?
This is additional information that can help your banker get to know you. It is equally important to have a succession plan and to advise your banker of that plan. If you are counting on certain individuals to help you move the business forward, you need a plan to continue business progress if something should happen to any of those individuals.

Your banker likes to know that you are thinking ahead. It is also important to involve key employees in your plans. Get their input before meeting with your banker. The more you utilize the talents of your key people, the more valuable those talents are to you.

If the business is seasonal or there are other areas that differ from more standard business situations, is the banker going to understand?
That is another reason to develop your relationship early on. The more your banker understands how seasons, weather, holidays or other variables affect your business, the more he or she can be prepared for those occurrences.

When loan officers see inventory is high and receivables low at a specific time they won’t be concerned if they recognize that as a part of your regular business cycle. If there is a good reason for certain ratios to be other than the generally accepted norm, those figures can be a positive — or at least neutral rather than a negative. If your trade group or association provides average income and expense data that support your business plan or mirror the cyclical aspects of your business, that information should also be shared with your banker.

The banker who understands that there will be peak times and slow times, when they are expected, and how they affect the overall business plan will have more confidence in your projections and your business.

Does a business owner’s personal credit have any bearing on the company’s credit?
It definitely has an impact. You need to be open about your personal credit situation along with that of any other owners.

If you are considering taking on partners or additional investors, you need to be aware of their credit situation, and they need to recognize that it will have a bearing on the availability of credit to the company. It is very important to know who you are going into business with before their signature is on the line.

Before the bank lends money or issues a line of credit, it is going to look at every possible aspect of the company and the owner or owners. The company’s credit is going to be based on the overall credit of each owner. It is important that all parties understand their shared and individual responsibilities.

In summary, the more your banker knows about your business and the earlier he learn its, the easier he can meet your credit needs as they arise.

DONNA NEAL is chief lending officer at ViewPoint Bank. Reach her at (972) 509-2020 ext. 7355 or donna.neal@viewpointbank.com.

Tuesday, 25 November 2008 19:00

Eye on the prize

What are the most pressing challenges facing your organization today? You want your business to prosper and grow. The more attention you pay to the right details, the better your chances are. How do you determine the most important areas on which to focus the most effort?

“It is important to regularly define what business you are in,” says Chuck Orrico, president and co-founder of Houston-based DYONYX. “Understand the key business drivers that fuel the business. Set your priorities based on these drivers to move the business forward to accomplish what you have set out to do.”

Smart Business talked with Orrico for his insight into focusing on the right priorities.

What are the top business challenges facing executives in today’s business environment?

In talking with clients all over the U.S. and the U.K., they consistently identify their top five priorities as the following:

  • They want to sustain a steady top-line growth.

  • They want to grow their profits.

  • They seek speed and flexibility in dealing with customers’ needs in today’s business environment.

  • They want sound managerial talent.

  • They seek excellence in execution.

The top two are almost always the same, although they may be reversed from time to time. And, excellence in execution is almost always fifth or sixth.

Are these challenges prioritized correctly?

Excellence in execution should be the first priority. It is more difficult to achieve growth or increased profits without excellence in execution. It is how you execute your key business processes that determine the speed and flexibility with which key decisions are made.

You also need to know how you are going to gain any efficiencies from any processes you implement. Will these processes increase efficiency or provide more layers that detract from your core business?

What role does IT play in addressing these challenges?

IT should be an enabler to the business and not a disabler. In an effort to increase productivity and efficiency, one of the common mistakes made by most organizations is to allow technology to dictate the business units by focusing on emerging technologies that are advertised to streamline work functions. As a result, the business units are focused to re-engineer key business processes to accommodate the new technology. In many instances, the business unit suffers a productivity downturn, finds the technology difficult to use and views IT as an obstacle in achieving its stated business objectives. IT must have the mindset to understand the key business drivers and how these drivers generate profit and keep the company in business. Then IT must focus on the processes that support these business drivers and how best to optimize them. Once optimization occurs, IT can then implement technologies that will automate these processes, bringing an additional level of productivity improvement and efficiency to the business unit — again, ultimately increasing its ability to properly execute.

What about outsourcing certain functions?

Productivity can be further increased by outsourcing commodity-type functions, such as network infrastructure and desktop and help desk support. This allows more time to focus on the key business functions.

What does continuous improvement (CI) really mean, and how can it help overcome challenges?

As the term implies, CI is a never-ending process. It is much more than specific activities, such as answering the phone by the third ring if you are in the service business. It is reducing variations. It’s eliminating situations that do not add value. It’s improving customer satisfaction. It is important to determine what causes situations to occur in the first place and focus on the causes rather than just fighting fires. When you engage in process improvement, you seek to learn what causes things to happen in the first place, and then you can use this knowledge to implement the correct solution.

Please explain process definition.

Building a task and event relationship is called process definition. Being able to define that process has several advantages. If you properly determine how processes and technology affect each other and what your customers are really looking for, you have a much better chance of supplying their needs in a timely, profitable manner. When you define any barriers to customer satisfaction, you can eliminate them. Examining a process can give you more insight into its pros and cons, allowing you to make adjustments that lead to improvement in your overall operation and customer satisfaction. Process accounts for 80 percent of all problems while people account for only 20 percent. If you have the right processes, your people can act more efficiently.

CHUCK ORRICO is president and co-founder of Houston-based DYONYX. Reach him at (713) 830-5603 or chuck.orrico@dyonyx.com.

Sunday, 26 October 2008 20:00

Pomeroy IT Solutions on IP telephony

One of the areas that more and more

businesses are exploring as a way

to be more competitive and profitable is IP telephony.

“IP telephony is an up and coming technology that is going to be the standard in

a few years,” says Mike Bond, CCIE, senior network VoIP engineer at Pomeroy IT

Solutions. “You can improve communications with increased mobility and receive

the added benefit of disaster recovery.”

Smart Business spoke with Bond for

more information on IP telephony.

What is IP telephony?

It is taking your phone and fax and

moving it into your Internet protocol

through your computer. Telephony runs

off your traditional network and passes

packets of information back and forth.

Besides internal networks, it can work

through external networks. It exchanges

voice, fax and other forms of information

that have traditionally been carried over

the dedicated circuit-switched connections of the public switched telephone

network (PSTN).

Why should I consider IP telephony?

With IP telephony, there is a return on

investment over a period of time. For one

thing, you can set up a virtual office

almost anywhere.

If you have multiple offices or locations, you can have a centralized system

to manage all of your communications. If

there is a problem with a line, you have a

backup built in that allows you to continue to communicate. It helps with remote

office workers. They can have their desk

phone literally sitting on their computer

and it functions as though they were in

the office.

Another advantage is that you can add

more employees without the expense of

more office space and equipment.

Are there potential pitfalls with IP telephony?

There are several, but with proper planning, they can be avoided or minimized.

If you lose power and have no backup, you lose communications. You must have

a backup plan. One option is to have a

backup generator to run your power. You

can also use a UPS backup system.

Whichever form of backup you utilize,

you must make sure that it matches up

with your system. Setting up your system

is a lot like building a house. You have to

have your foundation in place. Your network has to be optimized. If not, you

won’t be happy with the service. Make

sure that all parts of the system match

and work with each other.

You should implement quality of service appropriately. For seamless communications, you need to mark your voice

packets with a higher priority than data

packets and alleviate the network congestion to assure that voice is the highest

priority traffic on your network. You

should also adhere to a regular maintenance schedule that includes the communications servers, VoIP equipment

and the backup systems.

What are the costs?

It depends on the equipment you have

and on what you need or want. You may have some of the equipment on-site that

can be used. If you have to start from

scratch with all new equipment your

costs are going to go up. The cost can

run from $10,000 to $50,000, or more. It

also depends on the extras that you want

or need.

To get the best value, talk over all

aspects with your solutions provider. Let

them know all of your wants, but keep in

mind your needs and consider all the

pluses and minuses of each. Cabling

costs also need to be kept in mind.

How do the benefits offset the costs?

You can centralize your administration.

You will be bundling your computer and

telephone needs into one system. You

will only need one set of cabling as it

eliminates the need for separate PBX

cabling. Your LAN or network cable and

communications cabling are all now one

and the same. You can also eliminate

long distance charges. You will save time

in contacting those within the system.

Instead of punching 1 plus the 10-digit

number, you can punch in only the three-or five-digit extension number.

Moves, adds and changes (MACs) are

much less complicated and cost considerably less with VoIP than a traditional

PBX system. A PBX phone move is usually handled by an administrator or the

service provider. When moving a VoIP

phone, most of the time, the user can

pick up the phone and move it him or

herself to another networked port. Or,

when moving to a new physical location,

an administrator would only have to

modify a few fields. With a traditional

PBX, MACs could cost hundreds of

dollars.

MIKE BOND, CCIE #17963 (Voice), is a senior network VoIP engineer at Pomeroy IT Solutions. Reach him at (615) 399-0404 or by

e-mail at mbond@pomeroy.com.

Thursday, 25 September 2008 20:00

Pomeroy IT Solutions on desktop virtualization

Desktop virtualization may be a quicker and easier way to make changes to

any part of your computer system.

Without desktop virtualization each desktop PC must be worked on individually or

complex and inconsistent distribution

tools must be used. The downloading and

set-up takes time.

“One advantage of desktop virtualization

is the ability for employees to work from

anywhere,” says Geoff Hanson, practice

director of servers and storage at Pomeroy

IT Solutions. “Another is the immediacy of

disaster recovery.”

Smart Business talked with Hanson for

his insights into desktop virtualization.

What is Virtual Desktop Infrastructure?

Virtual Desktop Infrastructure, or VDI, is

the virtualization of the desktop environment. Without re-engineering applications,

traditional thick-client desktop PCs are

replaced with virtual machines that are

centrally managed and maintained from

the data center. Users can access their

desktops, which are running inside virtual

machines, remotely from any location via a

thin client or PC. This environment provides increased levels of reliability and efficiency while delivering a familiar experience to the end user.

Why is it important to my business?

There are many important advantages to

virtualizing a business’s desktop infrastructure. Through VDI, businesses are able to

simplify their desktop management,

increase and tighten control and security

and reduce their operating costs. By hosting the desktops on virtual machines that

are running on servers in the data center,

businesses are able to provide more effective and efficient desktop business continuity, high availability and disaster recovery functionality. System administrators

performing operating system and application upgrades, patch management and

desktop maintenance can perform these

tasks remotely through a centrally managed single dashboard interface. Provisioning new virtual desktops is accomplished in minutes, making end users more productive from the start. End users are

provided complete and unmodified virtual

desktops with greater application compatibility that behave just like their normal

thick-client desktop PCs, eliminating the

need for end-user training. They also have

the ability to access their virtual desktops

remotely from any location.

It is projected that businesses will procure

more than 300,000 virtual desktop licenses

by the end of 2008. That number will increase to more than 50 million virtual desktop licenses procured by the end of 2013.

What are the components of VDI that my

business needs to consider?

There are multiple components in implementing a Virtual Desktop Infrastructure.

The first component consists of the server

virtualization software that runs on the

servers in the data center where the virtual desktops will reside. The second component is the virtual desktop management

software that remotely manages the virtual desktop environments, and the third

component is the connection broker that

connects the end users with their virtual

desktops.

Is this going to cost or save money?

Businesses will realize significant cost

savings through implementing a VDI.

Hardware savings in the data center will be

achieved through server and storage consolidation and virtualization. Data center

operating cost savings will be achieved

through reductions in footprint, power,

heat, warranty support services and labor.

A client is needed to remotely access the

virtual desktops. Many businesses are

addressing their client needs through their

desktop technology refresh cycles by

replacing their traditional thick-client PCs

with centralized virtual desktops. They are

replacing many of the physical PCs, based

upon end-user requirements, with thin

clients. Thin clients include USB interfaces

to support printers and other external

devices and provide added levels of security. Thin clients are less expensive than traditional PCs, are energy-star compliant and

come with full warranty replacement.

Are there risks in virtualizing desktop infrastructures?

Yes, there are risks in virtualizing a business’s desktop infrastructure. Hosted virtual desktops are suitable for some, but not

necessarily all, end users. The performance

of applications through virtual desktops

may not be adequate for certain user

requirements. A strong recommendation to

IT organizations moving forward is to have

an assessment performed of their IT desktop infrastructure. It is also extremely

important to have assessments performed

on their server, storage, printing and networking infrastructures. These assessments allow businesses to better understand their hardware utilization, network

contention and the cost savings that can be

realized through consolidating and virtualizing their environments with new energy-compliant, energy-efficient and state-ofthe-art technologies. Regular audits of their

infrastructures should be performed to

ensure maximum utilization and efficiencies are being realized.

GEOFF HANSON is the practice director of servers and storage at Pomeroy IT Solutions in Cincinnati. Reach him at (602) 690-6376

or ghanson@pomeroy.com.