Steve Trusty

How familiar are you with unified

communications (UC)? UC is in its

very early stages compared to many other technologies, but it is something

you should be considering and planning

for. Productivity can be enhanced,

employees can save time, and your firm

can save money.

“The sooner companies can establish

their UC system, the sooner they can start

reaping the benefits,” says Louie A. Belt,

internetworking principal at Pomeroy IT

Solutions. “Besides the benefits of productivity improvements, UC also enhances the way in which all employees


Smart Business spoke with Belt for

more of his insights into UC.

What is unified communications?

UC is an integration of applications that

create the unified workspace that allows

people to choose how, where and with

whom they wish to communicate. Major

components include IP telephony, messaging, conferencing and meetings, media

exchange, instant messaging, text messaging and setting calendars. With UC,

employees can work from anywhere they

need to be and be able to share information with anyone that needs to know.

There are applications that allow your cell

phone to effectively turn into a desk

phone when you walk into the office.

Why should I be interested in learning more

about UC?

If you are interested in improving your

company’s communications and profitability, using UC is a very good thing to

do. It is a platform to integrate business

applications with communications. There

are various factors to consider, and it is

important to put the proper planning into

what is going to work best for your business. Results documented by Sage

Research showed organizations using UC

saved an average of 32 minutes daily per

employee because presence technology

enabled staff to reach one another on the

first try. That was just one of the many

savings that they have documented.

What are the key factors that one should be

aware of concerning UC?

When evaluating your move into UC,

you need to look at your current business

practices. You need to determine how

these practices depend on communication and how you can leverage UC into

your practices. You need to know when to

modify business practices to take better

advantage of UC and where cost or time

savings will be realized.

As workers become more mobile and

work from various locations, UC becomes

even more important. UC allows you to

optimize time and resources effectively.

UC is business driven, and each case must

be evaluated on its individual merit.

What are some of the benefits of UC?

It is easier to access information. There

is the ability to reach mobile colleagues

and key decision-makers quickly. More

effective communications are realized.

You can experience on-demand collaboration. Essentially, when implemented

effectively, it results in employee time

savings and cost savings. Wherever

employees’ work takes them, they can work more effectively. With gas prices

what they are, there can be substantial

savings for everyone.

How do I make sure that I am obtaining the

best UC fit possible?

Review your current systems and take

on some pilots that could improve

processes for you. Proactively implement

the organization changes that anticipate

the technology and market changes. Plan

for the future. When evaluating, understand your company’s core strengths.

Understand your vendor’s core values

and know where they intend to go in the

future. There are a number of things to

evaluate when choosing vendors and


  1. Total cost of ownership — Looking

    not only at initial upfront costs but also

    looking at the real cost over the lifetime

    and the value of what is received for what

    is being spent.

  • Feature robustness — Consideration

    of scalability, flexibility and adaptability.

    Can it be reconfigured and changed? Also

    consider compatibility — will it work with

    other programs in your system? 

  • Business continuity — Survivability

    of system. Is it able to take hits to the system and allow you to continue business?

    Can it survive outages? 

  • Management and support — How

    easy is it to maintain? Can I handle internally or do I need to outsource? If so,

    what is the experience of the vendor’s

    development team and what are the support systems available? 

  • Complexity — How complex is the

    solution in terms of installation configuration, ease of maintenance and, most

    importantly, how easy is it for users to use

    and navigate?

  • LOUIE A. BELT is internetworking principal at Pomeroy IT Solutions. Reach him at (615) 351-6095 or

    Tuesday, 26 August 2008 20:00

    Occupancy costs

    Occupancy costs have a big effect on the bottom line. Depending on whom you ask, they are usually the second- or third-highest costs of operating a business. Personnel costs are usually first. Occupancy costs rank just before or after IT costs. Some companies consider some of IT costs as a part of occupancy costs. You need to be fully aware of what goes into occupancy costs and look for ways to cut them and still deliver all the needs for customer and employee satisfaction.

    “Occupancy costs are not just rent, and when analyzing those costs, you also have to consider the culture of the organization,” says Eric Ross, senior vice president in the Atlanta office of CB Richard Ellis.

    Smart Business talked with Ross about what you need to know about occupancy costs and ways to reduce them.

    What are occupancy costs?

    Occupancy costs are any costs a tenant incurs to occupy a property. They may include but are not necessarily limited to: rent, taxes, insurance, landscaping, utilities, security, telephony, cabling, computers, furniture, fixtures and equipment. Some businesses include capital improvement costs they spend to upgrade the property. Some IT costs are lumped into occupancy costs for many businesses. Occupancy costs are both expense- and capital-related. These costs can also be affected by proximity to restaurants, entertainment, gyms, shops, residential housing and hotels. Closeness to public transportation also can affect costs as well as traffic in or around the property. In some businesses, traffic is very important, and in others, it can be a detriment. In any event, it has to be taken into consideration.

    It should also be noted that some firms, even though they own their property, charge occupancy costs against their earnings for a more realistic view of their expenses.

    What do you mean by ‘culture of the organization’ and how would that affect occupancy costs?

    The culture of an organization is its personality. It is composed of the attitudes, experiences, beliefs and values of the organization. An organization whose culture includes encouragement of physical fitness, camaraderie and attractiveness to young people may want certain amenities in close proximity to attract and keep the best employees. Location may not be important to attract customers, but closeness to gyms, restaurants and entertainment may be of great interest to employees. Retail amenities and housing within walking distance may be important. Easy access to public transportation may be another criterion. Organizations may be willing to pay more for space that is close to public transportation. This can become even more of an issue with rising fuel costs. Any or all of these factors are going to affect costs. The more attractive a property is to a wide range of people, the higher the cost.

    What are some of the other factors that affect occupancy costs?

    Taxes. Cities and other taxing authorities are raising property taxes because of previous sales of properties at record prices. They are basing their rates on the highest possible values to produce more income to cover their costs.

    Utilities. These costs are not going down. Tenants are trying to figure out how to be better corporate citizens in use of water and other utilities.

    Insurance. Rates have gone up with terrorism coverage. Of course, the coastal areas also have seen increases. Replacement costs have gone up, too. They haven’t been spiking like in the past but still are going up.

    Landscaping. There are no significant increases here except in the extreme drought areas. Owners have to make some changes in their maintenance practices and requirements.

    Security. Since Sept. 11, companies have looked more closely at their security plans and adjusted as needed. Almost everyone has had to increase security. It may only account for 1 to 3 percent per year, but that must be considered.

    What can be done to reduce occupancy costs?

    Occupancy costs can be reduced by occupying less space. An area that is becoming increasingly effective is redesigning to fit more bodies into a space. The working figure used to be one employee to every 250 rentable square feet. The norm is now becoming one per 200 square feet. Another way to reduce space needs is by what is known as hoteling. If a business constantly has people on the road, maybe one office space will serve two or three employees. Telecommuting also has an impact. It may be driven more by fuel costs but still affects space needs.

    ERIC ROSS is senior vice president with the Tenant Representation Group at CB Richard Ellis. Reach him at (404) 923-1303 or

    Wednesday, 25 June 2008 20:00

    Pomeroy IT Solutions on staff augmentation

    There are a number of reasons that

    you might need additional IT help.

    It could be your business is growing. You might be exploring expansion

    into a new area. Maybe it’s time to investigate better customer service options. It

    could be time to ramp up for a new product launch. Perhaps you need to get a

    better handle on how your business is

    really doing.

    In any event, you need help — maybe

    one person for a few hours a week,

    maybe several people working multiple

    days — to get the job accomplished,

    especially in today’s challenging business


    “In uncertain times, staff augmentation

    is usually the way to go,” says Matt

    McGee, the vice president of technical

    staffing services at Pomeroy IT Solutions.

    “A temporary worker is the best alternative to a W-2 employee.”

    Smart Business spoke with McGee

    about ways to obtain the best solutions

    with staff augmentation.

    What do you mean by staff augmentation?

    Staff augmentation is an outsourcing

    strategy to quickly obtain the person or

    people you need to complete a project.

    The project may be temporary or ongoing and may take one or more people.

    The key is, you are not in a position to

    add to your full-time staff but the work

    still needs to be done. Those reasons

    could include but are not limited to: You

    are restricted to a certain percentage of

    labor to income and this project can be

    charged to another line item; the work

    might be for a specific project and that

    project can support the work without it

    increasing the entire overhead; you may

    need to maintain the ability to ramp up

    and ramp down very quickly; and you

    may not be in a position to attract the talent needed on your own or have the skill

    sets to get the best people so you partner

    with a specialist in this area.

    How should staff augmentation be done?

    It is very important to partner with a

    firm that understands you, your business

    and your needs. Take the time upfront to

    interview two or three potential partners.

    Make sure that they will take the time to

    really get to know you and your needs. If

    your partner doesn’t know you well

    enough, you’ll become a sorter of

    resumes. You’ll receive hundreds of candidates when you really only need a few

    to select from for the best fit.

    It is also important for you to take time

    to thoroughly research your needs. As

    the specific needs are identified, they

    must be carefully spelled out in the job

    description. It can’t be one or two sentences. It is also important for you and

    your partner to work together to find the

    person that not only has the skills you

    need but also will fit in well with your

    culture. The better your partner knows

    you, the better it can identify the right


    What do you do differently in finding temporary resources?

    You need to respond much faster. A

    person identified by your partner may be

    on the market for a week or two. If you

    don’t respond within 24 hours with an

    interview time and take a week or less to

    make a decision, you are likely to miss

    the right person. If the first person you

    talk to isn’t the right one, you need to

    respond quickly to get your partner looking for another candidate. You also need

    to be clear on why the first one was not

    right so your partner has the information

    needed to make a better choice on the

    next go-round.

    What do you do the same?

    Your criteria for hiring an employee or

    retaining a resource should remain the

    same. In either case, you want the person with the right skills that fits in to

    your company and with the other

    employees. The resource is going to

    have to fit in to be comfortable and

    effective. Staff augmentation is a great

    pathway to a full-time employee. In fact,

    you should not hire a resource whom

    you would not consider as a candidate

    for a full-time position.

    Are there different tactics for different types

    of businesses?

    As a CIO or IT manager, there is no difference for you. Your recruiting partner

    should be looking for talent who has

    experience in your type of business. This

    will be easier for your partner if it has

    experience in your area. That is one of

    the things to look for as you interview

    potential partners. There will be a better

    fit if the resource is already very familiar

    with your type of industry.

    MATT MCGEE is the vice president of technical staffing services at Pomeroy IT Solutions. Reach him at (859) 586-0600 x1162 or

    Friday, 25 April 2008 20:00

    Green-powered IT

    Being green isn’t just about the environment. Going green with your information technology (IT) infrastructure can take more red out of your expense side and put more green on your bottom line. Today, a significant cost factor of in-house or outsourced data centers is directly related to power and cooling. The more efficient the system, the less power is consumed and the more you can save. Energy is not only consumed by power servers, but it is also needed to cool them. Outsourcing some or all of your IT needs to a “green service provider” to reduce your overall IT footprint and management costs can provide additional savings.

    “Virtualization, business continuity, service-oriented architecture (SOA) and proactive monitoring are four good strategies that lead to improved resiliency and reduced cost for the business, while at the same time promoting good corporate citizenship — great reasons to care about green power,” says Trent Henson, Executive Vice President, Information Technology at DYONYX. “Anything that can be done to reduce physical infrastructure and provide the same or better level of service inherently reduces the complexity (and cost) for managing that process.”

    Smart Business learned more from Henson about the benefits of green IT.

    How does virtualization fit with green power?

    Typically, as a business grows, more servers are needed for more applications. More servers require more rack space, which requires more floor space. All of this infrastructure requires more power and cooling. More power requires more money. Virtualization is a proven strategy for making hardware more efficient. This mature technology allows several operating systems to reside on the same server, and more tasks can be performed on one machine. Where traditional servers provide a 1-1 efficiency ratio, virtual servers provide an average 15-1 ratio. Energy can also be saved by deferring lower priority tasks to be performed at night when energy is needed less for other operations and costs can be considerably less. Instead of purchasing new, more efficient servers that utilize less power while doing more, you might look into outsourcing to a firm that through economies of scale only charges you for the resources you need and utilize.

    What about business continuity?

    You can also leverage virtualization technology for lower-cost, high-availability solutions. Businesses need to make sure they take measures to ensure business continuity; however, many can’t afford two of everything should one component fail. Virtualization allows you to lift virtual images (your data) onto another physical device, quickly and without the time and cost of replacing the exact same hardware. A service provider that has multiple server sessions and data centers can build this in for you. Redundancy is made practical with virtualization.

    What is service-oriented architecture, and how does SOA fit into this?

    SOA is the concept of taking traditional IT functions of a business and turning it into a service. SOA reduces costs through increased reuse, another greening strategy.

    Another advantage of SOA is it reduces redundancy and the associated decommissioning of applications. Common implementation of business rules and processes results in better consistency, security and compliance. While the long-term results can provide more service with less cost, the initial developmental costs can be quite extensive. It takes a while to recoup them. Virtualization can provide affordable SOA, especially for middle-market companies. If you outsource SOA functionality, it is possible to get even more service for less cost. Imagine spending a few thousand dollars per month for a service that could cost well over $250,000 in purchased hardware and software, data center space and the skilled resources to manage it all.

    Don’t most companies already have proactive monitoring systems?

    Many companies think they do, but more often than not, it is more reactive in nature. When something happens, someone is notified, and the IT department gets right on it. Proactive monitoring is encompassing and utilizes predictive analysis to notify IT before the failure occurs. Does your system monitor power draw? As the power demand goes up, more heat is produced and something has to give. A breaker trips and the system goes down. Getting it back up is going to take some amount of time. Even minimal downtime can be costly, especially if core systems or customer service is compromised. Monitoring power draw, all motherboards, ram and all other processes can predict an oncoming problem and provide notification and adjustments before a crash occurs. Make sure your IT department or outsource provider can demonstrate this as part of your systems management.

    At the end of the day, most companies are more interested in meeting their business goals than being green. By asking the right questions, it is possible to achieve both objectives, and who doesn’t want to increase productivity, reduce cost and look good doing it?

    TRENT HENSON is Executive Vice President of Information Technology at Houston-based DYONYX. Reach him at (713) 293-6359 or

    Sunday, 24 February 2008 19:00

    A new methodology

    Significant benefits can be gained with wide-scale virtualization. Holistic virtualization is the next step in the evolution. It is imperative to have a strategy to pull everything together for best results.

    According to Jaymes Davis, virtualization practice specialist at Entisys, “The most important thing about VOA methodology is that it is a new, trademarked methodology that is sweeping the industry as the de facto standard for building virtualization architecture. It is time to consider what it can do for you and your company.”

    Smart Business talked with Davis for his insight into holistic virtualization.

    What is holistic virtualization?

    It is defining solutions and architectures within your environment to work with virtualization technologies. A methodology has been created for transitioning and adapting to the virtualized workload. We have found that holistic virtualization has become the mindset in today’s market around solutions that integrate everything from hardware, software and applications because of its benefits. Prior to this point, people believed certain workloads would not work in this space, and we are finding that this is not the case.

    What’s the VOA methodology?

    VOA is the virtualization-oriented architecture. It is a methodology that has been defined to create an assessment that captures the logical definition of your existing environments, i.e. processes, inventory, forecasting, architecture design and implementation planning. The VOA identifies soft costs and hard costs when you are thinking about consolidation, new services, business continuity planning or disaster recovery. It is a holistic view of virtualization that employs the virtualization ecosystem to ascertain a strategy versus utilizing it as a tactical solution.

    Why this methodology? How was it created?

    The VOA methodology was created by the deployments and implementations for SMB to enterprise customers and finding processes and logic structures as well as information architectures that helped create the stepping-stones for this process. When aggregating the data, we found that certain subsets of logic indicators played out in all the scenarios, i.e. VM sprawl, forecasting host scalability as well as defining architecture and processes, which allowed us to create and base the VOA methodology on an ITIL format with an emphasis on performance and perception.

    Why should people move to virtualization?

    From desktop users to managers of data center infrastructure, people move to virtualization for a number of reasons. The main reason is to create new service capabilities within their own environment and to create time to market improvement of their business. Another reason is consolidation and disaster recovery (business continuity planning). New opportunities for virtualization have been found in desktops with VDI architectures, providing more cost savings, mobility and stability scenarios than ever.

    How can a virtualized company benefit from the VOA methodology?

    Existing virtualized companies can benefit from the VOA methodology through the evolved assessments, the VOA foundation services and the VOA comprehensive assessments. These expanded services were created to further adoption of the new technologies and service methodologies for your existing environment. If you don’t have an ITIL-based change management or a service delivery model for your virtualization platform as well as chargeback, these expanded methodologies are for you.

    With so many different virtualization platforms, how do you choose?

    It is important to provide a choice for customers after defining the logical structure and requirements within an organization. This helps create solution architectures and scenarios with most hypervisors and hardware configurations while embracing CAPEX and OPEX before defining a strategy for a company. Because there are so many choices and virtualization has such a big ecosystem, it is important to make sure that the solution presented is customized to fit those variables.

    Are there workloads that can’t be virtualized? How does that tie into holistic virtualization?

    There are workloads that can’t be virtualized but can still benefit from virtualization-oriented architecture. Nonvirtualized workloads can utilize tools from third-party vendors as well as platform supportability to augment its capability to participate. Virtualization can play a part in disaster recovery for the nonvirtualized workload at a reduced capacity or a service replacement once identified.

    How long does a VOA assessment take and what is the cost?

    VOA assessments for Phase I take approximately two weeks. The latest virtualization appliance technologies, project implementers and project engagement services are utilized to fulfill Phase I assessments with speed and accuracy. Cost varies based on the server count, but the return on investment and savings can be staggering.

    JAYMES DAVIS is virtualization practice manager for Entisys Solutions. Reach him at (925) 270-8230 or

    Sunday, 24 February 2008 19:00

    Avoiding disaster

    No one knows when a disaster might strike. Whether it’s a natural disaster, riots or a disgruntled employee erasing the computer’s hard drive, disasters can have a huge impact on your business if you are not prepared. The longer it takes to recover and get back in business, the less chance a company has of surviving.

    “Disaster recovery can make or break a company, depending on its preparedness,” says Geoff Hanson, practice director-server of operations, storage and migration services at Pomeroy IT Solutions Inc. “The CEO or CFO must consider it if the business is going to be there tomorrow. If you don’t plan for disaster recovery, it could be gone. Besides yourself, you need to think about your investors, employees, customers and community, and how important your business continuance is to all of them. By positioning your company with the right plan, right equipment and right personnel, you can survive a disaster.”

    Smart Business spoke with Hanson about disaster recovery processes and what companies can do to implement them.

    What is the first step in disaster recovery?

    You should develop a comprehensive disaster recovery plan and put it in place. A company that plans and prepares can experience minimal or no loss. Companies that are unprepared will experience a very stressful time during their recovery process.

    What areas of a business should be taken into consideration?

    Disasters take a wide variety of forms. Power outages, floods, fires, weather phenomenons and riots can happen at any time. Some emergencies might not harm your property directly but may make it impossible to access it for a period of time. Take into consideration power, people, facilities, air conditioning, communications and the surrounding area. Businesses depend on computers and people to run them. Evacuation, data and paper backup, processes and safety must be thought out. Every area of your business should be taken into consideration.

    Who in the organization should be involved in the planning process?

    All departments within the organization should have some involvement in the planning process. A point person should have responsibility for the overall plan. That person needs to make sure that all departments are involved in providing input and that each department knows what it needs to do to implement the plan. Then everyone can do their parts when disaster strikes.

    Is more and better technology the only answer to disaster recovery?

    More and better technology can aid in the recovery process, yet it is not the only answer. It takes a combination of the business plan and the disaster recovery plan itself, designed and implemented by key personnel utilizing the right equipment, to successfully recover from any disaster. You have personnel, customers, equipment and productivity to consider. Your plan has to spell out how you are going to recover and what equipment is needed. Remote facilities and personnel must be an integral part to the recovery time and to minimizing any disruption. Having the right-skilled resources in place with the replicated data for a company to press on with business as usual is the key. It is also very important to have space between your business and the data recovery facility. It does you no good to have your backup data system so close to your home office that a disaster can take out both.

    How do you differentiate between cost and value when it comes to disaster recovery and business continuity?

    First of all, cost is a dollar amount. Value is what you receive for that amount. Companies have to ask themselves how much time they can afford to be shut down. The shorter the time, the more comprehensive the plan must be. Those who plan and invest and have everything in place can recover with a minimal effect on the bottom line. How many companies went out of business because of Sept. 11, Hurricane Katrina or any other disaster that comes to mind? How many of those might still be in business if they had a disaster recovery plan? What is the value of continuous operation compared to the cost of being prepared for whatever comes up?

    How can you save the business money while lowering the risks?

    The first step is through proper disaster recovery planning. The next is through server and storage consolidation and virtualization initiative. These tend to reduce and/or eliminate specific hardware dependencies. Companies are thus better positioned to ride out disasters with little to no loss of data, equipment or their associated business revenue streams.

    GEOFF HANSON is the practice director-server of operations, storage and migration services at Pomeroy IT Solutions Inc. Reach him at (623) 551-5771 or

    Wednesday, 26 December 2007 19:00

    Real estate: Where’s the value today?

    Changes underway in the debt market are unquestionably having an effect on the value of real estate. The result can be positive or negative depending on a variety of circumstances. As an investor for either the short or long term, it is critically important to be current on the value of the asset in today’s market.

    “Right now, we are in the most dynamic and fluid real estate market of the last 10 to 15 years,” says Jerry Gisclair II, MAI, Managing Director — Florida for CB Richard Ellis Valuation & Advisory Services Group. “As such, third-party appraisals are imperative to ensure property owners are taking the right steps to realize optimum return on their investment.”

    Smart Business talked with Gisclair for his insight on the current real estate market and why current valuation updates are important.

    What effect is the current debt market having on real estate values?

    The current debt market does not offer the same high-leverage programs so evident in 2005 and 2006. Today, we see deal structures that require stricter underwriting, higher equity requirements and subsequently lower loan to value debt percentages. The result is a shift to those buyers and lenders who prefer lower leverage and who have been somewhat shut out of the market by the more aggressive, highly leveraged entities of the past few years. While the reality and the on-going anxiety of the subprime market has become evident in the residential sector, we have seen only minor impact to commercial properties. Aside from market to market strengths and weaknesses, the fundamentals in the commercial sector remain in check and quite healthy.

    So, is this good or bad for values?

    It depends. Repricing certainly had been expected under these conditions, and we are seeing this come to fruition for highly leveraged properties where buyers paid top dollar. A good example is land, where prospective residential or high rise condo developments caused prices to soar. On the other hand, quality assets are still experiencing strong demand but are now being pursued primarily by investors with the capacity to bring a higher equity component to the transaction. As such, the changes in the debt market are somewhat mitigated. Additionally, the change in the value of the dollar is encouraging to foreign investor interests, who see a two-fold advantage in a real estate play and a long-term hedge that the dollar will recover, causing an arbitrage of sorts on their currency.

    Are appraisals needed then for other than buying and selling real estate?

    Certainly. Current appraisals are also important for annual reporting to fund managers, private investor groups, for some Sarbanes-Oxley compliance cases and to assist with tax planning and FASIBE 141 compliance. A third-party appraisal accompanied by a proper cost segregation analysis can help structure depreciation schedules that can potentially result in significant federal tax savings. A current appraisal can also help in evaluating the true potential of a property and what steps can be taken to achieve that added value.

    What should be considered when choosing an appraiser?

    It is important to interview the appraiser to make sure he or she meets your particular needs. Your appraiser should be adept at analyzing financial statements and properly weighing risk/return amongst different property types. He or she should have the necessary resources and a sound understanding of current market conditions to ensure a valuation at a specific point in time. What was happening 15 months ago is relevant but not necessarily applicable today.

    If you have properties in multiple markets, both nationally and/or multinational-ly, it would be very helpful to work with a company that has the presence to bring demonstrated local expertise to each. While the real estate itself remains subject to a variety of local influences, the approaches and methodology to value are much more consistent. As such, the best of both can be enhanced through a single source provider.

    Do you have any other advice for those in the real estate market?

    Treat any investment as though you are going to hold it for at least three to five years, regardless if it is a residential or commercial property. Consider the cost to enter, alternative investment options, current valuation, long-term goals and, of course, the cost to exit. Some of the problems on the residential side occurred because the real estate was simply treated as being much more liquid than it really was. This applies to the land purchases for residential development and the home buyer.

    JERRY GISCLAIR is the Managing Director — Florida in the Valuation & Advisory Services Group of CB Richard Ellis in Tampa. Reach him at (813) 261-4510 or by e-mail at

    Wednesday, 26 December 2007 19:00

    Communication in employee benefits

    Employee benefits are an essential tool in attracting and maintaining a motivated and loyal work force. If the employees aren’t fully aware of all the benefits available to them, much of the time and effort employers spend to select those benefits is negated.

    “People can’t put a value on what they don’t know about,” says Naomi Hall, regional director of training for Gallagher Benefit Services Inc., Houston. “Effective communications include getting the right information out at the right time for the right audience. The more employees know about the benefits that the company is paying for, the better chance there is that they will appreciate what they have.”

    Smart Business talked with Hall for her insight into effective employee benefits communication.

    Why is communication of benefits so important?

    First, there are the legal requirements. Most employers are familiar with the communications mandated by COBRA, HIPAA, and other federal and state laws, but just as important is keeping employees regularly informed about what the benefits mean to them and at what cost. Too often, employers will simply hand out a ‘benefits booklet’ once a year when the new plan takes affect. Studies show that about half of employees just skim those booklets. Communications-savvy companies are finding a variety of ways to provide more timely information targeted to the employees’ needs.

    Strategic communications are so important. It takes forethought and planning, but can pay big dividends in employee knowledge and morale.

    What benefits information should be provided on a regular basis?

    The majority of employees underestimate the total cost of their benefits package and overestimate their cost share. Employers should share information about the total cost of benefits with employees. It’s often called ‘the hidden paycheck,’ the amount employers pay for benefits, yet employees don’t know about it. That can be 20 percent to 40 percent of their total compensation. Also, reminders about how to most effectively access and use benefits are essential. For instance if you have a wellness plan that pays for a free annual checkup, remind employees about it. Healthy employees are more productive. You can also communicate various ways that employees can better maintain a healthful lifestyle.

    What are some of the ways companies can communicate this information?

    It depends on the corporate culture and what resources the company has available. If employees regularly have access to the Internet, e-mails or postings on the company intranet can be effective. Some companies are setting up specific Web sites just for benefits. Employees can go to that site 24-7 to obtain benefits information and request updates to addresses or even coverage levels. Web casts are also effective. A year-round communications campaign is very important. If considering print communications, postcards could be mailed. Break-room posters are visible reminders of the benefits package. Helpful wellness tips in the pay envelope can be effective. If you need help in getting started, your benefits vendor should be able to supply some ideas or even printed materials that you could use.

    Employers don’t need to spend a lot of time or money, but the more they do communicate, the more advantages they are going to receive from the benefits provided. Some companies use a specific font or logo to communicate benefits information. Any time employees see that font or logo in company communications they know the item is addressing benefits and they are more likely to review it.

    What do you mean when you say the right time?

    The right time certainly includes the open-enrollment period. Be sure to get the information out at least a month ahead of the deadline. Some larger companies formally survey employees from time to time to get their feedback on effective benefits programs. If you are doing this, be sure to get the survey information out six to eight months before renewal so that you have time to thoroughly review the input as you are making decisions. These surveys can be done online, through one-on-one visits or focus groups. This information can help determine what is really important to your work force.

    What do you mean by the right audience?

    For example, if you have a primarily younger staff, those people are probably going to be more interested in child-care programs than retirement plans. By communicating the availability of nurse hot lines through the medical plan or possible federal tax breaks on child-care expenses by using a flexible spending account, you can target this part of your work force so that the employees better value the benefits package provided to them.

    NAOMI HALL, CEBS, is regional director of training in the Gallagher Benefit Services Inc. section of Arthur J. Gallagher & Co. in Houston. Reach her at or (713) 358-5898.

    Friday, 26 October 2007 20:00

    Controlling insurance costs

    Securing the right insurance is an ongoing challenge. Obtaining affordable insurance can be an even greater test.

    The market can get quite complicated so it is wise to consider all the alternatives. One option is group captives.

    “Group captives provide a means whereby business owners can achieve more control and stability over their insurance program, while lowering their insurance costs through the return of underwriting profits and investment income,” says Norman Henley, director, Captive Services, Arthur J. Gallagher Risk Management Services Inc., Houston.

    Smart Business talked with Henley for more of his insight into group captives.

    What is a group captive?

    A group captive is an insurance company owned and operated by its members for the benefit of those members. It is over-seen by a board of directors made up of elected individuals from the member firms. They are often based in locations where there is favorable tax treatment and less onerous regulation, like Bermuda and the Cayman Islands. Since the passage of the 1986 Tax Reform Act, domestic captives have become more popular. Some U.S. states, such as Vermont, South Carolina and others, have passed laws adopting captive domicile status to be able to regain some of the lost premium tax income.

    Is there more than one type of group captive?

    Essentially, there are two types of member-owned group captives: homogeneous and heterogeneous. Homogeneous refers to those groups whose members represent the same industries. For example, all the members could be temporary employment agencies, or they could all be building contractors, trucking contractors or electrical distributors. Heterogeneous group captives are those whose members come from diverse industries.

    What are the benefits of a group captive?

    There are several. One of the benefits is that premiums are based on the insured’s loss experience rather than trends in the overall insurance market. A captive provides control of claims through proactive, third-party claims management. The insured retains the underwriting profit and investment income.

    As a group captive member, you are an owner. You control the ‘who, why and when’ of the insurance process. The financial strength of the group allows the members to choose the highest quality service providers while limiting the risk of catastrophic losses. This ability to control and manage these services reduces operating costs.

    In a group captive, premiums paid to a captive are generally tax deductible because there is risk sharing. That is unlike self-insured programs where only the operating expenses are deductible and losses are not deductible until paid.

    What about loss control?

    Along with claims management, the business owners control the return on their investment through the design of detailed loss prevention strategies.

    Captive members take an active part in the claims process. They do that with protocols that provide for special handling requirements. They identify ‘hot claims,’ which alert adjustors to claims that require immediate attention. Many captives also have access to online claims information that allows real-time review. Claims management and loss control services are usually provided by third-party administrators.

    What coverages are written by a group captive?

    Captives were originally used to insure tough-to-place product liability insurance. Over the years, they have evolved into a creative vehicle for providing insurance covering most types of frequency-driven insurance including, but not limited to, workers’ compensation, general liability, automobile liability, automobile physical damage and even warranties. Because many of these have a ‘long tail’ on the claims payment, the insured has the benefit of investment income.

    Should a business owner be concerned with this alternative approach?

    Once an alternative, we believe that captives have now become conventional. Currently, there are more than 5,000 captives in existence, representing $38 billion in premiums.

    But, entering into a group captive should not be taken lightly or with only the expectation of immediate savings. It is imperative to seek out and obtain expert advice on all aspects.

    It is important that the determination of risks are actuarially determined, that the premiums are set to reflect the retained exposure and that all operating costs are determined. All of these costs must be shared on an equitable basis.

    NORMAN HENLEY is director, Captive Services at Arthur J. Gallagher Risk Management Services Inc. in Houston. Reach him at (713) 358-5788 or at

    Tuesday, 25 September 2007 20:00

    Offshoring and outsourcing

    There are numerous new outsourcing and offshoring issues that need to be recognized and dealt with before a company jumps on either practice’s bandwagon.

    “Company executives are always looking for ways to lower costs and increase services delivered,” says Al Solorzano, practice manager in Application Delivery Infrastructure at Agile360. “Outsourcing and offshoring are ways to increase efficiencies, however, the shift to globalization isn’t without pitfalls.”

    Smart Business talked with Solorzano for his insight on some of the things executives should consider.

    What should be my first concern as I consider outsourcing and offshoring?

    You have to be realistic in your expectations. Your organization must have the infrastructure and systems in place to maximize the efficiencies expected or you will never get the best return on your investment. In order to maximize the potential benefits to your company, you also will want to partner with an adviser who has done this before who can help you think outside the box and analyze the pitfalls on both sides. Realize that the person or company that you are dealing with to supply the offshore work force has more experience in this field than you have. Consequently, he or she is going to have more experience in developing a contract. Doesn’t it make sense for you to partner with someone who is looking out for your best interests?

    What about security concerns?

    Security is definitely an issue. You have to consider security of data — electronic and print — and security of communications, with an emphasis on access rights and user authentication methods. Along with that, you have to think about turnover — how it relates to security and to customer service. Training is another issue. What systems does your organization currently have in place to allow new employees to learn their tasks quickly and accurately? Are your account provisioning systems and security auditing tools efficient? The higher the turnover rate the offshore work force has, the more an inefficient IT infrastructure can result in increased costs for your organization. It is also always best to plan for more turnover than initially expected.

    How do I know what I am going to receive from a potential supplier?

    Both service-level objectives (SLO) and service-level agreements (SLA) should be developed. Understand which is which. An SLO lays out what you want to accomplish and what is needed to meet those objectives. An SLA is the agreement by the supplier of what is actually being supplied and usually comes with financial compensation for not meeting the agreed-to terms. An SLO is analogous to the postal service and standard mail delivery. There are posted terms on standard mail delivery, in this case the service-level objective. You agree to those terms when you send standard mail by using a stamp on your envelope. If the postal service takes another day or two to get the mail delivered, the postal service does not compensate you.

    However, the SLA is more analogous to a higher-level service like next-day delivery. You contract for a certain service and, if the postal service misses its obligation, you may receive a refund. In some cases, if you don’t receive what is agreed upon, you may even be compensated damages that are specified in the contract. Be careful though; in our example, you could also be liable for damages if you don’t meet your obligations based on the contract, such as trying to send a 10-pound package when you only paid for a 5-pound package. Make sure you understand your contract and whether you have SLOs or SLAs.

    Most organizations have issues supporting local desktops, much less desktops halfway around the world. How is this addressed?

    Managing desktops is a concern, but there are many methods to get the users access to the applications quickly and efficiently. Centralizing your data, access methods and applications would be the most efficient way of getting users access to the tools they need to perform their work. Efficiencies are going to have to first be internal. The more efficient the organization is, the easier it is going to be to make the outsourced and offshore tasks efficient. The reverse is also true, but your organization must be efficient first. To really optimize the return on your investment in an offshore work force, your IT infrastructure must be able to adapt to changes and scale as additional requirements are identified or as new opportunities to out-source are identified.

    What kind of technology infrastructure should be considered to make an organization efficient?

    An application delivery infrastructure that utilizes remote display capabilities makes the most sense. You want centralized application, centralized data and IT control maintained by your organization. You should also have rapid application deployment that is adaptive to changes in requirements while, at the same time, keeps all data securely on your network and does not traverse other networks. Combine these solutions with desktop virtualization infrastructure and your organization will be ready for globalization. Spend time with an organization that is knowledgeable in these solutions, and you are well on your way to achieving an efficient offshoring and outsourcing plan.

    AL SOLORZANO is practice manager in Application Delivery Infrastructure at Agile360. Reach him at (949) 253-4106 or