Think Like a Startup

Many companies practice zero-based budgeting. The idea is that you do NOT start with last year’s budget. You don’t say, “We spent $xx in this category last year, so how much more or less do we spend this year?” You start with a clean sheet. This has the effect of getting rid of those costs that have always been there just because…well just because they have always been there. And that frees you to spend on what you really need, not on what you needed or thought you needed several years ago.

You can take the same approach to IT. Think like a startup, even if you have been in business for decades. Startups do almost all their IT in the cloud and using software as a service (SAAS). That is the default. A startup would think really, really hard about doing anything in-house or custom. Unless something is absolutely core (which means you should be the best in the world at doing it) it is best outsourced to a firm that does that as a core competency.

It is agility that really matters today. Huge companies are crumbling before our eyes. Watch Citigroup and General Motors and your daily newspaper as they go from invincible to suffering or dead. Huge companies have huge overhead. But medium-sized companies cannot afford that overhead.

In 1955, Fortune 500 companies accounted for one-third of the GDP in the US. In 2000, that had doubled to two-thirds. Within that cold statistic lies thousands of human stories of family farms, Mom & Pop stores and other small businesses trampled by Wal-Mart, Agribusiness and other large companies.

That is a massive shift. But it is not written in stone that large companies should control two-thirds of the economy. We may have seen the high water mark of this trend. It maybe reversing. The demise of huge companies is a massive, historical opportunity for smaller companies.

Mid-sized companies need to decide: Are you are agile like a startup or a smaller version of a large company? The latter may give you all the problems of a large company without their advantages of scale.

So, think like a startup. Only do some IT functions internally if you are really (no, really) convinced that those functions are totally core to your mission and you can be the best in the world at them.

That is easier said than done. You do have legacy IT and processes. The most important thing to recognize is that people’s jobs are at stake. If you make the process of moving to cloud/SAAS a genuine win for your people, those objections (”It’s OK for some companies, but its way too risky for us for this reason and this and oh this one as well.”) will disappear like morning mist.

Somebody who is maintaining/managing in-house systems needs to see one of two future career paths:

1. Within your company, moving from context to core, from cost center to profit center.

2. Outside your company, working for cloud/SAAS vendors, trading on the success of the migration of your systems.

Either is a good result, and it will vary by individual.

Recap of Recent Webinar: Managing for Growth

Did you miss our recent webinar, “Managing For Growth And Change In A Tough Economy”?

If so, you can still watch the full webinar here. Meanwhile, let me give the highlights of some of what you missed 

The goal of the webinar was to outline strategies and tips for growing your business by leveraging information technology.  I was the moderator and one of the speakers. I was joined by two extremely knowledgeable people:

• Chris Peters, End User Product Marketing Manager, Server Product Group – Intel
• Mac McConnell, Global Program Manager, Systems Group at Sun Microsystems

Business Outlook

First we covered the current business and economic environment. Our collective view is that although the economy is still in the midst of a recession, some cracks are starting to emerge in the dark facade. We noted the small signs of improvement here and there. For instance, U.S. Treasury Secretary Timothy Geithner has reported that the global recession has stabilized. A number of analysts and economists are now predicting that the recession will bottom out and end in the second half of 2009.

But perhaps the most interesting data point about recovery came from the webinar participants themselves. When asked about their budget expectations for the rest of 2009, 41% of the webinar participants reported that they expected budgets to increase. Compare that to only 18% who expected budgets to be cut. That was mildly surprising to us, given the economic environment we are living through, but also encouraging to see.

No matter what, innovative growth-oriented SMBs know that technology gives leverage and can support and even accelerate growth.  For instance, research by Six Disciplines found that SMB companies strategically using technology outperformed their competitors by 100%.

Strategies and Tips

Among the specific strategies and tips, we discussed:

Setting goals and understanding the challenges you are under. Communicate closely with all the functions in your company, including the Sales Department and Finance, especially during times like these.  You may be in a “no growth” mode but find that it is actually costing money to defer expenditures.  Intel discovered that it could save $19 million (PDF) in its own internal operations, by actually spending money to refresh servers.  Also,  you may be called upon to turn on a dime and gear up quickly to address increased sales growth as the economy opens up again.

Use open source software and existing tools to save money. You can get a software package off the shelf, and customize the software internally to suit your needs.

Using SaaS (software as a service) and cloud computing, avoids having to make large up-front investments for software licenses. It allows SMBs to manage cash flow better.  Also, as many SaaS contracts are month-to-month or short term, you gain flexibility by not being locked in.  However, Mac pointed out that by placing so much reliance on an SaaS vendor, it can have a chilling effect on your ability to switch vendors, in effect giving you less flexibility.

Also discussed were a number of strategic hardware management techniques, including trade-ins, server clustering, virtualization, and the computing performance increases you can gain in your organization.

Chris Peters pointed out the “Server refresh savings estimator.” This is an online tool that enables you to evaluate the benefits of replacing server technology with the latest generation of servers.

One key point was illustrated several times:  by doing a strategic technology refresh, the benefits multiply and spill over beyond just the cost of any hardware itself.   Example:  by consolidating servers, you not only end up with fewer servers that you have to buy, but you also increase computing capacity.  At the same time, it  reduces power consumption, reduces demand on staff time to administer and manage the servers, etc.

Customer Case Studies

Mac and Chris covered 3 customer case studies involved Sun and Intel, showing how SMBs (including one non-profit) had benefited from a strategic approach to technology and had put in place some of the strategies discussed.  The case studies are online:

• Practice-IT, an online training technology provider, utilized VMware and was able to significantly expand its capacity to support increasing workloads without increased cost as the company added new customers.

• NaviSite, a medium-sized hosting company, has 17 data centers around the globe. The company has a large VMware environment and needed to consolidate this environment to save costs while increasing the agility to respond to their customer’s needs.

• Catholic Diocese of Boise, a non-profit providing services and support for 54 parishes, 33 missions and chapels, 14 K–12 schools, a library, and 40 offices, has 38 employees who work at a central administrative office.  They were able to reduce 28 servers down to 4, by implementing Windows Server 2008 Hyper-V to minimize costs and increase server utilization.

There was some livetweeting going on behind the scenes, using the hashtag #MIDMKT. Follow the Twitter discussion  here.

This recap only scratches the surface of what we covered.  To get the full context, all the details, and much more advice, please listen to and watch the full webinar:   “Managing For Growth And Change In A Tough Economy“?