Movin' On Up
This story appears in the September 2003 issue of Entrepreneur. Subscribe »
The term "small business" is not the best way to describe you anymore. Sure, we all started out that way, but the description certainly never fit your dreams. And now, it probably doesn't accurately describe your physical operation. Desktops, phone systems, networks and software licenses--lots and lots of software licenses--you just sort of collect them while you're busy doing whatever it is you do. But it gets to the point where the patchwork of stopgap technology you've acquired starts to cost more in breakdowns, system mismatches and management headaches than the cost of replacement.
If you've suddenly awakened to find that you're trying to squeeze a size 12 business into size 9 hardware and software, it may be time for a technology refresh. That could mean upgrading your network hardware or operating system, your back-end database or e-commerce server. Perhaps certain high-growth applications like e-commerce or instant messaging are straining your processor and storage resources and gobbling up network bandwidth. Maybe it's time to stop buying equipment and start buying systems you can more effectively manage to reduce your operating costs and improve worker productivity.
If you're at that stage, here are five product choices for an upwardly mobile enterprise like yours. You probably won't need them all. No one has the time to buy or deploy them all, and no single product is right for every business anyway. But these systems should, at least, be on the short shopping list of any growing business.
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Note that computer and phone stuff differs from most capital equipment by virtue of its relatively short useful life. There's always some new thing coming along to render obsolete whatever you're using now. No one says you have to upgrade, but you may have a competitor on a different refresh cycle who could use it to gain an advantage over you. So use your high-tech gear and lose it in three to four years, and while you have it, demand a return on your investment. That is, after all, what Adam Smith said machinery is supposed to do for us in the first place, right?
Little Engines That Can
Michael Dell has one of the most inspiring entrepreneurial stories of the last 20 years--from selling PCs in college to being the largest provider of computers in the world. He got to the top by constantly finding new ways to squeeze costs out of his business. The guy knows how to save a buck, and his system specialists are trained to help you do the same with your business systems.
One secret to saving money is to strive for as much uniformity and connectivity as possible across your entire enterprise. You don't want to buy desktops willy-nilly anymore. Even if you add or replace computers at different times, you want a master plan for their deployment and upgrade over the useful life of the asset--typically, three-plus years today.
You also want a company-wide network configuration that gives workers the greatest possible access to data across the enterprise and the most uptime. A critical aspect of that strategy, says Erik Schmude, Dell server and storage specialist, is the unhinging of your data from each departmental server and desktop. Instead, your company data is pooled with the help of Networked Attached Storage (NAS) devices that are easily scaled up as your needs grow and that foster better systemwide data backup and availability. When combined with RAID redundancy, this solution both reduces productivity-killing system downtime and requires fewer IT staff hours to troubleshoot. Although such soft-dollar savings are application- and company-specific, they're real nonetheless and almost always good news in any independent total cost of ownership (TCO) study.
Then, too, the right desktop hardware and network design makes the most of your productivity applications, saving a few seconds here or a minute there every hour. A faster processor, a larger display, a faster hard drive with adequate capacity, gigabit LAN and broadband Internet connections--each adds up to a little more being done in less time. That adds up to significant employee hours saved over the course of a year. That should translate into higher revenue from your capital equipment and, hopefully, more that will land on the bottom line.
If at First They Don't Succeed...
...they try, try again. Microsoftproduct designers don't quit until they get it right--and, eventually, they succeed. Windows Server 2003 is a good example. A decade after it first introduced Windows NT Server, Microsoft wants you to extend your demonstrated preference for its other software products by adopting WS03 for your LAN, Web and database needs. While Microsoft owns an 80 percent-plus share of most markets, it's still running with the pack in this category. That means it's trying really hard to please--giving WS03 both attractive features and more flexible licensing arrangements.
While no first software edition is perfect, Microsoft has done a pretty good job fixing the NT Server 4.0 "pain points" and solidifying the enhancements it introduced in the Windows 2000 Server, according to Tony Iams, the vice president and research director for D.H. Brown Associates, an IT research firm: "Now those features are stable and easy to use."
WS03 is built with the same code as your Windows XP desktops with links to .NET, which Microsoft hopes will become the operating system of the Internet. There's a single pipe from your Microsoft Office desktops and Microsoft application development tools, like Visual Studio, through your servers and on to Internet plumbing standards like SOAP, UDDI and XML, which--big surprise--have Microsoft as their principal sponsor.
This uniformity means more direct manipulation of remote desktops from the server console and easier configuration using WS03 tools. Rules-based routines mean even an IT generalist can configure WS03, paring down unnecessary OS services you don't need.
That, combined with improved network performance reported by independent testers, means you can accomplish more with less hardware and network bandwidth. Some WS03 upgraders report reducing their server count and support staff by a third and overall costs by 20 percent.
This approach also leaves "less surface area" for hackers to attack, says Katy Hunter, group product manager. Better identity management in Active Directory Services and automatic bug patches also enhance security and reliability. Less IT time is needed to keep WS03 up and running.
Windows Server 2003 is too new to have empirical evidence about its ROI. But testimonials from beta testers suggest you could recoup this investment in six to 18 months.
Dishing Data
Has your Web site become an always-on vacuum, sucking up information on customers and visitors alike? Somewhere in all that data are the preferences of your customers and potential customers.
But it takes a very robust data manager, like Oracle 9i, to keep up with the flow and extract the insights needed to recalibrate your marketing, customer service and inventory activities. These applications all include databases, too, and feed into your accounting system--just another database. All your different contact lists? Databases. Your messaging system? A very important database. The trouble is, they seldom share, locking up your most important corporate asset inside a lot of disparate applications on a lot of desktops, servers and Web sites. The Oracle solution is to operate a single, centralized data center on your network, accessible by all your applications.
Data can actually be spread across a cluster of low-cost Intel hardware that operates like one virtual server. In fact, mirroring data on servers in more than one geographic location provides quick disaster recovery, workload leveling and quicker data transfer for far-flung operations. Both your servers and the Oracle data center scale up easily in response to, say, increased holiday sales.
You don't have to be a large company to need Oracle 9i; just have a high-transaction e-commerce site, messaging server or other mission-critical application where sluggish performance can nibble productivity to death and downtime would be disaster. Independent tests have shown that Oracle 9i can dish data twice as fast as popular alternatives and faster still than the application-specific databases most companies use. That means you can get your work done while spending less on computing power and network bandwidth.
Oracle 9i reliability and security reduce IT management time. A recent study by market research firm The Radicati Group concluded that Oracle offers the lowest downtime costs and the lowest TCO among major database products. And here's another money saver: Unlike most software, you buy Oracle once and get upgrades for life.
Buyer, Beware
By now, most corporate technology buyers appreciate that purchase price is just the down payment on complex gear--like networks and phone systems. Significant after-sale costs are always involved in wringing productivity from high-tech equipment, sometimes making the total cost of operation orders of magnitude beyond your original cash outlay.
A check is seldom cut when these costs are incurred. They're paid in soft dollars hidden in budget catchalls like G&A or training, making total cost of ownership (TCO) difficult to pin down. Time is always an element--time spent on qualifying a product, deployment, training IT personnel and other employees. Worker productivity lost to downtime during a system changeover or system crashes looms large--as does the increase in IT management needed as a product's useful life ticks down.
TCO differs by product, user billing rates and variables unique to a particular company or application mix. An example is the TCO calculator for a LAN deployment provided by Dell. Your company's variables may differ. But this is a good start.
Go IP
Right now, you and your employees transmit vast quantities of voice and data messages every day, but probably not over the same network. There's the Internet for data and the Public Switched Telephone Network (PSTN) for voice.
But can you keep meeting your earnings targets with one ankle tied to a phone system that hasn't changed much in a century? The business cycle keeps accelerating--and pretty soon, you'll want to mix voice and data in high-bandwidth applications like CRM, videoconferencing and streaming media presentations. Jumbo data types don't travel well over PSTN copper.
Plan B: Go IP. Internet-based or IP telephony offers capital and operational cost savings and productivity enhancements. An IP-based telephone system like Cisco's ICS 7750, the equivalent of a traditional PBX and a LAN, can easily mix high-bandwidth voice and data packets. Just one Category 5 networking cable carries both to every worker's desktop about twice as efficiently as the standard PBX network, so less hardware, less wire and fewer upgrades are needed.
An IP phone system costs less to buy and install than separate systems, but the real savings come in operating costs. Potentially expensive phone moves, changes and additions can be accomplished by staff without a visit from a PBX vendor. IT staffers need know only one system with one set of manuals and administration tools, and both IT and end-user training are simplified.
Workers have an LCD display with graphical phone options and a universal mailbox that, market research and consulting firm Sage Research says, can save the average person almost four hours of phone tag per week. The phone can display XML-based Web content and, when connected to an IP-based long-distance service, avoid the tollbooths that the Bell companies have placed along the PSTN. Remote, even overseas, offices are a local call. Put a mobile IP phone in the hands of your important telecommuters, and they can receive and make calls through the ICS 7750, too.
Cisco is one vendor focused on return, and its distributors can run an ROI calculator telling you specifically what IP telephony could do for you.
| Many Happy Returns? |
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Estimating your potential return on technology is a useful exercise that can help you refocus away from product specs and onto the real reason you're buying the stuff in the first place--to help your company make money.
But predicting ROI is hard to do. A lot depends on how and how well you use the equipment and what the billing rates of those users are. Here are some of the factors Dell system consultants use for network deployments. This sample ROI calculator starts with total cost of ownership (TCO) and gets more speculative from there. Since no one can foretell the future, product vendors can't definitively predict product ROI anymore than you know how many widgets you'll sell this quarter. But a vendor should, at least, be able to point you to research or anecdotal evidence upon which to base your ROI assumptions. If your salesperson can't, maybe your company is too sophisticated to be doing business with that company. |
Coping With Reality
It's not a question of whether your employees will use instant messaging (IM)--only whether they'll choose IM systems that leave your company open to fraud and mischief. There are no guarantees, but Lotus SameTime from IBM can reduce your exposure.
Consumer IM systems like AOL AIM and Microsoft MSN Messenger have overrun the workplace well in advance of security and acceptable use policies. You can try to ban them. But market research firm Osterman Research predicts that, by year-end, IM messages will be flitting back and forth across more than 90 percent of all corporate firewalls. Your best strategy, says Michael Osterman, president and CEO, is to give your workers a business-class alternative.
While Lotus SameTime won't eliminate your employees' use of public IM services, its user authentication, message--logging and auditing features breed accountability even when employees connect to their AIM buddies. Messages sent over the SameTime system, even to remote employees, are completely secured by 128-bit encryption. You can add an important customer or supplier to your in-house system just by mailing the client software and paying a $36 license fee.
Cheaper than long distance and offering more immediacy than phone or e-mail, messaging now occupies two hours of the typical knowledge worker's day and houses about 60 percent of all critical business information, says Osterman. The typical worker makes 10 phone calls and four trips down the hall to see co-workers every time the messaging system goes down for an hour.
IBM's own employees, who log about 10 messages per day, reduce telephone usage by more than 4 percent and save Big Blue about $13 per month per employee in travel expenses, says Kevin McClellan, IBM marketing manager.
What the numbers don't show, says McClellan, is the increased pace of collaboration that saves employees time, accelerates supply chain and customer service cycles and, ultimately, offers additional revenue opportunities.
IM is not without risks. But if you don't let your workers use it, fast-moving competitors could use it against you.
| 5 More Tech Investments That Pay Off |
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Akonix Enforcer
P2P music downloads and unauthorized instant messaging steal your bandwidth and open you up to security and legal risks. This $1,200 server checks the ID of every file crossing your firewall, blocking any on a constantly updated outlaw list.
InSciTek Microsystems' Allworx 10x
Vonage's Broadband VoIP
CorePROTECT's CoreRESTORE
Lindows OS Computer
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| Sample Total Cost of Operation (TCO) for Hypothetical Network | |||
| Year 1 | Year 2 | Year 3 | |
| Employee Count | 17 | 34 | 51 |
| Windows Desktops with Microsoft Office | $25,618 | $25,618 | $25,618 |
| Windows Servers | $33,707 | $9,057 | $28,832 |
| Network Attached Storage + Tape Backup | $17,338 | $500 | $500 |
| Network Switches, Routers, Firewalls | $11,638 | $626 | $3,750 |
| SQL Server Licenses | $18,500 | $0 | $18,500 |
| Exchange Server License | $1,754 | $1,105 | $1,105 |
| Financial Applications Licenses | $10,000 | $10,000 | $10,000 |
| Deployment Costs | $4,000 | $2,000 | $3,000 |
| IT & Non-IT Employee Training | $10,000 | $5,100 | $8,100 |
| Total Cost of Operation | $132,555 | $54,006 | $99,405 |
| Sample ROI for Hypothetical Network | |||
| Year 1 | Year 2 | Year 3 | |
| Employee Count | 17 | 34 | 51 |
| Total Cost of Operation (TCO) | -$132,555 | -$54,006 | -$99,405 |
| IT Savings from Network Consolidation | 10,750 | 21,500 | 32,250 |
| Revenues Not Lost to Downtime | 101,268* | 156,391* | 245,419* |
| Revenue Run Rate Improvement | 1% more | 2% more | 3% more |
| Revenue Added by Network Efficiencies | $121,238 | $242,477 | $363,715 |
| TCO + Benefits = ROI | $100,701 | $366,362 | $541,979 |
*20 percent of downtime hours saved annually multiplied by hourly cost of downtime
Source: Dell Inc. For a custom analysis, call 800-917-DELL.
Mike Hogan is Entrepreneur's " Digital Edge " columnist.
