Wholesale changes

The wholesale distribution business in the United States is changing at warp speed. The recession hit wholesalers hard; only the most robust, best-capitalized distributors made it through the downturn in good fighting shape, and now that they have emerged, they’re facing a flurry of new competitors and new technologies.

The biggest, strongest and smartest distributors — let’s call them the lucky few — are making the investments needed to keep pace with the changes. Many other distributors are looking for more affordable ways to stay relevant. And some are cashing in their chips and finding something else to do.

“Distributors’ customers’ demands are changing,” says Brent Grover, managing partner with Evergreen Consulting LLC in Cleveland. “They want to be able to call you or access your website and find out three things immediately: ‘Do you have the product I need?’, ‘What’s the price?’ and ‘When can I get it?’ And they don’t want to wait around for somebody to fumble through their system and figure out what the price is supposed to be.”

Brent Grover, Managing Partner, Evergreen Consulting LLC

Sophisticated online sellers with roots in retail, such as Amazon and Staples, have starting moving into some wholesale markets, and those sellers’ technological expertise has upped the ante for traditional distributors.

“Keeping up with those companies and their advanced systems requires a big investment in information technology,” Grover says. “The traditional ERP [enterprise resource planning] systems that distributors have been using don’t necessarily have the capability to provide all of these options to the customer. So distributors have to change their business processes and their support systems to make that happen. And it requires an investment in IT that some distributors may not be able or willing to make.

“But I think most of them will decide that they like adaptation a whole lot more than they like becoming irrelevant.”

The new technological requirements are forcing distributors to come up with answers to difficult questions and make tough decisions.

“It takes capital and management acumen to make these types of changes happen,” Grover says. “In the wholesale distribution business, the companies that are not big and well-capitalized have three choices in front of them: get bigger so they have the ability to afford these IT investments, get very specialized so customers will deal with them for reasons that don’t have to do with technology but because the customer needs their specialized knowledge, or get out — in other words, sell your business.

“All of this pressure, coupled with the low interest rates we’ve been seeing and the fact that banks have money to lend, has led to a lot of merger and acquisition activity in wholesale distribution.”

Guy Blissett, IBM Institute for Business Value

Guy Blissett, a wholesale industry expert with the IBM Institute for Business Value and a fellow with the National Association of Wholesaler-Distributors’ Institute for Distribution Excellence, underscores Grover’s points about the technological and economic shakeout taking place in the wholesale distribution business.

“We’ve seen the economic crisis drive many distributors out of business and damage others to the point where they’re struggling to grow now that the economy is starting to turn around,” Blissett says. “Unfortunately, some of those distributors now are not in a position to make the investments that they’ve been deferring.

“The key challenge that wholesaler-distributors face is simply continuing to drive their relevance in the supply chain. The traditional source of their value proposition — the ability to stock all the products their customers want and get those products into their hands quickly and efficiently — is still critically important, but it’s no longer enough. There’s so much transparency now with product pricing, product availability and individual company capabilities that distributors are having to think very differently about what will differentiate them over the next five to 10 years.”

The game changers

Amazon and Staples are the two most visible new players in the wholesale distribution market, and their technological sophistication is changing the rules of the game.

“AmazonSupply.com, in particular, has definitely had an effect on people’s psyche,” Grover says. “It’s not that they’re stealing everybody’s business, at least not so far. Our view of AmazonSupply.com is that it’s really for unplanned purchases of maintenance, repair and operating supplies for the noncontractor segment.

“Is AmazonSupply.com going to decimate anybody’s business? Probably not. Was it reasonable that the stocks of distributors, such as Grainger and Fastenal and MSC Industrial, took a hit when the news about the launch of AmazonSupply came out in April? No, it really didn’t make a lot of sense.”

Sensible or not, those distributors’ stocks did take a dive when the online giant came on the scene.

“When AmazonSupply.com was announced, the splash was that here was a business-to-consumer-style website appearing in the distribution world — and we all know about the bells and whistles Amazon has,” Grover says.

“Here they were repositioning themselves as a distributor, coming on-stream with prices that weren’t really low, but they were decent prices, and they were offering free two-day shipping for orders of $50 and up, which, I mean, that’s crazy, and a 365-day return privilege — a new feature. And they were offering a toll-free number to call during business hours for support, so you could actually talk to somebody at Amazon. That was a new thing. They’ve emerged with 14 different product lines and a half-million items in stock.”

Analysts who follow the stocks of publicly traded distributors overreacted to the news, Grover says.

“They reacted like, ‘Boy, this is terrible news for these distributors and AmazonSupply.com is going to come in and crush everybody,’” he says. “My personal view is I think that while AmazonSupply.com is the real deal and they’re going to be here for the long run, they’re not going to destroy anybody’s world, at least not right away.”

While Amazon is not expected to immediately cut a swathe across the old-line distributors’ business, the deep-pocketed gatecrasher has raised the technological stakes in the industry, and the other distributors will have to step up their games to compete effectively.

“The issue for distributors is that if they have an online portal, it’s probably something fairly rudimentary, a typical business-to-business-type Web experience,” Grover says. “The bar has definitely been raised by AmazonSupply.com bringing a business-to-consumer electronic commerce experience and putting it out there. For all of the other distributors, if they don’t have a good e-commerce portal, it’s going to make whatever they have look pretty bad. So they have to step it up.”

Blissett agrees that distributors will have to make serious investments to improve their e-commerce sites if they hope to compete with the new competitors moving in.

“Distributors have to ask themselves, ‘How do I sell my products to my existing customers, as well as new customers, using mobility, using the Web, using other channels of distribution?’” Blissett says.

“In some ways, customers’ demands are the same as they’ve always been — they’re just more acute now. So pricing continues to be key. Customers demand low prices. The difference now, I think, is that with more products being able to be purchased over the Web, price transparency has become a much more real tool that customers can use against distributors — if pricing is what they’re primarily focusing on.”

New ways to compete

There are several strategies that wholesale distributors are hatching to differentiate themselves in the new competitive landscape. An interesting new tactic is the use of vending machines to distribute supplies.

“This is a trend that’s just starting to emerge,” Grover says. “Distributors are placing vending machines in their customers’ industrial plants or in hospitals for nursing staff supplies. The employees use an ID card to get the needed supplies out of the vending machine.

“For example, in an industrial plant, let’s say a worker needs some safety goggles or some gloves. Instead of going all the way to the tool crib or having to fill out a requisition form, they can just go to the vending machine near their workstation and put their ID card in, and they can pick what they need out of the machine.

“It tracks who got the item and when they got it, and it also electronically signals the distributor when it’s time to replenish the machine.”

Blissett points to the use of data analytics as an exciting untapped opportunity for distributors to serve their customers in a new way in the future.

“Some distributors are looking at their role in the supply chain and the tremendous amount of information and data that flows through their organization and they’re realizing that can be a potential source of differentiation going forward,” Blissett says.

“They’re looking for ways to capture that data, do some analytics on it and turn it into something meaningful for their customers and suppliers. They’re starting to wake up to this potential and invest in it.”

Some distributors are envisioning that within the next five years they could reposition themselves as an information provider for their line of trade similar to companies such as IHS Global Insight and IRI Nielsen, Blissett says.

“They would be able to aggregate information from suppliers, information about customer interactions, as well as macroeconomic data and other information that they have access to,” he says.

“Their ability to pull all of that together, do some analytics on it and make some sophisticated forecasts and projections about where the overall economy is going and where individual facets of the economy and particular commodity prices are going — they could provide a lot valuable information by doing this.”

Economic modeling is just one area among many in which distributors could apply data analytics to create useful information for customers and suppliers.

“It’s essential, now more than ever, for distributors to understand their cost structure and all of the different activity-based costing elements of their supply chain and to be able to drive down the cost as much as possible, and then be able to go to their customers and have a fact-based conversation about that,” Blissett says.

“That allows a distributor to go in to a customer armed with a great deal of information and insight about their own cost structure and how things work, and they can use that to surface some inefficiencies in their customer’s supply chain that the customer might not even have been thinking about.”

Whether it’s in the supply chain, pricing, labor management, fleet optimization or customer segmentation, the opportunities for distributors to drive revenue to the bottom line via the application of analytics are many.

“We’re seeing many distributors make investments in this area,” Blissett says.

“As they get their basic data and their core IT infrastructure in place and they have either a packaged or a homegrown ERP system that’s robust and comprehensive and they can start to do some analytics on top of that, we’re seeing some exciting examples where distributors are challenging long-held perceptions about how to most efficiently move products through the supply chain and how to do things differently and capture a significant value along the way.

“Analytics is a potentially huge source of differentiation for wholesale distributors. Going forward, that type of role for these companies is pretty exciting.” <<

How to reach: National Association of Wholesaler-Distributors, www.naw.org; IBM Institute for Business Value, www.ibm.com/services/us/gbs/thoughtleadership; Evergreen Consulting LLC, www.evergreenconsultingllc.com

How BlueWave Computing keeps its customers atop the IT curve

Steve Vicinanza, CEO, BlueWave Computing LLC

As a provider of outsourced IT services, BlueWave Computing LLC regards service as the core of its mission and its key competitive advantage. The company, guided by CEO Steve Vicinanza, ensures that its service is the best available in its market segment by adhering to four concepts:

  • Hire the best staff possible to deliver the company’s services.
  • Provide the training and processes to ensure consistent service delivery.
  • Develop service metrics that allow BlueWave to continually improve the quality of its services.
  • Apply recommendations from BlueWave’s customer panel to support quality development.

BlueWave has implemented a rigorous recruiting process that focuses on connecting with college placement offices to find the top students available in its field, and then it pairs its new hires with seasoned company veterans to reinforce customer service concepts and adherence to proven processes. The company’s training program provides a focus on teaching its outstanding young engineers “The BlueWave Way” to ensure that its customers are consistently satisfied with the service they receive from the company.

BlueWave considers every one of its customers a VIP and strives to deliver top-quality service to each of them. The largest customers are assigned a technical account manager whose responsibility is to make sure that the customer’s complex IT environments are managed appropriately and effectively.

The results are self-evident. A third of BlueWave’s clients have been with the company for five years or more. And Ecolink, BlueWave’s first customer when it launched 15 years ago, has continued as a customer through three changes in corporate ownership.

“I have seen BlueWave grow from a small five-person IT shop to become one of the largest IT firms in Atlanta,” says Brandon Pelissero, Ecolink’s COO. “So many companies grow quickly but lose their ability to deliver high-quality service. I’m delighted to say that has definitely not been the case with BlueWave.”

How to reach: BlueWave Computing LLC, (770) 980-9283, www.bluewavecomputing.com

David Epstein helps employees at C3 make a difference for customers

David Epstein, co-founder, chairman and co-CEO, C3/CustomerContactChannels

David Epstein understands that his passion for customer service can become irritating.

“It drives my wife crazy,” says Epstein, the co-founder, chairman and co-CEO of C3/CustomerContactChannels. “If I walk into a store with her and I see something wrong, I’m immediately re-engineering the entire process of the store.”

For Epstein, customer service isn’t just a job; it’s a way to make a difference in people’s lives and help them solve their problems. As a well-known venture capitalist, one of the founding members of the American Marketing Association and the head of numerous successful business enterprises in his career, he knows that this mentality is even more powerful when it’s a group one.

“There isn’t a person that works at C3 who doesn’t understand the impact that they can make every day, not only on C3, but on our clients and our client’s customers,” Epstein says.

By filling C3 with employees who see their jobs as an opportunity to make a difference, and then giving them a culture and leadership that supports them, Epstein has helped grow the business process outsourcing (BPO) company from 15 to 7,200 employees in just two years.

Raise the bar minimum

To provide its BPO services for clients and customers, it’s been necessary for C3 to hire thousands of people in a rather short period of time. But as it’s filled its contact centers across 16 worldwide locations, the company has been careful not to take hiring lightly.

While the BPO industry is known for its triple-digit turnover and employees who look at the positions as “phone jobs,” Epstein says that the root problem, as in many industries, isn’t the job. It’s that companies aren’t being discriminating enough in the hiring process to weed out candidates who they know probably won’t be successful.

“Typically, for every 10 people that are interviewed, this industry has a reputation for saying that eight of them are qualified or they are offered a job,” he says. “There’s not been a steeped process for selecting the right kind of people.”

Just because someone can do a job, doesn’t mean that care about doing it well. When you hire employees who don’t care, that translates into the customer and client experience.

That’s why C3 has a talent acquisition team that is extremely judicious in selecting people who are the right ones to grow the business.

“We go through a whole different kind of profiling to understand if somebody is really going to have the propensity to be successful in this job,” Epstein says. “It starts with their communication skills but it really ends with, ‘Will they have that passion? Will they feel that energy and share the values and be here day in and day out in this job to do a great job for our clients?’”

For every 10 people that are interviewed, the company typically narrows the pool down to three or four that it thinks demonstrate the right skills and attitudes.

“We feel like making a difference is an important element to what we do every day,” Epstein says. “So our people who are out in the field select the right kind of people that want to come to work not just because they need a paycheck, but because they want to make a difference for themselves, for their company, their clients and the people on the other end of the phone.”

When you start with the right employees, you can feel comfortable tapping those people for referrals who they know share the same values.

“It’s the friend-get-a-friend concept, but it continues to grow,” Epstein says.

Since 2010, he says that the company has seen turnover 70 percent lower than the industry standard — only two or three percent of call center employees each month.

“Because we’re selective on the way in, it reduces our turnover down to a very, very manageable number,” Epstein says.

“We believe that we’ve really put together the dream team of the BPO space.”

Help people, not clients

There’s a true story Epstein frequently tells when he’s out in the field or speaking to training classes. It was several years ago when one of the company’s health care clients was walking through a contact center and came across a C3 customer service professional who was crying. After the agent regained her composure and finished the call, the client went back to her and asked about what had happened. She replied that she was assisting an elderly man with his prescriptions and he had been extremely appreciative, saying that he didn’t have any family around to help him. Noticing that his birthday was the following day, she’d also wished him a happy birthday.

“He began to cry because it was the first time in three years that he had heard those words,” Epstein says. “We tell that story and we say, do you think she made a difference for that gentleman that day? She made a difference in his life.”

Before you can make a difference with customers, Epstein says you need your people to care about customer service on a deeper level than a job or a business transaction. That involves creating a culture that engages people on a personal level.

“It is a paramount objective for us to make a difference for our clients,” Epstein says. “But first you need to make a difference for yourself. Then you’ve got a chance to make a difference for the company you work for.”

While it’s easy to write something on paper and make it a corporate goal, it becomes a personal goal when you actually live it. This is one of the reasons the company encourages employees to extend the culture of “making a difference” to its communities.

“When things become deeply personal they become deep corporate commitments,” Epstein says.

In recent years, the company’s centers have donated more than $1 million to various causes. But aside from the money, employees know that making a difference is also about community involvement. The organization’s 900 employees in Salt Lake City, Utah have been so involved with community activities and fundraising that they now have a reporter for the local paper assigned to follow their efforts. Another example is C3’s employees in Twin Falls, Idaho, which knit more than 1,000 beanies for the premature infants ward at a local hospital.

“They were sitting there at home or on break with knitting needles, learning how to knit to make these things,” Epstein says. “You won’t find that at most places, but that was a reflection of the culture we’ve tried to create and we have created.”

Around the organization, Epstein says that you’ll find employees using the expression “I’m MAD for C3,” which stands for I Make A Difference for C3. This personal commitment to helping others translates into people’s attitudes toward customer service. When employees are on the phone, they connect to the person on the other end of the line instead of only thinking of doing a good job for the client.

“When people talk about a brand online, it’s usually because they’re frustrated with the service of the brand,” Epstein says. “In the hotel and hospitality industry it’s something like 35 or 40 percent of Facebook messages and blogging is usually about the service. You have a chance to make a difference by helping somebody get through something that they are seeking help on and they are frustrated.

“That is why I think people want to stay part of C3. They aren’t looking for ‘Let me just get that paycheck’ and that’s it.”

Don’t “make it work”

Creating a culture that supports employees and helps them succeed translates into better customer service, which translates into more success for your business.

“When you have a passion in your culture for taking care of your clients and your customers, that will help manage a lot of the velocity of growing so quickly,” Epstein says.

But once you have the right people and the right culture, your company’s leadership needs to make the right decisions for employees to succeed long-term.

Being entrepreneurs, a constant test for Epstein and his partners is being able to say no to certain opportunities. Whenever an opportunity presents itself, there’s a natural inclination to want to seize on it even if it might not be good for your people or your business.

“It could be prospective client that doesn’t fit right with us today, and so it’s hard to say no because you really want to build and grow,” Epstein says. “It could be an acquisition that presents itself where as you peel it back more and more, you find out culturally it will never really work. There’s a tendency for entrepreneurs to say, ‘Well, I can make it work because I’ve been learning to do that my whole career.’”

Epstein’s advice? Know when to say no. When he became one of the owners of the NHL Florida Panthers hockey team 11 years ago, Epstein says he learned this lesson the hard way.

“I thought without a doubt I could change how the business model works for a hockey team and a sports franchise,” he says. “My general feeling was that they weren’t run well and that if me and my partners who were smart business guys and had built big businesses, we could get in there, then we’d be smarter than these other guys and we could change it. Guess what? No.”

If you want your employees to stay focused on customer service excellence, as a leader, you can’t afford to be lured into opportunities that will negatively impact your business. Being a good steward for them requires managers to be good listeners, listening to their people as well as to the market.

“When you stop worrying about how much talking you’re doing and you start to listen, you can hear themes that go on that tell you, ‘OK, maybe things are going a little too quickly over here and I need to pull the reins in a little or I need to add some more resources to that,” Epstein says.

If you see an increasing demand in a certain business line, as was the case for C3’s performance optimization business, don’t hesitate to add resources accordingly — more employees, better technology — to make sure you’re not outgrowing your infrastructure. While looking at metrics is important, Epstein says that being a good listener really helps you develop a gut feel about your business that will more often than not alert you to the right path.

“The biggest thing is not to fool yourself into thinking something can be something, even though deep inside you can hear that little voice — the one you try to ignore — that’s telling you that this is really not the right fit,” Epstein says.

The same goes for people, he says. Many companies hang onto people too long before eventually admitting the fit isn’t right and that they aren’t supporting the goals or the culture you want for the organization.

“It goes on for far too long and everybody would be better off if that person was doing something different,” Epstein says.

“If you’re building an organization and you have people who don’t belong, do yourself a favor and do them a favor and get them to move on quickly.”

As in any business, it’s hard to keep a perfect track record. Still, you can do your best to listen to understand the marketplace as well as your own instincts, which typically can guide you to the best decisions.

“Undoubtedly, we will make a mistake somewhere along the line and something won’t fit in the way we thought,” Epstein says. “That’s going to happen. It’s how you minimize that that makes the difference.”

In the last couple of years, the velocity of C3’s growth has been extraordinary, which Epstein says speaks strongly to the quality of people that work for the company and their drive to make a difference. The organization’s success in this mission also explains why 90 percent of promotions at the company have been internal.

“People look at that and they say, ‘This more than just a phone job,’” Epstein says. “This is a career path and this is a company that cares about its employees, cares about its customers, cares about the people calling and cares about its community. All of those things tied into what we do and culturally who they are have given us an edge and helped us continue to be successful.”

How to reach: C3/CustomerContactChannels, (954) 849-0622 or www.c3connect.com


1. Be selective about hiring.

2. Make your mission more than just a job.

3. Follow your instincts to lead people in the right direction.

The Epstein File

David Epstein
Co-founder, chairman and co-CEO

Born: New Rochelle, New York

Education: Florida International University

What goal would you still like to achieve in business?

To continue to spawn the next generation of entrepreneurs, whether it’s people that are entrepreneurial at C3 that are coming up with great ideas to build the company or it’s people who have all of this entrepreneurial energy and it doesn’t fit for C3 — helping them do it on their own or somewhere else. I think that spawning more entrepreneurism and doing that is a more personal goal. Also, it’s the idea that we continue to put people back to work.

Three things that business leaders need to know:

  • Your business: “It’s important to be clear on who you are and what you are as an organization, not try to be something that you’re not.”
  • Your go-forward strategy: “It’s like a tennis player. If you’re playing the game of tennis you either play the net or you play the baseline. You don’t play in the middle. When you play in the middle you’re dead. You have to pick your path and your strategy.”
  • Your fears: “Don’t let fear be your driver. It’s important to recognize that while some fears are clearly legitimate — you should be afraid of certain things and you shouldn’t ignore the consequences that come along with it — you can’t let it rule the day. You have to put fear in its right place, and frankly the key is to master wanting that fear.”

Steve Klingel: Webinar master

Stephen J. Klingel, president and CEO, NCCI Holdings Inc.

Every customer is different.

As a service provider to the insurance industry, NCCI has learned from extensive experience that we need to be able to move as quickly as our most nimble customers while still accommodating customers who tend to move more slowly.

It can be a tough balancing act, but it’s one that has caused us to examine all of our systems and electronic communication efforts so that we can adopt techniques that leverage technology to improve services and education.

We have not found, for example, that the best way for us to communicate with our customers is through social media programs like Facebook or Twitter. And while we use videoconferencing and instant messaging for internal communications, we do not employ it for external communications. Instead, we continue to lean toward using e-mail, the phone, and yes, personal visits for most of our customer interactions. Those revelations will surely leave some shaking their heads at our archaic communications practices.

To which we say “not so fast.”

We use the above techniques for direct customer interactions and to answer inquiries. But we are also fully engaged in a broader electronic communications effort that we think others can learn from when it comes to offering customers valuable information in a form that is most useful to them.

As might be expected, our main avenue for electronic communications is our website, ncci.com. The site serves a dual function: We have a public side to our website and a subscriber/member side. The member side is for customers who subscribe to NCCI services. It is open only to our data partners and provides them with a menu of support services and tools. But our members —and the press and public — are also very engaged in our public site. That is why we integrate our public and private services on our site.

As a promulgator of some of the most important rules and procedures for the workers compensation system, we are constantly trying to find the best methods for educating our customers in a manner that is understandable, accessible and available to them on their schedule.

How do we do that? Webinars.

In the past three years, NCCI has produced more than 100 informational webinars, which are available at no charge on NCCI’s public website. Designed to be viewed in 30 minutes or less and categorized by interest for ease of use, these webinars can be accessed conveniently over the Internet. Whether you’re an underwriter, actuary, data reporter, product or claims manager, agent/broker, or just interested in workers compensation, you can benefit from an extensive library of online educational modules.

Webinars give viewers something very close to a live presentation, but make it available on demand. This saves on travel time and expenses as well as other training costs.

The customer response to our webinars has also been very positive. In fact, many of our customers have already incorporated NCCI educational modules into their own training programs.

It’s a program that works for us — and more importantly, works for our customers.

Every employee knows that at the end of the day we are only as good as our last customer interaction. So NCCI’s continuing challenge is to leverage the latest technologies to increase our communications abilities, while being mindful that some of our customers tend to move more slowly when it comes to adopting the latest electronic tools. Our task is to find the best and most workable tools to make each and every such interaction a success — whatever the form it takes.

Stephen J. Klingel has served as president and CEO of NCCI Holdings Inc. since 2002. Before joining NCCI, Klingel was a leader with the St. Paul Cos. for more than 25 years. You can reach him at [email protected] .

How to prepare for the inevitable departure of critical IT personnel

Zack Schuler, Founder and CEO, Cal Net Technology Group

You may not want to think about it, but it’s bound to happen sooner or later: turnover in your IT department.
“Not a day goes by where we don’t receive an emergency phone call from a frantic executive with a story that we hear time and time again, ‘My IT guy has just quit, and he has all of our passwords, and we can’t do anything without him,’” says Zack Schuler, founder and CEO of Cal Net Technology Group.
Many companies don’t plan for this sort of exit, though this type of exit will be inevitable for every company at some point or another. It is safe to say that no one stays with a company forever, and when IT people leave, it can be especially painful.
Smart Business spoke to Schuler about how to put the proper backups and protocol in place to keep operations running smoothly even after the departure of trusted IT personnel.

What protective measures can businesses take to be ready for the departure of a key IT person?

1) Insist that your IT folks provide you with administrator and all passwords that they are in possession of. There is nothing worse than an IT person leaving, and not being forthcoming with password information. If you make this a requirement early, and ask for any changes often, you shouldn’t have an issue getting the information that you need. There are pieces of software that you can buy to securely store your passwords that you can give two or more people access to. The key here is making sure that there isn’t one person who has the ‘keys to the kingdom.’

2) Your IT team should provide you with complete and comprehensive network and systems documentation. I could fill up this article with the list of everything that should be documented, but let’s leave it simple and say that everything related to IT that has a power cord should be documented. Also, it is not good enough to document it once and then walk away, but a routine and methodical process of having it updated, at least quarterly, is a critical step. IT changes quickly, so you always want to have up-to-date documentation.
For some companies, this will be hard to get. For many companies, they’ve asked this of their IT folks, and it hasn’t been produced. Why? Most of the time, the pushback from IT is, ‘I have other, more pressing issues that get brought to my attention every day, and documentation always gets put on the back burner.’ One tip we’ve used here is to ask the IT folks to come in on the weekend (and offer to pay them if they are hourly, which they likely are, or at least should be), in order to get documentation done, uninterrupted. It doesn’t take that long once they get into the groove. If IT still pushes back, hire a company to come in and do the documentation for you. You’ll get it done, and have the benefit of an audit of your IT person’s work.
Once this is done, and done well, if the IT person leaves, it is a lot easier to have someone jump into their shoes and take over quickly.

3) Do your best to ensure that your IT people are cross-trained to the fullest extent possible. If you put a serious cross-training program in place, it may save you in the long run. It also gives you the opportunity to feel like you are not tied to a ball and chain with any one IT person, and it makes them replaceable, if the need be.

4) Develop a ‘lock out’ procedure. In the event that an IT person leaves, or is asked to leave, it is important to have a lock out procedure documented, and a plan in place to execute it. As soon as or just before the person is out the door, you should disable their user account and wipe their cell phone, if it is company property. Also, many times it is wise to have the user community reset their passwords, as, in some organizations, the IT guy had access to those as well. An exit agreement drafted by your attorney that lets them know that they are to give back any confidential information is advisable as well.

5) Hire an outside firm to be your backup. One of the duties that we fill for many of our clients is the role of backup IT provider. Most of our clients have an in-house IT staff, and we work with their staff on issues that they don’t have the skill sets to tackle themselves, or in areas where there is simply more demand than supply. Many of our clients hire us to help out, with the secondary benefit of being able to rely on us should an IT person quit or be let go. We are able to fill in for that person with minimal interruption because we’ve become familiar with the environment. Sometimes the company realizes that just part-time consulting work is all that they need, and other times we continue to work full time until they’ve backfilled us with a new resource, who we then train. Having a backup IT provider can be a very smart move.
It’s not always well received when the backup IT provider is brought to the table, as internal IT usually feels threatened. That being said, in almost every case, we work alongside that person well, and they get to understand our value. In many cases, we become the reason that the IT person is able to go on vacation, as we become his or her trusted resource. We want to become the IT person’s trusted resource, as well as the executives’ trusted resource, should the employment relationship go awry.
In short, protecting your IT environment means making sure that you have control over it. Nobody ever got fired for being prepared.

Zack Schuler is the founder and CEO of Cal Net Technology Group. Reach him at [email protected]

Insights Technology is brought to you by Cal Net Technology Group

How to make informed decisions when outsourcing cloud computing

Brian Thomas, IT Advisory Services Partner, Weaver

Executives are jumping on the outsourcing bandwagon as cloud service providers promise unlimited scalability, reduced expenditures for hardware and IT staff, and the ability to offload software and routine maintenance at a moment’s notice.

In fact, Gartner analysts predict that 35 percent of enterprise IT expenditures will be managed outside the IT department’s budget by 2015.

But overzealous executives eager to jump to the cloud may encounter security issues down the road, as the security practices of the cloud service provider are often unclear — up to and including where the data is stored. A survey by Symantec shows that only 27 percent of companies have set procedures to approve cloud applications that use sensitive or confidential information.

“It’s easy to deploy data and applications to the cloud, but most executives don’t have a handle on the true risks associated with those decisions. So they fail to build the proper assurances into the procurement process,” says Brian Thomas, IT advisory services partner for Weaver.

Smart Business spoke with Thomas about the risks of outsourced computing services and why companies should seek an auditor’s assurance during the procurement process.

What are the specific risks associated with the cloud and outsourced computing?

Possible issues include data integrity, confidentiality, privacy and security, system availability and reliability, and data retention and ownership. But the threat level and mitigation strategies vary depending upon the importance and sensitivity of the data being processed by the cloud service provider.

It may not matter if you can’t access your sales prospects for a few hours if your hosted CRM application goes down, but business would come to a halt if your hosted e-mail or e-commerce system crashes. Therefore, the provider’s server redundancy and service-level contract guarantees may be the most critical risks to address, where in other cases, the primary concerns may be security and privacy issues. Certainly, regulated companies need to pay particular attention to how the cloud service provider addresses their regulatory risks.

How can executives identify outsourcing risks?

When considering cloud computing project ideas, executives should ask a lot of questions. First, they must understand the nature of the cloud services being procured and the sensitive aspects of the systems being hosted or managed by the provider. After getting an understanding of the types of data and systems that will be exposed to the cloud, executives should ask ‘what if’ questions of their project teams. Such questions should be focused on general risk areas including data integrity, confidentiality, privacy and security, and system availability and reliability.

Executives should also get an understanding of their company’s exposure to risks related to data ownership and retention. Examples of questions to ask include, ‘What will happen if we lose connectivity to our cloud service provider for an extended period of time?’ And,  ‘What happens if our cloud service provider is acquired by another company?’

How can executives use an outside audit to ensure the performance of service providers?

A third-party assessment by a qualified professional is the only way to know whether a cloud service provider has designed and implemented effective measures to identify and mitigate relevant risks, as self reporting is inadequate and providers may simply tell you what you want to hear.

You can save money by having your auditor review a cloud service provider’s service organization controls (SOC) report. There are three reports available under the AICPA’s standards for service providers. SOC 1 is based on the Statement on Standards for Attestation Engagements No. 16 (SSAE 16) and is best suited for companies that previously used SAS 70 for Sarbanes-Oxley or financial audit compliance. SOC 2 addresses the design and operating effectiveness of a service organization’s controls over the security, availability, processing integrity, confidentiality and privacy of a system. This may be more valuable for executives evaluating the controls a cloud service provider has in place to address risks beyond those relating to financial reporting.

SOC 3 involves the same scope as SOC 2; however, the report contains less detail and is intended for broader (marketing) audiences.

When are SOC 2 and SOC 3 appropriate?

Executives should request that their cloud service providers submit a SOC 2 report where applicable. The scope is generally best suited to address the concerns of users of cloud services. SOC 2 reports provide details of the procedures executed by the auditor to test the controls in place at the cloud service provider, and the results of those procedures.

If a cloud service provider only has a SOC 3 report available, that may be sufficient for getting comfortable while evaluating the service provider during the procurement process. However, executives responsible for the cloud services should request that the service provider submit a SOC 2 going forward to ensure that they can monitor the provider’s efforts to address any failed control activities.

Are there other certifications that can help mitigate risk when transitioning to the cloud?

If the provider cannot provide a SOC 2 report, see if they are certified as ISO 27001 compliant or if they have obtained assurance reports from a security firm addressing the ISO 27001 standard. If the provider processes, stores or transmits credit card information, it is required to meet the Payment Card Industry’s Data Security Standard (PCI DSS). Be careful when using these other forms of assurance. Their scope is generally narrower than SOC reports and may follow less rigorous quality assurance standards. However, in the proper context, they can be useful for executives attempting to get information about the activities performed at the cloud service provider.

Brian Thomas is an IT advisory services partner at Weaver. Reach him at (713) 850-8787 or [email protected]

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Jerry McLaughlin: If you want a raise, turn off your e-mail.

Jerry McLaughlin

Jerry McLaughlin, CEO, Branders.com

Before you read this today, you read your e-mail. You’re always reading your e-mail. E-mail is Facebook for grownups: America’s current favorite distraction from work — corporate America’s No. 1 de-focuser.

I have teenagers. If you have teenagers, then you too have heard someone explain why it is important to have a Facebook page open while doing homework. The rationale is that some of the other kids have the same class and they are talking about the assignment.  But we all know that even if the chemistry homework got mentioned, the kid isn’t using Facebook as some sort of electronically enabled chemistry symposium. Facebook is distracting more kids from doing their homework than it is facilitating it.

The same thing is true about your e-mail and your work. E-mail can facilitate the exchange of information and documents — no doubt about it. But it isn’t without its costs when you continually check and re-check it. E-mail has become our informational slot machine. Each time you pull the lever — that is each time you check the inbox — you might find something rewarding there. But nine times of out 10 it’s just junk or very low priority information, for example, the date next month that they’re testing your building’s fire alarm system. Yet even with the rewards to checking e-mail so terribly low, we continue to distract ourselves with it.

The key to success in baseball is to avoid outs. As long as your team makes less than three outs, you remain at bat and in the position to scores runs. If you make no outs forever, you can score runs forever. That would make for a very long game, but still one that you would certainly win.

The key to success in good thinking is to avoid changing subjects. In other words, if you can stay focused on one idea or problem until it is fully developed or solved, you’ll find many more insights and produce much higher quality work than if you switch your attention to and from the main idea or problem. How many times have you found yourself, in mid-conversation, asking aloud, “What was it I was saying?” or confessing, “I just lost my train of thought.” Keeping our minds focused on a single point is so precarious we can lose the point even while we are talking about it.

No meaningful accomplishment I know of was completed in the first pass. Great writing always involves many rewrites. Great marketing ideas evolve through iterations. Important laws are drafted and re-drafted countless times before achieving a final form.  All thinking activities require that someone hold a problem or idea in mind and work with it for an extended time.

Scientists are acknowledged to be some of our best thinkers. The world is full of interesting scientific problems and curiosities, however, most scientists cannot think in a serious way about more than one or two areas at a time. That is why a scientist will sometimes shoo away a colleague that proposes an interesting new problem.

Again, the idea is that you cannot allow yourself to divide your attention among multiple areas if you hope to make a meaningful contribution in any one of them. Our minds don’t perform any differently when working on business or organizational issues. With work, family, and personal issues clamoring for our attention, the odds of focusing are already stacked against us. We are awash in the noise of all the people and projects that want our attention. Into that mix come the enticements of advertisers and other pitches designed to catch our attention. Then comes e-mail and its constant promise to relieve us from the hard and productive work of focused thinking.

Increased focus leads to better work productivity and in the longer run, to better career opportunities and better jobs. Focus begins with and depends upon the elimination of distraction.

If you want a raise, turn off your e-mail.

Jerry McLaughlin is CEO of Branders.com, the world’s largest and lowest-priced online promotional products company. Reach him at [email protected]

Tim Czyzak’s tips for incorporating audio and video equipment

Tim Czyzak, President, Industrial Video

Our workplaces are managed behind the scenes by ERPs, CRMs and advanced accounting systems. To manage our personal work schedules, we use smart phones, tablets and laptops to access our calendars, e-mails, corporate documents and even Twitter accounts. But there is a third type of corporate technology that can be used to sell, display, and communicate information — audio/video. Audio/video systems are widely defined as technological tools that either project or display images and sound and can be found in most successful organizations.

At the forefront of advanced workplace audio/video solutions are conferencing systems. Video conferencing solutions provide near-in-person communication while eliminating travel expenses. Systems are typically used for customer, vendor and employee meetings where a standard conference call is not sufficient or it’s too expensive to meet in person. Additionally, videoconference calls are used when last-minute meets are scheduled or logistically it’s impossible to organize a face-to-face meeting. Though it is difficult to replicate an in-person meeting, video conferencing allows all users to see the body language of the meeting attendees and better communicate information — often with the use of video images. Conferencing systems were initially used to reduce long-distance travel costs, though companies today understand that video conferencing systems are effective even on a local level. Whether used for local or internal purposes, video conferencing eliminates travel and, thus, productivity improves.

While construction paper poster and information boards were once used to display important information in work settings, today digital signage is used. Ranging from touch-screen kiosks displaying hospital floor information to flat-screen panels showing restaurant menus to displaying real-time manufacturing statistics, digital signage is everywhere. The users of digital signage are typically organizations that recognize that as the scale of their organization grows, so does the need to amplify communication. This can be efficiently done by displaying digital signage in hallways, entryways, cafeterias and conference rooms.

Electronically presenting information through digital signage provides eye-catching and instantaneous communication and advertisement. By allowing for numerous messages to be displayed on multiple, fixed points, digital signage can be customized to allow for organization or location information. Further, in the event of an emergency, many organizations choose to use digital signage as an emergency communication system. While technical in nature, controlling digital signage is typically very easy, and a single user can instantaneously control messages across the world. This real time customization can allow for different images to be presented based on the time of day, location, event, or almost any other condition — allowing for the right message to be put in front of the right audience.

Conducting meetings by displaying information on projection screens or large flat panels is another way to provide impressionable and clear information. Typically meeting settings use these technologies to allow participants to review the same information, at the same time, with the meeting facilitator providing a controlled presentation. With many of these video products allowing for connectivity to the Internet or an internal shared network, almost all information can be displayed. For larger conference rooms, it is typical to have audio/video systems that allow for the use of multiple presenters or interactive presentations.

Control systems for audio and video products make an entire room automated from one location. The single point might be a wall touch panel or a portable unit like an iPad. Control systems make using intricate A/V systems user friendly and enhance presentation by dimming lights, closing shades, turning on a projector, or dropping a screen. All of this can be done by touching a single icon. Switching between laptop computers, playing a DVD, or starting a video conference are now tasks that anyone can perform. Most successful salespeople have found that by creating an impressive audio/video presentation, their likelihood of a sale significantly increases.

Audio and video systems are used by organizations to improve communication with customers, vendors and employees. Used correctly, conferencing systems, digital signage applications, and imaging displays (flat screen panels and projector screens) can increase sales and communication for companies. Many companies focus on improving ERP, CRM and smart phones, though audio /video products are additional tools organization can use to differentiate.

Tim Czyzak is president of Industrial Video, a leading audio, video, conference and broadcast solutions company founded in 1968. Industrial Video is one of the largest Midwestern companies within its industry and has provided solutions for thousands of customers. Reach him at [email protected].

How to bridge the gap between facilities and IT departments

Rich Garrison, Senior Principal, Alfa Tech

The “gap” between facilities and IT organizations has become an industry standard term over the years. While some companies are making strides to overcome this challenge, most struggle with this issue. So, what is the gap? Simply stated, it is when two departments don’t see eye to eye, and in many cases don’t work well together.

Over the past few years there has been a surge in the need for high-capacity and high-density data center facilities to meet the growing demands to store and manage information. This is being driven in large part by social networking, social media and cloud computing services growing at unprecedented rates. Data centers, unlike any other portion of a company’s real estate portfolio, requires input and support from both facilities and IT management and staff.

“IT is in the business of managing information — how it flows at the application layer, how it is transported, processed and stored at the hardware layer, and how it is protected,” says Rich Garrison, senior principal of Alfa Tech. “That is done through a combination of server, storage and network infrastructure designed to deliver and manage information, which in today’s information age is the greatest asset of most companies. Facilities are all about managing the real estate portfolio, space, power and supporting infrastructure.”

Smart Business spoke with Garrison about how to create a more productive work environment in which these two departments can work more effectively together.

Why is there often a gap between facilities and IT?

The gap occurs because of several factors, most originating from the human element. First, IT and facilities speak different languages and often simply don’t understand each other’s needs and priorities. Another major contributor to the gap is that in most companies IT and facilities are two separate organizations with separate budgets, schedules and agendas with competing priorities.

Some companies have rolled up the two groups into one organization to help align the two groups. The fundamental problem is getting those groups on the same page — or even to speak to each another in some cases. This leads to the more subtle interpersonal issues, like pride and ego, that often get in the way. It’s common for power struggles to occur over who is controlling what, allowing both sides to lose focus on what is really in the company’s best interest.

What are some consequences of the gap?

Employees become frustrated. They get tired of beating their head against a wall, make poor decisions and often are forced to settle for solutions that really don’t meet the business’s needs with respect to capacity, reliability and scalability. IT has a history of asking for ‘more than they need’ when it comes to space, power and other facilities resources. This is often due to the fact that long–term requirements are unknown, yet IT must be able to support whatever comes along. Some of these unknown factors may include changes in technology, mergers and acquisitions, changes in the companies’ products or services to name a few. Facilities on the other hand are pressured to ensure that real estate assets are cost effective and operationally efficient. Therein lies the gap, a gap in priorities, business requirements, budgets and management support or direction.

At the end of the day, the company ends up suffering because it doesn’t get the right solution or it spends too much money getting a solution that meets the business’s needs. We have seen IT groups choose colocation simply so they can maintain control of the data center, not because it was the most cost-effective way to meet the company’s data center demands.

Today’s server, storage and network hardware platforms are forcing IT to understand more about power and cooling due to the significant increase in density in recent years. However, having IT staff responsible for planning or managing space, power and cooling is not always the best solution. They usually end up getting it wrong, which can result in unnecessary risks or even catastrophic failures of the data center facility itself by not understanding the underlying facilities infrastructure.

How can companies bridge the gap between facilities and IT?

In almost every instance where this gap is an issue, the companies lack a strategic plan for IT, facilities or both. When companies get serious about developing a formal data center strategy they get much closer to bridging this gap. One particular tool I’ve developed to help bridge the gap is the OPR (Owner Program Requirements) document. The purpose behind this document is to facilitate a process to get facilities and IT to stop thinking about technical solutions, take a step back and start thinking about the business requirements, corporate goals and objectives. It then looks at the functional requirements of both organizations necessary to meet these corporate objectives. Next is to define in their own language the supporting technical and operational needs of both organizations necessary to be successful. This collaborative approach to developing a strategy and plan has proven to be a successful method to begin to bridge this gap.

Getting the two organizations to collaborate and talk in their own languages while finding that common ground is the point of the OPR. It demystifies technology by defining the requirements in terms both IT and facilities groups can understand. For a new data center project, this can be expanded to include a set of design considerations and criteria, written in more technical language that designers and engineers need to understand.

When we see IT staff taking an active interest in understanding facility operations and facilities staff take an active interest in understanding IT requirements, the results have been positive and bring about successful projects that deliver cost-effective solutions for the companies they work for.

Rich Garrison is a senior principal with Alfa Tech. Reach him at (408) 487-1209 or [email protected]

How small and medium-sized businesses can thrive in a rapidly changing environment

Steve Carter, President and CEO, ii2P

Last month Steve Carter, president and CEO of ii2P, challenged small and medium-sized businesses (SMB) to take a look at investment decisions around their current support models. This month, he stresses the importance of adopting a strong sense of urgency to avoid upcoming challenges.

“SMBs worldwide are projected to spend $1 trillion on IT by 2014. But unless something drastically changes, that spending could be like a heavy weight on a vessel headed into a perfect storm,” says Carter. “We want to stop, take a pause, and not repeat history by spending money on technologies without really looking for a composite solution.”

Smart Business spoke with Carter about the challenges SMBs face, how to avoid common traps and the importance of managing cost pressure while strengthening customer intimacy.

Why do you feel there needs to be a heightened sense of urgency around creating change this year?

There are two fundamental problems facing the SMB market space: 1) cost pressures to stay competitive; 2) customer intimacy is in jeopardy. All companies with products and services wrestle with relieving cost pressures to maintain competitiveness. However, the most significant challenge I see is declining customer intimacy. This is an aspect that has been ignored. In order to sustain and grow market share, maintaining customer intimacy is paramount. Overall, a quality customer experience is missing, which shows up in lost market share.

What factors do you feel are causing these challenges?

A perfect storm is described as having multiple conditions that are colliding at the same time. There is a perfect storm in the SMB market today. First, all too often we see both cost and customer intimacy elements are chained to an archaic standard support model. Such a model is actually designed to cost more to interact with the customer. Historically, this has been why companies scrambled to find ways to cut back on support costs. This standard model is also designed to drive customer interactions out because it costs so much and reflects pure overhead. What this does is create an environment for the SMB that says, ‘Use it less, find a way to reduce calls for support.’ Sounds like a good thing, but it is deceiving. It’s a death trap for the SMB.

At the same time the demographics of the end user have changed considerably and it is imperative that you respond to their wishes. Our clients have grown up in the technology world and favor what I call the ‘preferred end user support model’ — they prefer to satisfy the needs themselves rather than call a support center for help.

Lastly, by not considering and committing to a holistic approach when installing new technologies into your business, you are actually burdening your organization with incomplete and ineffective solutions.

How can the SMB know if it is facing the perfect storm?

There are some clear, obvious indicators that every SMB should use as beacons:

ν Check your specific market growth. Has your business grown at a healthy rate? If you are not growing at a healthy rate, the storm will ultimately catch you.

ν Check your client retention. This one is big. You can’t glaze over client loss as being a result of some external factor. Truth is, if you are losing clients, your model is working against you. The two key components are your cost competitiveness and your ability to be intimate with your end users.

ν Check your profitability. This one should be obvious, but can be deceiving. If your margins are falling, for example, don’t automatically blame costs of raw materials. The cost of your support model is a more obvious culprit.

What options does an SMB have if it determines it is facing a perfect storm?

There are three options that always apply, and the first two are the most common traps that sink businesses. The first option is to do nothing. Keep steaming straight ahead, believing the situation will improve. The second option is planning to do something in the future. While this one doesn’t sound quite as bad as doing nothing, it has the same result: the longer you wait, the more you lose ground.

There is a third option: Do something new. Now is the time to face the perfect storm.

How should an SMB go about implementing a new approach in order to avoid the perfect storm?

The thing to remember is that surviving the storm requires a balance between the two elements I spoke of earlier: managing cost pressure while strengthening customer intimacy. The first step to bailing water out of your boat is to analyze and optimize your current support model. Then establish a clear strategy and create self-improving client intimacy through customer-facing self-service.

We’ve all made the mistake thinking that just purchasing technology is the answer. Take a new holistic approach that will bring technology, process and management disciplines as a complete and total solution. Examine the investment in current IT expenditures and make the hard assessment: ‘Am I getting real return on investment?’ If not, make a change. Finally, establish committed continuous improvement processes that focus on balancing the customer intimacy mandate with prudent cost management. With these approaches in place, clearing the perfect storm is simply a matter of having your clients use your new model more.

Steve Carter is president and CEO of ii2P. Reach him at (817) 442-9292 or [email protected]