Over the past few years, the term “managed services” has become more prevalent in the IT services community. It’s how many companies these days are consuming IT services, especially companies without the need or the budget for a full-time IT department. In its most basic sense, managed service delivery is the utilization of remote tools in which an IT service company can remotely manage and support a client’s IT environment.
These tools allow the remote monitoring, patching, upgrading and support of a client’s servers, workstations, and network devices. These services are usually priced on a “per device or user/per month” model, with the idea that a network can be maintained for a “fixed fee” per month.
“There are distinct advantages to this IT service delivery model, both to the IT company as well as to the client,” says Zack Schuler, founder and CEO of Cal Net Technology Group. “First, from the IT company’s perspective, they can automate most of the routine tasks that are associated with maintaining a computing environment. These remote management tools have many automated processes that can be turned on, thus saving the IT company time and money.”
Smart Business spoke to Schuler about how to get the most from managed IT services.
How do businesses benefit from managed services?
First, this service delivery model helps clients manage their IT budgets a bit more closely, as many of the services are delivered on a fixed fee. This adds predictability to the ongoing cost of IT. Next, if the IT company has perfected its own processes around these tools, the ‘human error’ factor of manual maintenance goes away.
With all of the benefits to managed services, if a company looks at it as its only answer to IT services, it is doing itself a huge disservice. While managed services might be the answer to basic maintenance of the system, it neglects helping companies to truly drive value out of their IT resources. Managed services, when pitched as the solution, put consumers in a highly commoditized mindset. IT services should not be viewed as commodity services since, if delivered correctly, they can add serious bottom line advantages to the business.
How can businesses ensure these services are effective?
A less known term in the industry is ‘blended services.’ Blended services are a strategic combination of managed services and professional services that are packaged together to deliver the ultimate amount of value to the customer. This consists of looking hard at those services that can take advantage of remote tool sets and automation, and subsequently injecting intellectual capital into every other facet of IT that cannot be automated.
Part of blended services consist of pre-scheduled on-site consulting time. The face-to-face interaction that occurs during this time is invaluable to the business. It is during this time that questions like, ‘What is the best way to do such and such on my computer?’ or ‘What application can solve this business process issue that we have?’ are more likely to get answered. It is this face-to-face interaction that leads to new efficiencies being discovered, and people at the company ultimately being more productive.
If services are delivered 100 percent remotely, the chances are slim that a person will pick up the phone and call a relative stranger to ask about the best way to do something.
How can executives be sure they derive value from managed services?
They need to see the value in IT and its effectiveness as a bottom line tool. Too many executives at companies have traditionally been ‘technophobes’ and view IT strictly as overhead, a necessary evil, as opposed to a bottom-line boosting critical part of the business. In short, when consuming IT services, make sure that you are as equally engaged as your service provider.
Make sure that you see past the commoditized services being sold to you, and that you ask your IT company to do more and to prove its real value. Assuming you are paired up with the right organization, they will help you take your company to the next level. This might cost more in the very short run, but in the not too distant future, the ROI will be there.
Zack Schuler is the founder and CEO of Cal Net Technology Group. Reach him at firstname.lastname@example.org.
Insights Technology is brought to you by Cal Net Technology Group
When a company’s projects include cleaning nuclear reactor test sites, building clean coal power plants and restoring wildlife habitats, you don’t have to look too deep into its operations to label it sustainable.
But environmental services alone weren’t good enough anymore for MACTEC Inc., which was recently acquired by international engineering and project management firm AMEC plc. Both inside the company and out, people started asking what really made it so sustainable.
“Whereas answers like, ‘Yes, we provide sustainable solutions,’ may have been acceptable in the past, people want you to demonstrate today how and what it is you do, both internally and externally,” says MACTEC Director of Sustainability Sarah Hansen.
As the conversation around sustainability matures from environmental generalities to business specifics, leaders like Hansen keep up by walking the talk, both through operations and projects. After all, industry credibility and image are on the line — not to mention client shareholder value.
“Our clients have certain expectations of a company that they hire because their stakeholders have certain expectations of them. It’s somewhat of a flow-down,” she says. “The ability for us to say, ‘Yes, we’ve been able to reduce our water use. Yes, we’ve been able to improve our recycling program,’ — we are asked those questions as part of proposal processes. Our internal performance does feed directly into what clients are asking of us.”
To answer some of those questions proactively, MACTEC released its first Sustainability Report, detailing the company’s accomplishments through 2010 and outlining plans and metrics for moving forward. It was a way of actively engaging dialogue around the question: How is your company sustainable?
“The scope of the question has expanded beyond health and safety, diversity, wellness, cost savings, risk reduction, etc.; today it is an integrated ‘sustainability’ perspective that seeks to measure organizational behavior and service delivery in terms of social responsibility, environmental stewardship, and economic benefit,” the report reads. “The challenge in measuring sustainability in our projects is establishing a shared understanding with our clients of what is to be measured and the expectations of performance.”
Building the big picture
MACTEC’s leadership had to connect the dots of sustainability’s shifts to be able to lay out expectations for clients. The first step was defining what sustainability meant and how it would be measured, inside the organization and out.
“We at MACTEC see it as having a responsibility to see that future generations have the resources they need to grow and prosper. That’s the global perspective, and everybody’s going to say something similar to that,” Hansen says. “More locally, sustainability means providing a preferred workplace for our employees, creating value for our shareholders, improving our community and preserving the environment through what we do.”
Most companies have general commitments, but MACTEC went one step further by breaking sustainability into three pillars that would be used to measure it, both operationally and through client projects.
“With sustainability, it’s a balance between the economics of the situation, the environmental impact and the social impacts,” she says.
When it came to measuring sustainability on a project-by-project basis, then, Hansen looked at three criteria within each of those three elements. For a project to pass the test, it had to satisfy at least one from each category:
- Social responsibility: enhancing community stability, health and welfare, and aesthetics
- Environmental stewardship: resource conservation, habitat restoration and ecosystem diversity improvements
- Economic benefit: avoid/save costs, avoid/mitigate risk and enable client goal
When it came to measuring sustainability internally, Hansen wanted to give employees more concrete areas where they could control each office’s footprint. She surveyed each office last year about energy and water use, waste management, recycling and general facility management — and identified this list of Operational Sustainability Indicators:
- Green cleaning
- Energy-efficient lighting
- Programmable thermostats
- Access to public transportation
- Energy sub-metering
- Ride sharing
- Work from home
- Energy Star
- Flow-limiting devices
- Water sub-metering
For sustainability to truly live top-down in the organization, Hansen had to engage the local levels around these areas to contribute to that bigger picture. So she set the expectation that each office would create its own sustainability plan to implement at least one environmental improvement project. She measured them quarterly, using the shared indicators, and expected to see return on investment in less than three years.
The challenge was turning a general commitment to sustainability into a specific strategic plan that held people accountable. How do you do that?
“The big answer is you have to change the culture,” Hansen says. “And to change the culture requires strong governance in conjunction with committed leadership. At MACTEC, we have the directional support from the board. Our senior leadership provides a vision. My team translates that vision into a structure with roles and responsibilities.”
The CEO appoints senior leaders to the Corporate Sustainability Team to advise and assist Hansen in decision-making. From there, responsibility branches out to office managers, who make sure that sustainability plans and projects are implemented — largely through the efforts of Green Ambassadors. Those local champions serve as key links in Hansen’s communication chain.
“We have an internal structure around sustainability that has accountability and responsibility assigned to each office,” she says. “That sustainability plan is approved by that local operations manager, and so he’s held accountable for meeting that plan — just like a financial plan. But locally, the Green Ambassador has the responsibility for seeing that it gets done.”
But the responsibility doesn’t stop there. Starting this year, every single employee is accountable.
“Beginning in 2011, every employee will be measured on sustainability metrics that we’ve established,” Hansen says. “In our annual appraisal process when every manager sits down to review employees’ performance for 2011, there’s two line items that deal with sustainability. Each employee will have to show how they contributed locally and corporately to the success of our sustainability initiatives.”
Achieving the specifics
Once an organization has the structure — both people and plans — to take on sustainability projects, you still have the challenge of, well, doing it.
And when you lease your office space — like all but one of MACTEC’s properties, which range from two to 200 employees each — you have yet another challenge when it comes to greening your internal operations.
“Because we’re in leased spaces and our offices are variable in size, we have the challenge that some of our offices don’t have transparency on the utilities. It’s an all-in type of lease; we just pay one lump sum that covers energy, water, etc.,” Hansen says. “If you can’t measure it, it’s kind of hard to improve it — except in a qualitative way.”
Aware of this, she built the expectations so that leased offices could still control local sustainability programs, even when they couldn’t measure them.
“At those locations where we have that limited to zero visibility on water and energy use, we look for them to implement what we call best practices, common sense measures: shutting the lights off if you’re not there, only running water when you need it,” she says “The simple things — you know that has to help but you just can’t measure how much that helps.”
Here are a few examples of the big savings MACTEC could measure by taking some of these small steps:
- Energy use: Just by installing motion sensors and reminding employees to turn off lights, one location cut energy use by 1030 KwH. Another reduced consumption by 18 percent, saving $2,500 just through the third quarter. After replacing an aging HVAC system, another office estimated 2010 cost savings of $70,000 and annual cost avoidance of more than $120,000. Others installed programmable thermostats, more efficient lighting, blinds and awnings and Energy Star appliances.
- Water use: By installing low-flow devices on fixtures and toilets inside and rain sensors on sprinklers outside, one office saved 131,000 gallons of water, reducing operating costs by about $1,800.
- Waste management: In addition to recycling paper, aluminum, plastic, cardboard, electronics and toner cartridges, the company identified nearly 100 items it could replace with items containing recycled content. About 30 percent of the offices pursued green cleaning, and 75 percent eliminated Styrofoam use.
- Paper reduction: At one office, delivering just two projects electronically saved more than 200 reams of paper. Another office saved an estimated 90 minutes of printing and binding time per project by going paperless. Furthermore, the accounts payable and procurement departments began requesting that suppliers submit invoices electronically — which will not only reduce supply and postage costs but also ensure quick delivery.
Through simple projects like these, 76 percent of MACTEC’s offices achieved their 2010 sustainability goals. They invested a total of $15,000 — but by the end of the year, they already exceeded the estimated three-year ROI. The company ended up saving around $80,000.
But it’s not just about saving money, especially if you look at it from your customers’ perspective. What’s in it for them? By revenue, 77 percent of the company’s projects helped clients reduce or eliminate an environmental risk last year, which translated into improved shareholder value for them. When sustainability results from your commitment to meet client expectations, it’s a win-win situation.
“You’re bringing new ideas in, you’re solving problems with a lot of minds that come at things from different perspectives,” Hansen says. “That’s really what’s at the core of advancing sustainability, because oftentimes what happens is innovation results. With innovation, you’ve done something cheaper, better, faster — and that’s what it’s all about.”
How to reach: MACTEC Inc., (877) 762-2832 or www.mactec.com
There’s no doubt that cloud computing has received a great deal of interest from companies both large and small over the last couple years.
Gartner Inc. estimates that cloud services revenue grew 17 percent in 2010 to $68 billion. The promises of ROI, cost savings and lower total cost of ownership are some of the major contributors to this trend.
Despite this fact, there are many companies that still aren’t seeing the cost savings. A CIO of a major health care company recently had this to say about moving to a cloud based PBX: “I did look at the cloud solution very carefully and it was just too expensive.”
Smart Business spoke with Mark Swanson, the CEO of cloud communications provider, Telovations Inc., headquartered in Tampa, Fla., to get a better handle on cloud financials.
If you put your financial hat on, how should one look at the cloud?
The easiest way to think about cloud computing is that your technology infrastructure — the servers and software you purchase, run and maintain — is on the Web. Unlike traditional software, which is deployed on-premise, cloud applications are designed for Web deployment — that is they are multi-tenant and users share processing applications managed by the vendor. From a financial perspective the cloud has three basic attributes:
- Little or no upfront costs. Instead of paying license, hardware and/or installation fees, users pay as they go. There’s little upfront capital cost as companies pay per user, usually by a monthly fee. From a financial perspective, you can take advantage of scale, which means the cost per user is less, especially over shorter time horizons like less than five years. In addition, these systems require skilled technicians to deploy and maintain, so perhaps the biggest thing you realize is that the upfront costs include the cost of hardware and IT employees that no longer need to be in-house.
- No hardware or maintenance costs. In the cloud, the vendor takes responsibility for maintaining the software and servers. However, if you just evaluate the ROI of switching from on-premise to cloud products by comparing what they are spending now to what they will be spending if they switch, it’s not really comparing apples to apples. In an on-premise environment, the customer pays for the hardware, storage space and IT personnel to maintain the system, in addition to the software. In a cloud environment, the vendor fronts those costs, so a larger percentage of the total cost of ownership by the customer shifts away from hardware and people and toward software.
- Quick implementation process. Many seasoned IT professionals have heard the nightmare stories about over budget/over time failed implementation projects where you are spending money but getting zero benefit. With the cloud, most applications can be up and running in a few minutes because there is no software to install. The implementation process also is easier for companies with multiple locations or remote workers as everyone can have access to the same version of the application simultaneously.
After you pick an adequate time horizon, a Net Present Value (NPV) calculation can be quantified pretty easily. But it’s really the intangibles that make or break the calculation.
What do you think is an adequate time horizon to evaluate?
I suggest analyzing whether to make the switch as a three-year amortization of upfront costs for an on-premise application including servers, software licenses and installation, plus estimated maintenance and support costs, and comparing that to the cost of subscribing to the cloud version of the product for three years. Some might think that three years is too short, but according to many studies three to four years makes sense for several reasons. What you have to consider are unplanned events: you get acquired, technology obsolescence, you grow too fast, and the big one, how long apps take to test. Gartner also reports that testing consumes 25 to 50 percent of the average application life cycle. That’s a year right there!
What are the intangibles that sway the calculation?
This is where you get into what I call ‘BeanCounteritis.’ Many financial people get wrapped around the axle about the hard cost comparison with premise based systems. The real savings and return lie in the soft costs surrounding cloud based applications, including:
- Office space. Create ways to work remotely, which enables savings on office space through hoteling or home offices.
- Reduced support costs. Rather than having to employ in-house experts for product support, the vendor typically provides support directly for the customer.
- Reallocation of resources. IT staff can focus on more strategic projects, rather than system upgrades and maintenance.
- Easier and more regular upgrades. Vendors regularly upgrade products. In the cloud, those enhancements are made automatically in the background without disrupting work.
- Disaster recovery and backup capabilities. One of the costs incurred by customers who keep their data on-premise is backing it up, typically via tape or a third-party backup provider. This is another area covered by the vendor in a cloud environment.
- Credits from SLAs. Downtime is never good and it is particularly bad for cloud vendors. They spend extra money to make sure it does not happen. And if it does you get a nice credit. You won’t get this from your IT staff.
Any other symptoms of ‘BeanCounteritis’?
Perhaps the biggest threat of ‘BeanCounteritis’ is not considering risk. Often companies become so gun shy about pulling the trigger on large capital expenses that they let others get a leg up on them. The cloud ultimately is a way you can count your beans and eat them too. The cloud makes it easy to change direction without incurring the capital costs and significantly reduces the cost of failure. That’s the great thing about cloud apps.
MARK SWANSON is the CEO of Telovations Inc. Reach him at email@example.com.
Many people are talking about corporate sustainability, but many don’t understand exactly what corporate sustainability means.
Corporate sustainability is a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social development.
Still, even if a company is interested in achieving corporate sustainability, the prospect may seem overwhelming. But it’s really not that difficult to get started, according to Timothy Iszler, a partner with Crowe Horwath LLP.
“You can take small steps to get started,” says Iszler. “And the benefits can be significant. Generally when companies go through this process, they end up saving money and improving the bottom line.”
Smart Business spoke with Iszler about corporate sustainability and how it can improve a company’s image and its bottom line.
What key factors does a business need to focus on when approaching sustainability?
The first is a commitment from the CEO and top management. Without that commitment from the top, it will be very difficult to get the buy-in of employees and push the initiative throughout the organization. The leaders also have to develop a business case for sustainability, including a return on investment, as well as the compliance aspect with government regulations, consumer concerns and employee interest.
Consumer consciousness may be driving sustainability initiatives, but on the business end, they can also save costs and improve the bottom line.
Another factor to consider is finding the right person to lead the initiative. Don’t just assign someone to lead; instead, talk to people across different departments to find those who are really passionate about the issue, because without that passion and drive, the effort is likely to fail. You also need to measure the results of your efforts, and not just assume that they are working.
Finally, start small. Looking at too many areas at once can be overwhelming, and taking small steps will reap small successes, which will encourage you to continue your efforts.
What are some ways to start small?
One entry point is to look at your product design. For example, Nike started its sustainability initiative by examining its product design and discovered how much waste it had in the process. By reducing that waste, it was able to realize a cost savings, but it was also an environmentally good thing because a lot less material ended up in the landfill.
Another thing you can do, especially in manufacturing, is to go through your processes and determine where things could be done more efficiently to reduce waste. Even things that seem simple, like changing the light bulbs in a factory to more efficient lighting, can result in additional cost savings and benefit the environment.
Also, more and more companies are using environmentally friendly packaging with a certain percentage made from recycled cardboard and other materials. Doing so can not only save you money but also benefit your brand image, as more and more consumers are becoming more environmentally conscious and view recycled packaging in a positive light.
What are the benefits of sustainability?
The biggest one is an improved brand image for the business. There are also cost savings to be realized from things such as using less electricity, and sustainability can give a company an advantage in a very competitive marketplace. Finally, increased employee satisfaction is also a benefit as workers gain pride from working for a company that is doing the right thing for the environment.
How do you get buy-in for sustainability?
Employee buy-in is critical. When you find the right leader for the sustainability initiative, that person needs to put together a sustainability team. The people on the front line are the ones who are going to be able to identify the opportunities in your organization.
The challenge is to identify those people within your company who are driven and have a passion to pursue the opportunities and then have them spread that passion throughout the organization.
Sustainability should flow throughout the organization, not be separated into a silo or an individual department. The goal is to fully integrate sustainability issues into the core business structures and processes, rather than managing them as separate issues.
Can a company begin the process on its own, or should it consider outside help?
That depends on how sophisticated the company is. It can be difficult to identify issues from inside the company. Before you go down that path, it’s a good idea to have someone from outside the company come in and help you develop a plan. An outside firm can help you assess and respond to the risks and opportunities integral to achieving your strategic business objectives. A sustainable corporate governance program provides a platform to understand, communicate, collaborate and deliver solutions in alignment with your organization’s vision and mission.
A consultant will help you answer questions such as: How do customers measure your performance? What sustainability metrics are included? How do your customers validate what you report? What new sustainability initiatives are your customers putting in place? How are you taking advantage of new tax and economic incentives related to sustainability? How are you going to take advantage of the new business opportunities presented by companies reacting to climate change? How are you preparing for CO2 cap and trade programs?
By consulting with a professional firm, your company can take full advantage of sustainability opportunities to help the environment, improve its image and improve the bottom line.
Timothy Iszler is a partner with Crowe Horwath LLP. Reach him at firstname.lastname@example.org.
Everybody wants to have his or her cake and eat it, too.
When a presentation is made to a board of directors or a group of company outsiders, it needs to be right. The presenters always want to appear to have their act together and project an aura of all-knowing. It’s part of being human. However, what about important, yet more run-of-the-mill, presentations to smaller groups on nonearthshaking matters? Is the cost of preparation worth the return?
For the last few months, each time I attended a meeting, either within my own company or for other companies and organizations with which I’m involved, I’ve asked those responsible for the preparation how many hours they invested in producing the final show and tell. Almost without exception, I’ve been taken aback by the amount of energy expended. This begs the question: What other, more important activities, providing a better return, didn’t get done because of this diversion?
Perhaps more startling was the number of hours spent on “dress rehearsal” run-throughs, particularly for internal meetings.
I have no problem with the amount of work it takes for big meetings, particularly with outsiders, who can cause you untold grief if one looks amateurish, indecisive or, worse, a fool. If someone who works for me committed this near-fatal sin of lack of preparation, he or she would receive a quick trip to the proverbial woodshed. On the other hand, I’m a big believer of certain types of less formal presentations that include brainstorming components that are more impromptu, with fewer constraints on form and sharper focus on substance. I’m always pleasantly surprised with the golden nuggets, representing new thinking and ideas, that surface when participants focus on making creative contributions rather than obsessing on what others may think.
So, how do you, as a leader, foster creating acceptable presentation guidelines that will make your people more productive and also communicate to them that not all assemblies are equal? Let’s take the work involved for major outsider confabs for investors, bankers, important vendors and customers off the table, while recognizing you’re not going to risk taking only half measure just to spare a little work and a few extra dollars. Internal presentations or meetings with external consultants, however, are a different matter. For these types of sessions, the top-of-the-mind methods used by improvisational comedians extraordinaire, such as Robin Williams and Jerry Seinfeld, can be more productive, more fun and produce much better results.
To get your team pointed in the right direction, start asking after each meeting how much time was put into preparation. This simple exercise will reveal if you’re getting the appropriate return on the investment. Next, working with your team, create a template that is acceptable for each type of presentation. One size doesn’t fit all. A high-powered gathering of movers and shakers requires whistles and bells versus a much more simplified presentation for an intimate get-together of your inner circle. Provide flexible guidelines, including the type of handouts to be utilized and the form of graphics used from very elaborate presentations that would put a Las Vegas chorus line to shame to basic easy-to-prepare flip charts and PowerPoints that more than suffice and make the right impression.
Before any presentation is launched, always ask, ‘Who is the audience, and what are the intended results?’ By doing this, you will quickly determine if the costs are commensurate with the expected results. There is a difference between an all-hands-on-deck undertaking and a few scribblings on a legal pad for a smaller session’s talking points. When you follow this protocol, your people will gain respect for you because it shows that you understand that their time is money and you have an appreciation for what it takes to get the job done.
A long-ago favorite Burger King television commercial portrayed kitchen workers belting out the lyrics, “Hold the pickles, hold the lettuce, special orders don’t upset us,” with the payoff tagline, “Have it your way.” Special orders in the form of elaborate presentations that don’t fit the audience should definitely upset you because of their costs. Instead, have it your way by substituting the “burger” with a “cake” topped with a not too rich but still sweet and easily digestible icing.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, will be published by John Wiley & Sons in late spring 2011. Reach him with comments at email@example.com.