Los Angeles (1224)

Friday, 25 April 2008 20:00

Leaning green

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The next time you clock out, Jason Meugniot would like you to turn off your computer. It may seem like an odd request, but it’s just one of many rituals that he and his 75 employees at Guidance Solutions Inc. engage in on a regular basis.

The reason? Environmental sustainability.

“[The green movement] brings integrity to the business,” Meugniot says. “In today’s economy and business climate, integrity is essential to growth.”

At the information technology service company, the owner and CEO has embraced the employee-led initiative, which he says has contributed to the company posting $6.3 million in 2007 revenue.

Smart Business spoke with Meugniot about how to go green at your own company.

Q. How do you begin to establish an environmentally friendly workplace?

We put together an environmental tool kit that lists simple but key areas that we can look at to understand our carbon output and start the education process. We talk about hibernating or turning off our computers and using energy-efficient fluorescent light bulbs, optimizing the AC usage, or [using] light sensors in restrooms.

We talk about things like carbon credits and working with other companies who are committed to alternative energy sources. We talk about looking at your suppliers. Almost every company purchases certain staple products: paper, electricity, telephone service. Guidance, for example, works with Internet hosting vendors who use solar power instead of diesel generators as a backup source of power.

In order to establish carbon neutrality or really get serious about carbon neutrality, we look at education, measurement and action around reducing waste, improving air quality, eliminating greenhouse gas emissions and finding renewable sources of energy.

Q. How can other leaders implement programs at their companies?

To start an effective program, you need to walk the walk. You need to be carbon neutrality. As the executive, you set the example.

I’d also say you need commitment at all levels. You can’t do it alone. Let the initiative live and grow. Don’t stifle the conversation. When I say conversation, I mean the ongoing conversation at the office or at the business about the environment.

Allow employees to share ideas. Allow them to set up blogs. Talk about it. Don’t just post signs around the office.

Q. How do you get employees involved?

Start with education. We provided, very early on, links to Web sites. We shared personal stories. We screened movies [about environmental sustainability] here at the office. We talked about the impact of our own carbon imprint and helped employees to determine what their carbon footprint was at home.

We have a Guidance Green committee. The committee meets regularly throughout the month. They lead various initiatives, and they collate information.

Use your core values to generate buy-in. The first core value is honesty, integrity and fairness. If we’re to have any integrity or fairness in our consumption of nonrenewable resources, we all need to be committed to the environment.

A key component in the program is not creating a top-down program. It’s really creating a program that’s created and even led by the employees. To create this momentum, the employees really need to be a part of it at the onset.

Q. Do you choose the committee, or is it run by volunteers?

The people who serve on our committee are not asked or chosen. It’s a voluntary committee.

Look for people with energy, with commitment to the environment. Look for people who are open to ideas and then sharing those ideas.

Q. How has this movement benefited your company?

It’s really made an impact on our employees and how they work together and the bonds and relationships that keep them together.

We also have prospects who call us out of the blue wanting to work with us because they’ve heard we have a green program. I don’t want to give you the impression that it happens every day, but we are working with clients today who sought us out because they were referred to us from someone who’s heard that we have a green program.

It also filters into recruiting.

As your employees are talking to candidates and new recruits, they’ll say, ‘This is an amazing company. We take a stand for the environment in the face of various circumstances, and I’ve never worked at a company like that.’

You’ll have employees talk to other folks about it, and it gives them a sense of pride in the company they work for, in the work that they do and in their relationships together at the office.

HOW TO REACH: Guidance Solutions Inc., (310) 754-4000 or www.guidance.com

Wednesday, 26 March 2008 20:00

The U.S. dollar

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The U.S. dollar, still the benchmark for world currency, has been sagging the past several years. A detriment to U.S. consumers and U.S. companies that import products, the weakening dollar benefits some players in the global marketplace.

“Exporters will generally see their sales increase as the price of their product becomes cheaper in foreign currency terms,” says Gary Loe, vice president, foreign exchange at Comerica Bank.

Smart Business spoke with Loe about the weakening dollar, who benefits from it and why he expects the dollar’s value to increase as the year progresses.

What are some of the factors behind the weakening of the dollar?

Current economic factors that may be signaling recessionary conditions in the U.S. economy and could undermine confidence of U.S. dollar-based assets include the downturn in housing, turbulence in the equity markets and job woes. Additional interest rate cuts by the U.S. Federal Reserve could further erode the return of investors as lower interest rates may produce additional inflationary pressures, lowering the dollar’s value. Also, continued budget and trade deficits tend to weaken the U.S. dollar.

We are in an election year and increased political uncertainty could warrant a more cautious approach to holding assets based on the U.S. dollar. Lower oil prices could reduce demand for U.S. dollars, as oil is priced in U.S. dollars globally. More and more countries are diversifying away from the U.S. dollar as their principal reserve currency and are substituting the euro, pound, yen and others.

Who benefits from the weakening dollar?

Exporters will benefit from the weakening dollar. Mutual funds with overseas investments rise along with the currency they are denominated in as long as the funds don’t hedge against currency movement. People holding foreign currency accounts or notes will benefit as well as people holding gold; gold is priced in dollars across the globe and generally rises when the dollar loses value as buyers using other currencies drive up the price as it becomes cheaper. Also, our trade deficit should decrease as U.S. entity sales outside the country increase, and U.S. companies will buy less from foreign trading partners. The weak dollar is encouraging foreign manufacturers to set up factories in the U.S., bringing jobs and other economic benefits.

How does the dollar’s lower value help exporters?

The weak dollar makes American goods and services less expensive in the global marketplace. Therefore, exporters should increase their sales. The entities buying the exporters’ goods will be able to purchase them with fewer units of their own currency. Also, sales could increase as buyers shift purchases they currently transact with entities in other countries.

Do you expect this trend to continue?

In the long run, we should see the trend continue. The two major factors driving this are, one, the current account deficit — a broad measure of U.S. global trade and investment — and, two, the federal budget deficit. Experts don’t expect either to narrow significantly anytime soon, so in the long term, the dollar could very well keep falling.

What is your forecast for the dollar in the remainder of 2008?

There are many reasons why we could end 2008 with the dollar at a higher value than today. The U.S. Federal Reserve has made it clear that it wants to be ‘ahead of the curve,’ meaning it would rather risk a little inflation than bear the consequences of a recession. Unlike in the recent past, when interest rate cuts weighed on the dollar, new cuts may be viewed by the market as a monetary stimulus and spur investment, help correct housing imbalances and aid in minimizing the effects of a recession.

The dollar trend of the past few years, coupled with a stabilizing to improving equity market, will tend to encourage U.S. dollar demand (investment) as U.S. investments are bargains compared to anytime during the past few years. Higher oil prices (higher inflationary pressures) will tend to increase demand for U.S. currency. The upcoming elections could help the U.S. dollar as policies are re-enacted, amended or abolished. At the end of the day, foreign central banks will not want super-strong currencies, as it tends to diminish demand from the world’s largest consumer market — the United States — for foreign goods, which is needed to boost the rest of the world’s economies. I believe dollar positives will outweigh dollar negatives, and we will end the year with a slightly higher dollar.

How do fluctuations in the dollar’s value affect today’s global economy?

The U.S. has the biggest impact on the global economy and its monetary unit value, and fluctuation has the greatest effect relative to other currencies. The value affects company profits, budgeting and manufacturing costs. It has ramifications on capital investment, plant openings and closings. For example, some companies that have outsourced customer service and call centers to India have returned these centers to the U.S., since the weak dollar has eroded the cost benefits of operating overseas. It all underscores the importance of hedging currency risk to help mitigate variances from companies’ forecasts and plans.

GARY LOE is vice president, foreign exchange at Comerica Bank. Reach him at (800) 318-9062 or gloe@comerica.com.

Wednesday, 26 March 2008 20:00

Adapt and survive

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Rich Cordova can still tear into the engine of a 1955 Chevy. It’s not really a skill that helps him much as president and CEO for Childrens Hospital Los Angeles, but then again, maybe it is.

Cordova has been around the block as an executive during the last 35 years, including leading the Southern California Region of Kaiser Permanente’s Health Plan and Hospitals, but his core style might just come from the mechanic’s sense to tinker.

A native of Southern California, Cordova grew up working in his father’s gas station doing everything from pumping gas to engine repair. The early lessons were lasting: Any one of a thousand problems can keep car off the road, so you have to think about each function of the engine to make things run smoothly. That adaptability is something Cordova keeps in mind with his 3,200 employees at Childrens Hospital, which treats seriously ill and injured children and is affiliated with the Keck School of Medicine of the University of Southern California.

Since moving into his current role in 2006, he’s worked to understand the discrepancy in employees from secretarial staff all the way up to highly educated surgeons, and he realized that keeping momentum at the organization was all about his ability to figure out the hospital’s problems and get the staff behind him.

“Any leader has to be flexible enough to understand the environment that they’re going into,” he says. “With hospitals, they have this saying that ‘Once you’ve been in one hospital, you’ve been in one hospital,’ meaning the cultures are so different, even though the mission is the same. You have to be flexible enough to understand that your leadership style may have to be tweaked here and there when you approach a certain group of people.”

Here’s how Cordova has continued to tweak his leadership style while working to conquer his field.

Hear and address the problems

There are a lot of differences between fixing an engine and running a business, but one similarity is training your ear for problem noises and adjusting your strategy.

The same way you can hear the loud exasperation of your failed exhaust manifold gasket, Cordova knows you can hear the problems of an organization.

“One thing I’ve been consistent at the whole time to be successful is having open communications,” he says. “I don’t do a lot of work behind the scenes making decisions, I have the executive team that I meet with weekly, we set agendas, and we talk over the issues and get consensus before we go to implement a new plan or program.”

Cordova makes it a priority to regularly speak with leaders in each of his departments. He knows he doesn’t have time to hear 3,200 different opinions on what needs to be done, but, he says, department leaders, a more manageable group to deal with, will tell you their big problems. It saves time in sorting out feedback while still getting to the heart of the situation.

“The key is listening,” he says, “Listening to the concerns of our scientists, listening to the concerns of nursing staff and our practicing physicians, and then understanding what needs to be done to correct the situation. Our whole strategic plan is a culmination of things raised by the faculty here at Childrens Hospital, and we’re fixing all those things.”

Once he’s heard the organization’s problems, he reciprocates their openness with a transparency of his own. For example, he gathers all the department leaders to hear the results of the hospital’s performance each quarter, and then updates what those results mean to the strategic plan so they can share it with their staff. By addressing the problems of the organization and letting everybody know you are not shying away from it, you’ve created the equation for consensus.

“My success has been to build that consensus,” Cordova says. “Be transparent as to where you’re going and where you’ve been.”

Just from letting people know the inner struggles of the organization, Cordova says you will get more candid feedback on what problems people have that are in the way of strategic goals. The added bonus will be employees who feel empowered by the knowledge of what’s going on.

“The feedback I’ve been getting since I’ve been the CEO has been phenomenal,” he says.

“It’s invaluable to them owning the plan. It’s sharing all that information because sometimes you take a dip in your financial performance and everybody needs to understand why — and then understand how we’re going to move in a more positive direction.”

Show short-term progress

To keep an organization with an operating budget of more than $493 million moving, you have to show your entire staff momentum. Cordova makes it a point to show the positive changes Childrens Hospital has made, and then points out that he’s not just inventing ideas in some ivory tower.

“I keep articulating back to them, ‘I am only fixing the things that you told me need to be fixed’” he says. “That tends to motivate them.”

That momentum is something Cordova says has to be fed constantly. He recommends what he calls low-hanging fruit, a series of short-term goals that will help keep the whole organization feeling as if it is moving forward.

“Strategic planning is typically longer-range thinking, but one of the key elements to success is some short-term operational corrections,” he says. “One of our strategic goals was operations improvement to show them that those operational concerns were imbedded in our strategic plan. That’s the first year of implementation of that plan, it was not the 10-year goal, to give them the confidence that we were moving on those issues.”

Those momentum-building changes don’t have to be big, they just need to have a positive impact on many people. One thing Cordova started with at Childrens Hospital was the redesign of the Web site.

“Things like that are short-term — to establish that we are beginning to make those changes,” he says. “Did it cost a little money? Comparatively speaking, that’s low-hanging fruit, and it goes miles to show that we are listening and we can make changes.”

That continued effort will keep the emphasis on the organization’s forward movement, but it will also inspire employees to continue to give productive feedback.

“They feel they are being listened to and we are taking care of these issues for them,” Cordova says. “Our job as administrators is to create an environment so that the physicians and nurses can practice the best medicine they can, and you can only do that by listening to their concerns, understanding what needs to be done, developing the plan to get there and having the vision to get to the future. If you do all that, you’ll capture their imagination, you’ll capture their energy, and you’ve got an alignment of the organization.”

Give a chemistry test

While the key to an engine repair may be a new part, there are no stores stocked with employees who will fit your company. So to find new talent for the senior leadership team, Cordova takes a nugget he’s learned in the medical field: He administers a chemistry test.

“The old motto is you are only as good as the people you surround yourself with,” he says. “You can get a lot of resumes, and, of course, you look for the skill level and the education, but just as important, maybe more important, is the chemistry they bring to the organization. I’m almost inclined to say that counts even more because I’ve seen people who are textbook smart but can’t survive in large organizations.”

Cordova’s chemistry test isn’t complex. He first mixes a job candidate with the people he or she would work with — both daily and occasionally — and then he finds a way to relax those candidates who make it to a second interview to get to the core of their personality.

“When I select the interview panel, I’m selecting people that I know are going to work with this person,” he says. “Then, I select people that may be further away from that position [but] will have some kind of interaction. I make sure that I get a lot of data points on this person.

“Then I do the informal interview process where I take the candidate to dinner and give a more relaxed atmosphere. I’ve even taken some candidates to play some golf.”

In taking his perception from the casual atmosphere and blending it with the thoughts of staff members involved in the department, Cordova says you can get the right equation of how the person will fit.

“By having my own assessment and the assessment of the key executives that they’re going to work with, we can make a pretty good judgment as to what I call the soft sciences, meaning their people skills, their teamwork, their sensitivity to others, how they are going to work with physicians and nurses, and their team approach,” he says.

Match culture and community

More than just hiring for the right chemistry of the organization, Cordova places an emphasis on matching the culture of the hospital to the community. The Los Angeles market is one of the most diverse in the nation, and if you want to serve others — whether they are clients, consumers or patients — you have to realize that your people need to reflect that. To Cordova, that starts from the top.

“I look for diversity of the executive team,” he says. “Serving a very diverse community of Latinos, Koreans, Chinese, Armenians and so forth, an organization needs to reflect the community it’s serving, both at the governance level and at the executive level.”

First, Cordova says the way you search for outside talent has to be different.

“You start with the criteria you are using for recruitment,” he says. “You make that commitment. You begin to tell your search firms that this is a priority for you, and you have to start putting the onus on your search firms to help develop a diverse pool of candidates.”

Beyond making that recruiting effort a priority, Cordova says that companies can do the work internally to make diversity happen.

“The other commitment companies can make is to grow your own,” he says. “Develop the pipeline by bringing in students, interns and administrative residents that have diverse backgrounds and grow them in your organization.”

That process requires a leader to groom his or her diverse talent by tying each person to the organization.

“Give them stretch assignments, so four to five years from now, they are going to be ready for a director-type position and, four to five years later, that director will be ready for a vice president position,” Cordova says. “You have two avenues that you really have to pursue. One is grow your own. Two, make a commitment to having a diverse pool of candidates when you’re recruiting and having that be a requirement in your search.”

The ability to integrate that work force is extremely important, and Cordova insists that there is a direct connection between an organization’s quality measure and its leader’s ability to properly match the community’s diversity and emphasize cultural understanding of those whom you’re serving.

“There is a major emphasis on quality, and quality can be measured in a variety of ways,” he says. “I think there is a correlation between having a diverse staff and individuals that are trained in culture competence so that we are able to understand the different cultures that we’re treating, that has an impact on quality. And there’s a direct connection between leadership, culture competence and quality.” <<

HOW TO REACH: Childrens Hospital Los Angeles, (323) 660-2450 or www.childrenshospitalla.org

Sunday, 24 February 2008 19:00

Improved reporting

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Financial Accounting Standards Board Interpretation 48 (FIN 48) is a new tax initiative that significantly alters how companies account for uncertain tax positions. The new rules — intended to increase the comparability of financial statements — also expand documentation requirements.

“New disclosure requirements provide for companies to set forth in their tax footnotes a complete discussion of the impact of FIN 48, including the impact of potential interest and penalties on potential tax deficiencies,” says Gil Greene, vice president of Gumbiner Savett Inc.

While meeting FIN 48 requirements may prove to be challenging, companies can benefit from implementation of the initiative. FIN 48 provides the opportunity to enlighten a firm’s management and shareholders about historical business and tax operations.

Smart Business spoke with Greene about FIN 48, why the initiative was adopted, and how it is expected to improve financial reporting and increase transparency.

What is FIN 48?

Financial Accounting Standards Board Interpretation 48, Accounting for Uncertainty in Income Taxes, was issued in July 2006 as an interpretation of FASB 109, which sets forth the standards for accounting for income taxes under GAAP (Generally Accepted Accounting Principles). FIN 48 was first effective for financial statements of public companies issued in fiscal years beginning after Dec. 16, 2006, and is scheduled to become effective for private companies, beginning after Dec. 15, 2007. Thus, privately held companies do not have to implement FIN 48 in their 2007 financial statements but, nevertheless, should be looking ahead in order to be ready when the date for implementation arrives.

Why was this initiative adopted?

FIN 48 was adopted in order to clarify accounting for uncertain tax positions in financial statements. Tax laws, in some cases, are subject to varied interpretation, and whether a tax position will be ultimately sustained may be uncertain. As a result, diverse accounting practices have developed leading to inconsistency in accounting for such positions. This diversity in practice has resulted in noncomparability in financial statement reporting of income tax assets and liabilities.

How is FIN 48 expected to improve financial reporting and increase transparency with respect to tax matters?

FIN 48 introduces new standards for identification and measurement of tax benefits associated with uncertain tax purposes. A tax position refers to a position taken in a previously filed return or a return to be filed in connection with a current reporting period and also includes, for example, decisions to not file returns, shifts of income between jurisdictions and decisions to exclude certain types of income from returns. Issuers of financial statements are required to inventory all uncertain tax positions for all jurisdictions for all open years. A ‘more likely than not’ threshold is required in order to record a tax benefit in the financial statements with respect to an uncertain tax position. Positions satisfying this ‘more likely than not’ standard must be further analyzed to determine the percentage likelihood (i.e. between 51 percent and 100 percent) of being sustained, assuming an audit by the income tax authority having full knowledge of all relevant facts.

How might the implementation of FIN 48 result in disagreements between company management and external auditors?

Because the implementation of FIN 48 requires that judgment be applied in areas subject to varying interpretations, it is reasonable to expect that disagreements may arise between management and auditors. Public companies are often sensitive to items impacting their reported earnings, and therefore, may resist acknowledging an uncertain tax position that might give rise to a higher than anticipated tax expense. Private company shareholders may be more focused on tax savings than public company shareholders and may take more aggressive tax positions, leading to disagreement with auditors.

Does FIN 48 heighten the risk of being audited by the IRS or by a state or international tax authority?

It is too soon to know for sure what the impact of FIN 48 will be on the audit process, but certainly the disclosure requirements will provide a road map for tax authorities to follow in requesting information about tax issues. On the bright side, FIN 48 will require companies to take a fresh look at their tax positions and may enlighten management and shareholders about the importance of managing tax risk.

GIL GREENE is vice president of Gumbiner Savett Inc. Reach him at (310) 828-9798 or ggreene@gscpa.com.

Tuesday, 29 January 2008 19:00

Your virtual infrastructure

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Virtualization is a rapidly growing technology used by many organizations today. Most companies understand the purpose and value of integrating a virtual infrastructure but may not understand how to properly integrate this new technology into their traditional IT management framework and processes.

“Although virtualization technology may be complex, many management tasks related to virtualization are simplified compared to traditional systems,” says Brian Capoccia, disaster recovery practice manager at Agile360, A Division of Entisys Solutions, Inc.

Smart Business talked with Capoccia for his insight into the best practices in managing your virtual infrastructure.

Do I manage my virtual machines in the same way I manage my physical systems?

In many ways, yes. Software updates, security patches and service packs are all applied in the same manner as they would be to a physical machine. However, there are also many management tasks that relate to virtual machines (VMs) that do not exist for physical machines. Tasks such as rapid provisioning, live migrations between physical systems and snapshot capabilities are performed with VM management software. This software also provides administrators performance and resource information about the host system and the VMs that run on it.

Does virtualization increase the complexity of my IT environment?

The initial implementation will add to the level of complexity as a whole, however, many administrative tasks will be simplified. Virtualization brings new and simple ways to accomplish tasks that are traditionally more complex on physical systems. For example, implementing virtualization can offer protection against server hardware failure that is comparable to clustering. However, implementing and maintaining a clustered system is much more complex than maintaining the same system in the virtual infrastructure.

Virtualization can also simplify the recovery process for failed systems. VMs are recovered as easily as restoring deleted files. In contrast, the recovery process for physical systems may require that the system is recovered to identical hardware, which will usually include the installation of a base operating system, applications and then the restoration of critical files from full and incremental backups.

Can I monitor virtual machines with my current system management software?

Yes, most system management software packages have the capacity to manage and monitor VMs in the same way as physical systems. HP Insight Manager, Dell OpenManage and IBM Director all have this capability. Administrators that are already familiar with these tools are able to leverage their existing knowledge to also manage host machines in the same way.

In addition to these system management tools, virtualization solution providers have management products that are designed specifically for VM management.

What kinds of tools and processes can I use to prevent ‘server sprawl’?

Virtualization itself combats server sprawl by allowing for the consolidation of many physical servers. However, compared to physical servers, VMs are relatively easy to build, duplicate and deploy. This leads to a new phenomenon known as ‘virtual machine sprawl.’

The provisioning process for physical machines has built-in controls that manage machine sprawl. Cost and the procurement process are probably the biggest factors. The VMs should be viewed similarly. The key to managing VM sprawl is to manage the provisioning process just as the procurement process is managed for a physical server. A provisioning process should include the requestor of the resource, the reason for the request and an approval process. Only then should a VM be created.

Controls exist in the virtual infrastructure to prevent unauthorized personnel from creating VMs. Only administrators directly responsible for managing the virtual infrastructure should be assigned this right.

Can I back up VMs the same way I back up physical servers?

Yes, VMs can be backed up just like any other server in the environment. However, careful planning should be considered when backing up VMs. Traditional methods can cause a lot of strain on the system if multiple VMs are backed up simultaneously on the same host. This is because the backup agent is designed to utilize the processor on the server that is being backed up.

There are several methods that exist that can augment traditional backup methods. They include SAN based backups, disk-to-disk-to-tape backups and virtualization specific consolidated backup frameworks that allow for the off-loading of the CPU processing to a backup proxy.

What effect does server virtualization have on my backup window?

Certain virtualization technologies have the capacity to allow for a ‘hot backup’ of VMs. This means that the VM is briefly put on pause to allow for a backup to occur with little impact on performance. This provides the ability to back up VMs during production hours, virtually eliminating the traditional ‘backup window.’

BRIAN CAPOCCIA is disaster recovery practice manager at Agile360, A Division of Entisys Solutions, Inc.. He can be reached at (949) 278-8065 or at brian.capoccia@agile360.com.

Tuesday, 29 January 2008 19:00

The Feinberg file

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Born: Burlington, Calif.

Education: Bachelor’s degree, economics, University of California, Berkeley; an M.D. from University of Health Sciences/The Chicago Medical School; MBA from Pepperdine University.

What was your very first job?

When I was 9 or 10, my dad’s friend owned a travel company and my older brother and I would go — in the older days, the bag tag on suitcases you had to write in the travel codes, like HNL for Honolulu — and we’d spend eight hours a day writing airport codes on bag tags. I got $1 an hour, and you got a little extra money to buy french fries and a drink at the cafĂ© next to the building. One day I went in to ask for a raise to $1.25. I spent all day, the guy was on the phone, and I stood outside until I finally got the courage up to ask if we could get a $1.25. We got it; the guy laughed and said, ‘Of course.’

If you could be one superhero, which one would you be and why?

Really, to me, the superhero is the mom upstairs who is taking care of a kid with cancer or the husband who is taking care of his wife. The superheroes in my day are those families that are dealing with the illnesses, especially with the children. It’s incredibly inspiring to watch how they navigate through these nightmares. They are the heroes, along with our staff.

If I have to choose a real superhero, I like Flash. But I feel like we have 7,000 super-heroes that come to work every day, and the patients and the families are superheroes, too. In real life, if you think about what superheroes do, that’s what these people are doing.

Wednesday, 26 December 2007 19:00

Mortgages and the economy

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Burdened by weaknesses in the real estate sector, the economic outlook for the first half of 2008 is sluggish.

The housing sector, however, is expected to rebound later in the year, providing a boost to the economy as a whole.

One of the factors behind the recent real estate slump was the widespread availability of subprime mortgages. These types of loans will be harder and harder to come by in the future, says Comerica’s chief economist Dana Johnson.

“We’re not going to go back to a sub-prime mortgage market that was as wide open and that allowed a lot of reckless behavior on the part of both borrowers and lenders,” he explains. “There is going to be more of a continuing restraint on the purchases of homes.”

Smart Business spoke with Johnson about his economic outlook for 2008, the impact of the subprime mortgage industry and the overall strength of California’s economy.

What is your economic forecast for 2008?

I’m expecting the economy to grow sluggishly this winter and then accelerate over the course of 2008. I’m projecting growth over this winter — the fourth quarter of 2007 and the first quarter of 2008 — to be around 1.5 percent at an annual rate and then accelerate by the end of the year to about a 2.5 percent rate of growth.

The credit crunch has already extended and intensified the recession in housing, and housing is going to be a big drag this winter. All of the turmoil in the credit market will also be a constraint on the economy. For these reasons I think we’re going to have a pretty sluggish pace of growth for a while.

The drag from housing, however, will slow, and we’ll find a bottom sometime in the spring or early summer, and then things will level off or perhaps gradually improve a bit.

How will the meltdown of the subprime mortgage industry affect the economy?

It’s had a very clear and direct impact already in reducing the ability for people to buy houses, which has intensified the pullback in homebuilding and accelerated the decline in home prices. The key issue beyond that is whether the decline in home prices is going to cause consumers to spend more cautiously. So far, there is not much evidence of a big spillover to consumer spending. With consumer spending holding up OK, it looks like the spillover effect has been limited, and this is one of the reasons that I think the overall economy is going to avoid recession.

Foreclosure rates have been especially high in California. Do you believe the housing market will rebound in the upcoming year?

No, I don’t. House prices in California have begun to fall but are still far higher relative to income than anywhere else in the country. It looks to me like there are a lot more adjustments that have to be made in the price of houses in California relative to incomes in California relative to houses elsewhere. California has relied more than any other state on the subprime mortgage market, which is not going to fully recover for years. The adjustments in home sales and prices are going to continue to be very difficult in California all through 2008. We’re talking multiyear adjustments where house prices will not hold up as well in California as they do in other states.

In what ways does the California economy differ from other regions of the country?

The California economy is in many ways a microcosm of the U.S. economy. The distribution of jobs by industry in California looks very similar to the national averages in many respects. There are two areas, however, that look different: It has a leading position in various knowledge-based sectors as well as the life sciences industry.

How important is the health of California’s economy to the United States’ as a whole?

California’s economy makes up approximately one-eighth of the overall U.S. economy, so its health is vital. The California economy is intimately integrated into the rest of the economy; we don’t tend to see the sharp regional differences that we once had. The U.S. economy’s performance is going to look like California’s, and California’s performance will look like that of the U.S. California doesn’t move in lockstep with the U.S. economy but, given its size, its diversity and the fact that the distribution of jobs is so similar to the distribution of jobs by industry in the rest of the economy, what happens in California tends to happen nationally and vice versa.

DANA JOHNSON is chief economist for Comerica Bank. Reach him at (214) 828-5970 or through the bank’s Web site, www.comerica.com.

Wednesday, 26 December 2007 19:00

Making the SAN decision

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As companies grow, so do their requirements for technology. As they outgrow servers and disk space, they must look for the best alternatives to assist their growth with the least disruption to their current business.

According to Richard Florence, director of professional services for Orange County-based Agile360, “The utilization of storage area networks (SANs) is becoming the solution of choice for many growing companies. A SAN combines the IT structures already in place with what is needed to accommodate current and future growth in a way that optimizes the entire IT operation.

Smart Business talked with Florence about the benefits of SANs.

What is a SAN?

A storage area network is essentially a separate computer network that connects storage devices to a heterogeneous set of servers on a many-to-many basis. SANs are typically comprised of network switches, disk arrays and some form of physical interconnect, such as fibre channel, SCSI or iSCSI.

What is the primary reason that a company might begin to look at using a SAN?

The main reason most companies introduce a SAN into their IT environment is that SANs provide IT managers the ability to manage their universal storage requirements from a central platform. When an IT organization purchases a server, the amount of disk space available for any application running on that server is limited by the size of the server and the size of hard disks available to that model of server. In many cases, disk space intensive servers, such as databases and file servers, face unpredictable growth due to company mergers or other changes in the business. As a result, the company must purchase a new server with greater storage capabilities once the available disk space of that server is exhausted. Often, the other computing resources on the server, such as memory and processors, are still capable of fulfilling their intended purpose. In the case of SANs, an increase in disk space requirements of an individual server can be addressed by simply adding additional hard disks to the SAN.

How else can the use of SANs enhance IT functions?

SANs can provide advanced functionality that usually isn’t available on servers without the use of third-party applications. Features such as data replication, mirroring and snapshots provide higher reliability to an organization’s critical data. Another popular advanced feature is the ability to move data across different levels of tiered storage based on factors such as frequency of use and file types. For example, there may be an accounting spreadsheet stored on a file server that has not been accessed in more than year. That spreadsheet would be automatically moved into a lower-performance, lower-cost disk array within the SAN infrastructure to ensure that the maximum amount of space is available for frequently accessed files on the portion of the SAN containing the faster, more expensive disk drives. Features such as this ensure that companies maximize their investment in storage.

What are some of the key considerations in the evaluation of a SAN?

Some of the critical elements of the SAN buying decision are high availability, performance and software capabilities. Since a SAN acts as a central data storage facility for multiple servers, it becomes a single point of failure for many of a company’s core business files and applications, so high availability of the SAN becomes the most critical concern in its selection. Features such as multipathing, which provides multiple data paths from the SAN to a server, and the use of multiple switching fabrics help to ensure reliability.

The performance capability of a SAN should also be examined using a ‘best-fit’ approach, whereby the speed and performance of the SAN should match its intended purpose. For example, a SAN that will be used to provide data storage for an e-mail archive system does not require the performance levels guaranteed by a fibre-channel, SCSI disk-based SAN. For that application, a SATA disk-based SAN usually meets the performance requirements and would be a less expensive solution. One must also look at the range of software available for use with the SAN to provide advanced features, such as data replication, mirroring and tiered storage functionality.

Are SANs suitable for small- to mediumsized businesses?

Yes, there has recently been a major push to create relatively affordable SAN solutions to accommodate the small- to medium-sized business. By utilizing newer technologies, such as SATA-based drives and iSCSI connectivity, some manufacturers have been able to offer SAN solutions in the sub-$10,000 price range. Many SAN manufacturers have also started to simplify the management of SANs to enable IT administration generalists to manage their environments without specialized training.

RICHARD FLORENCE is the director of professional services at Agile360. Reach him at richard.florence@agile360.com or (949) 278-9532.

Thursday, 27 December 2007 19:00

The Gores file

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Where were you born?

Nazareth, Israel

Whom do you admire most in business and why?

Warren Buffett. [He’s] very successful acquiring companies, he’s hands on, he knows operations and his way of living is something that I admire, and he hasn’t let all the money get in the way of what he wants to do.

What is the biggest challenge you’ve faced as a leader?

You might hire someone and they are here for a while, and they grow and reach their limit and they’ve capped out, how do you then bring somebody new without losing that person who can still add value but that just can’t step up to the next level?

What was your very first job?

I worked at a grocery store as a carryout boy when I was 16.

Who is your favorite superhero and why?

My son Eric. He’s an individual, he’s 23 years old, that has a handicap, and he never really let his handicap get in his way. He’s gone on to act and do whatever he wanted, so he’s my favorite hero.

The Gores Group fast fact: The firm’s private equity capital fund has committed equity capital of $1.3 billion.

Sunday, 25 November 2007 19:00

Saving green by going green

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In today’s environmentally conscious economy, many companies have adopted numerous “green” initiatives. Whether it’s organizing carpools to reduce greenhouse gas emissions or recycling bottles, cans and paper goods, conservation has become a growing concern for many organizations.

“Information technology holds the keys to new conservation opportunities that leverage technologies to increase computing resource efficiencies within the data center,” according to Kelly M. Chinen, virtualization practice manager for Agile360.

Smart Business talked with Chinen for more insight into going green with your IT infrastructure.

Why should a company be concerned with making its data center more efficient?

As business reliance on computer resources continues to increase, many companies are faced with challenges around where those systems will reside and how to provide the required electrical power and cooling to keep those systems up and running. A more efficient data center provides increased computing capacity while reducing electrical power consumption and physical space requirements.

How is it possible to reduce the number of computing resources if business requirements continue to grow?

Although computing resource requests continue to increase in most organizations, it is common to find that existing resources are heavily underutilized. In fact, many computing resources are running at 5 to 10 percent of their full capacity. This means that up to 95 percent of the physical computing resources are sitting idle. Imagine a single person driving to work each day in a 10-passenger van. It’s pretty obvious that leaving nine empty seats is not an efficient use of the van’s available capacity, but this is what many organizations are facing today.

Server virtualization is the technology that allows for greater physical computing resource efficiency and reduces the amount of physical computing resources required to meet ongoing business requirements.

What is server virtualization, and how does it help to reduce the number of physical computing resources?

Server virtualization allows multiple operating systems along with their applications to reside on the same physical computing resource, which increases both its utilization and efficiency. Although multiple systems are running on the same physical computing resource, each system remains isolated and does not affect the stability of its neighbors. Server virtualization provides the means to reduce the number of physical computing resources in the data center through server consolidation, which is the process of migrating existing or new systems onto the same physical computing resource.

How do I prevent server consolidation from affecting service level agreements?

Proper planning and preparation is essential for the successful implementation of a server consolidation effort. In situations where existing physical resources are to be migrated into a virtual infrastructure, ‘capacity planning’ tools are available to monitor utilization levels over a period of time. Typically, utilization levels are captured over a period of one month to properly identify average and peak loads. Following the collection period, the data is analyzed to determine the amount of physical computing resources necessary to provide the required service levels.

How does going green reduce server computing costs?

By reducing the number of physical computing resources in the data center, electrical power and cooling costs may be significantly reduced. Reducing the number of existing physical computing resources also provides spare data center capacity for future growth, delaying or eliminating the need for future data center expansion.

Are there other programs that increase the ROI of going green with server virtualization?

Some local power companies are offering rebates to businesses that reduce their power consumption through the removal of physical computing systems from their data centers. Each power company has a specific process that must be followed in order to obtain these rebates. It is important to stay on top of this process to ensure maximum savings.

This sounds great for large companies, but can small companies have an impact on green initiatives?

Yes, small companies may also see an impact on green initiatives. Many smaller companies have been able to reduce server power and cooling requirements through server virtualization. One company had a requirement for 10 new servers. Instead of purchasing 10 physical servers, it was able to consolidate those 10 servers onto two host machines. This not only resulted in an 80 percent reduction of physical servers, but it also significantly reduced the amount of power, cooling and rack space required to support this new initiative. The IT staff was able to allocate the time that would have been spent supporting the additional hardware to supporting the business.

KELLY M. CHINEN is the virtualization practice manager at Agile360. Reach him at Kelly.Chinen@agile360.com or (949) 253-4106.