Author Archives: cbcsolutions

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Keys to a healthy technology budget

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Practically every business these days spends a sufficient amount of money on technology, however surprisingly few have a healthy technology budget. Either they are spending more on products, services and overhead than the solution saves them, or they don’t spend enough to keep systems and applications running efficiently. Move over, many business are still not taking full advantage of the Cloud.

There are many reasons for this. The most obvious is that Technology Professionals are not typically versed in business (and often don’t care to be). Another is that the environment is changing so rapidly that it’s almost insurmountable for a business decision maker to understand the options that are out there. There are a lot of Consulting agents willing to help, but not all of them take a holistic approach to planning a technology budget.

Identify the Business Requirement

In order to adequately evaluate the solutions in place, it’s necessary to have a clear understanding of the process that the solution is here to solve. Take the focus off the technology, infrastructure and product and move it toward the specific part of the business process that it addresses.

Understand your TCO

Many times we get sticker shock when we look at certain solutions which can force us to scale down and ultimately end up with a solution that costs more to operate and support then it would to just purchase the right product or service. It’s thus important to have a full understanding of the Total Cost of Ownership for the product in question. Cheap or free can sometimes lead to huge support costs and unexpected downtime.

Long Term Planning

To be effective and still keep up with the changing landscape, I’ve found it’s important to look at the long term. When I say “long term” in technology, I’m talking 3-5 years. Depreciation cycles should be set at roughly 3 years. Contracts are best as a 1 or 2 year, though there can be massive savings available with a 3+ year contract.

All of this should be re-evaluated every year to make sure the costs and technologies match the offers available. When signing a long-term contract, always make sure you know what options are available to terminate early. For example, you may want to term the contract in a year because you are moving offices. In this case, you have two options. One is to transfer the service to your new location, the other is to end it completely. If you’re moving out of an area serviced by that vendor, you have no option but to terminate it.

Vendors should have provisions in their contracts for early termination. There may be an early termination fee. This cost should be factored in as a risk when the contract is signed. They may also offer a way to move service to your new location for free. To determine the value of this, make sure you know what the cost of that move would be if that offer wasn’t on the table.

Utilize the Cloud

Cloud Computing has commoditized technology, but it’s costs need to be controlled. See Time for IT to Rein In Cloud Computing Control. Cloud services can really help get costs under control. I’m not talking the generic “OpEx vs. CapEx” discussion that most Cloud Consultants use. That discussion is for another day. I’m talking about the costs of building an infrastructure and the costs of maintaining that infrastructure vs. paying for what you use when you use it.

Consider this. Before the cloud, we used to have to spend a lot of time defining the architecture, spec’ing out the right services, building up the servers, network, and access control, and planning for disaster recovery, backups & antivirus before we even install the first application. The graph below is an example of what those costs look like. It starts with a large expense in the form of hardware, software and often services. This expense offers virtually no value to the organization. Next, IT spends time installing and configuring applications and services to bring the solution to life and then starts rolling it out to end users. In the graph below, the orange lines equate to large purchases, while the blue line is the utilization of the service.

Capital costs

I know that the math geeks out there are going to cry foul on these charts. That they’re generic and don’t represent re-world scenarios. I agree. Real costs can fluctuate greatly, but it does provide a model to compare how costs relate to utilization so bear with me.

Once end users start using the solution, the value of it starts to grow. The green shaded areas indicate where the solution is adding it’s most value, while the red regions show where the costs exceed the value. The more the utilization, the higher the value, however, once the utilization reaches a certain point, the infrastructure can’t keep up with the demand and performance suffers. Until another large expense is allocated. Then the costs out-weigh the utilization and the process starts all over. Meanwhile the costs keep going up. Sound familiar?

Software As A Service
Under the Software As A Service (SAAS) model, your costs are directly proportional to the utilization and the net value of the services is more directly propositional to the costs. Again, please excuse the generic graph.
cloud costs

This is the real value of the Cloud. This is a Rent vs. Buy discussion. Think about a house. It’s a big expense. Much bigger than a rental, but you build up equity the more you put into it. Plus, unless you’re in a depressed area, the value of your house appreciates over time.

Now compare that to a car. The car depreciates in value the minute you drive it off the lot and continues to depreciate every year. Even if you don’t drive it. Leasing might be the better option from a purely financial aspect. No dollar you put into your car is coming back to you in 10 years.

Comparatively, the same happens with infrastructure. Your technology infrastructure will continue to depreciate until it becomes an expense to just keep it around. And it will depreciate at a faster rate than your car. Retiring old infrastructure can be quite costly as well.

Factor in Administrative Costs
Ever take a real look at how much time and money is put into supporting your technology infrastructure. The orange region of the chart below relate to overhead costs to support power and cooling, hardware maintenance, patching, virus protection, backups, fail over, remediation testing and upgrades. These are the area’s most IT departments spend a majority of their time. It’s important to note, that none of the tasks I just mentioned add any value to the business at all. The value add starts above the red line. To run an effective IT shop, you have to manage where that line is. The upper layers include software configuration, application customization and service provisioning which is where IT becomes a strategic asset to the company.

admin costs'

 

When you buy applications as a service, the orange region goes away and IT is working strictly as a strategic asset. The overhead costs are greatly diminished. Plus, when a better solutions comes around, you simply stop service on the old solution. There’s nothing to retire.

Long Term Planning
To be effective and still keep up with the changing landscape, it’s important to look at the long term. Contracts & solutions should be re-evaluated every year to make sure the costs and technologies match the offers available. When signing a long-term contract, always make sure you know what options are available for you to terminate early. For example, you may want to term the contract in a year because you are moving offices. In this case, you have two options. One is to transfer the service to your new location, the other is to end it completely. If you’re moving out of an area serviced by that vendor, you have no option but to terminate it.

Vendors should have provisions in their contracts for early termination. There may be an early termination fee. This cost should be factored in as a risk when the contract is signed. They may also offer a way to move service to your new location for free. To determine the value of this, make sure you know what the cost of that move would be if that offer wasn’t on the table.

Summary

The main point of this post is that your technology budget is a large part of your operating costs. With the right consideration and long-term planning, it can be managed in such a was as to keep the companies finances in order and add value to the organization A good technology consultant who is focused on the business should be able to help you see the long-term hard and soft costs and assist with negotiating the best contracts on your behave.

 

 


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Why you need a Cloud Consultant

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“Cloud Computing” has got to be the most misunderstood term since the technological revolution began. Not to mention all the sub-terms and acronyms that go with it.

With all these different flavors of computing, how a business leader know which one to pursue?

The good news is, you don’t have to. All you need to do is adequately define what your real requirements are and find the service that meet those needs. A Cloud Consultant can help.

 A business computing environment can be broken down to three parts. Processes, Data, & Services. Applications align with your business processes, store & retrieve data then deliver it to the user through a service. The questions you need to ask yourself are:

  • How is my data stored?

  • Are the processes aligned with my business?

  • How fast & reliable should the service be?

A Cloud Consultant should ask you some critical questions to help you define requirements. Do you care where you data is stored and how secure it is? Are your business processes well defined and are they efficient? How much downtime and delay can your business handle?

 Knowing these questions will help the consultant find the best services for your business. A good consultant will address these issues before getting into cost.

 Speaking of cost. The draw to Cloud Computing isn’t always that it’s cheaper, though that’s often the case. The real reward comes in the fact that the costs are predictable and scale up and down with utilization. With the right set of services, the costs will be more predictable and help drive down your bottom line.

 Internal solutions usually start with a costly investment in hardware, software, services & infrastructure. These costs generate negative value when they’re fist deployed. The value doesn’t come until the utilization of the services hits a certain threshold. Once the business starts using the solution, there’s a brief value add and the investment pays off.

Eventually the utilization will out live the capacity of the solution, and upgrades will be required. What happens then? Another large investment. The costs of upgrading, migrating and shutting down the old systems come in to play and now it’s even longer before you recuperate the costs.

 In contrast, a solution “As A Service” doesn’t usually require a lot of up front costs. A monthly fee is applied based on utilization so that the costs will scale with the value the solution provides. As your organization uses the service, the costs will rise. If the service doesn’t add value and it’s used less, the costs go down. It’s much easier to retire a service and the upgrades are handled by someone else.

CBC Solutions is a product agnostic organization that specializes in defining the business requirements and aligning solutions up that meet those needs with a predictable cost model with verifiable efficiency metrics.


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5 Questions to ask your Cloud Provider about security

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Almost every survey regarding moving an enterprise to the cloud shows “Security” as the top concern by most business leaders. It’s important to note, that the “Cloud” can only be as secure as the provider makes it. Some cloud providers are exemplary at providing a secure network, some are not. The right cloud provider is going to operate their network with a much higher level of security that most enterprises, but it’s not good practice to assume they are doing so. In order to find out how secure you provider is, it’s important to ask the right questions.

 It’s not enough to trust that your data is secure just because your vendor says it is. Read through your contract in detail. It’s also a good idea to get a legal review of the contract, preferably before it’s signed to make sure you know where your liability ends and the providers begins. Your provider should be able to answer these 5 questions

1. Who has access to my data and how is that access managed?
This is important. The provider will always have access to some form of the data. It has to. The question is, does the provider maintain a good security practice around the management of that data and how is access governed withing the providers network?

Good answers to expect: ‘We have limited access by only key individuals, security is managed by a rigorous access control and auditing program’

Possible warning signs: ‘We have no access to your data’; ‘We are not responsible for data security

2. What screening methods are involved in hiring staff members and vendors?
Service providers of every type should have a process to make sure that their staff members and vendors all pass a rigorous security screening which includes background checks to make sure they’re trustworthy.

Good answers to expect: ‘We have a detailed screening process that all employees must pass before they’re able to work here

Possible warning signs: ‘We make sure our employees are trustworthy‘ (without a process to validate it)

3. How can I report a possible security breach and what is the expected response time?
The answer to this question should be very clear. Furthermore, the process should be documented and easily accessible. Your staff members should be able to know what to do in an emergency.

Good answers to expect: Call this number to speak to a support representative immediately

Possible warning signs: ‘Submit a ticket by email or web form, your inquiry will be responded to within one business day

4. Do you have a security policy and is it available to customers?
This is a bit of a trick question. Security policies should be company confidential. If a provider is too willing to give you information about their security practices, that could indicate irresponsibility on their part. They should be able to provide a list of security policies and the table of contents, but not the policy itself. Some providers will be able to even provide certifications based on SSAE, PCI or SOX audits.

Good answers to expect: We have internal, confidential polices, but we can provide limited disclosure on what those policies contain

Possible warning signs: Yes, we can provide you with all our security documents

Even worse answer: We have a policy, but it’s not in writing

5. What security related certifications does your organization own?
There are a lot of security certification out there for solution providers. Sarbanes Oxley is one, SSAE 16 is one that applies to datacenters specifically; there are 3 types, 1, 2 & 3. Having all three means the facility has undergone a very strict audit that happens once a year in order for them to keep their certification.


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