Posts in ‘Technologies’

It was the best of times, it was the worst of times. It was the age of ever-cooler technology. It was the age of ever-increasing spending on IT infrastructure.  It was that time of the year – the season to present our annual IT budget, with company leadership insisting on it being received, for good or evil.

After completing my fair share of budgets over the past several years, I admit there have been more than a handful of times where the budgeting process was comparable to a dark Charles Dickens novel.  The budget would be “packaged” and presented for executive approval as expected, but only after months of planning, reviewing, justifying, and negotiating savings opportunities.

How the IT budget is presented is the key to bypassing those “worst of times” and being able to confidently steer your organization to the best of times.  This may sound relatively straightforward but let’s face it – IT and finance organizations are not known for their marketing or communication skills; it’s just not in the DNA of either group.  So then, how do you take your technology budget, containing a multitude of services, from network to datacenter operations and from it, develop a sound IT operations plan and budget which the business understands?

It’s the tale of two budgets……

The solution is providing clarity and transparency, translating the ongoing costs of previously approved investments and providing options.  Focusing on these three areas will result in the view that your IT organization is a high-performing business partner and not just another allocation to the business for which there is little or no control.

First, focus on explaining your budget in a manner which does not require an IT decoder ring for the non-technical folks.  One of the qualities that I consistently see in high-performing IT executives is the ability to translate technology and corresponding costs into the business drivers of your organization.  Keep your presentation in tune with the corporate strategy and growth drivers. The easiest way to break your costs down and translate into business drivers is to identify the product portfolios you support.  For example, if you’re a pharmacy operator, identify how much of your IT infrastructure is required to support  traditional brick and mortar pharmacy services versus online pharmacy services.  Furthermore, if on-line pharmacy services is experiencing rapid growth and has become the cash cow be sure to explain the impact on the information technology cost structure. Next, translate how online services, supported by IT have improved the customer experience (and possibly lowered transaction costs).  The success of your presentation will be measured not just by gaining budget approval, but on your ability to provide transparency into your cost drivers.  If you’re really on top of your game, you can even show how segments of your IT shop (like online pharmacy services) are actually profit centers.

Second, you can further enhance your reputation as a trusted business partner by identifying the ongoing impact of approved investments that reside in your budget.  These investments are likely projects that were approved and implemented in prior years and now are part of the infrastructure, which require ongoing support and maintenance.  Having a previously-established governance process is necessary in order for this conversation to be effective in your presentation.  I once worked with a CIO who consistently reminded his organization there was no such activity that was referred to as an “IT Project.”  All projects within the IT organization either supported, enhanced, or created new services which were understood by the business partner – and the investment had previously been approved jointly with the business.  The governance committee responsible for establishing these processes should be made up of members from the executive committee who will ultimately approve your budget, so that they can be familiar, knowledgeable, and even involved in the investment as they are made.  Likewise, many of these investments are predicated upon creating savings in your infrastructure or elsewhere in the organization.  Therefore, be sure to not only identify the impact of ongoing costs but also identify where the savings or enhanced revenue have been realized in the organization.

Finally, identify the investment opportunities in your infrastructure and present them as ‘levers’ that the executive committee can ‘pull’ when they look for reduction opportunities in your budget.  These levers can range from outsourcing portions of your infrastructure, to investing in new technologies that will result in performance improvements or efficiency gains in the future.  In fact, outsourcing is typically an easy sell when it addresses an area of your organization that is not a core system or competency.  As an example, many IT organizations have become responsible for managing the telecommunications infrastructure and related invoices for the entire organization.  This can be a labor-intensive process which often requires specialized knowledge of telecom billing.  Many outsource companies today can provide services to automate the paying and auditing of your telecom invoices – and even make the carriers’ job of servicing your account much easier.  This is a prime example of a lever you want to present to an oversight or executive committee because although it makes fiscal sense, you also want to obtain mutual agreement that it will also result in tough decisions with respect to staff reductions. Presenting options such as this will prove that your IT shop is not only looking to be a partner to the business, but also stepping up as a leader in reducing cost and improving services and performance.

In talking with a number of colleges, this is the time of year many IT organizations begin to work through their annual IT budgets.  Presenting transparency, impact of prior investment through governance, and providing cost-saving options are the keys to providing sound fiscal leadership and to developing a reputation as a trusted partner to the business.  As mentioned at the beginning of the article, the only potential “evil” side effect of following this outline – now that you are an expert – is that you may get cajoled into assisting the marketing department with its annual budget planning.    As sometimes the case, no good deed goes unpunished.

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This article is contributed by Brian Superczynski, CFO and Senior Partner at Datacenter Trust. Brian has extensive experience leading and advising information technology companies on financial and business operations strategies. His combined financial management and operations background allows him to follow the development of strategic initiatives from system design to detailed implementations

Tagged as: active garage, Brian Superczynski, corporate finance, data center trust, executive committee, finances, financial planning, IT budget management, IT Projects, managing the IT budget

4 steps to effective Disaster Recovery planning

by Marc Watley, Aug 23, 2010

IT executives today are, in fact, increasingly faced with the threat of disasters – whether natural or man-made. As organizations – and their customers – increasingly rely on database, server, and IP-connected applications and data sources, the importance and responsibility of maintaining continuity of the business infrastructure and limiting costly downtime in the event of a disaster, is paramount. Read this article to get a high-level, best-practices overview of the DR planning process. more…

Character and Personality #8: Competency

by Gary Monti, Aug 24, 2010

A good leader is also a good politician, one who finds a way to thread through a situation to reveal a path that, when followed, benefits the common good. Competence pulls technology and sophistication together so that one person can meet another person’s needs, i.e., a connection comprising the humanity of the stakeholders who need and commit to finding a solution that works. more…

Social Media and Tribes #9: The fear factor

by Deepika Bajaj, Aug 25, 2010

Even professionals who have gone through many technological innovations in the past don’t find the idea of being transparent and authentic over social media too appealing. They were worried about identity theft, making a wrong impression on a potential employer and above all were overwhelmed by the friend requests on Facebook. These are valid concerns, but not an excuse to avoid social media.  more…

Flexible Focus #16: The decision trap

by William Reed, Aug 26, 2010

Ambiguity causes anxiety in those who are inflexible, and creates possibilities in the minds of the people who have flexible focus. Tolerance for ambiguity drops when you have to make a decision. Urgency adds pressure, and when the decision affects the core areas of your life, you can feel as if you are lost in a labyrinth of choices. Your decision sets the wheels in motion, whereas with indecision the wheel turns without you. Read about the Six Criteria for Decision Making to stay in motion and steer the wheel. more…

Investment Value

by Steve Popell, Aug 27, 2010

In a previous post, Business Valuation in Divorce is Different, Steve discussed why Investment Value is more appropriate in the context of family law.  But, this method is not just for divorcing couples.  In any situation in which the party acquiring an interest (or a greater interest) in a company will become (or continue to be) part of the management team, Investment Value is often the most appropriate method.  Read this article to find out why. more…

Magesh is an accomplished software professional focused on building enterprise value through creative use of technology. Magesh enjoys working with people and is passionate about bringing out the best in everybody to achieve results that are larger than the sum of individual accomplishments.

Tagged as: active garage, Business Management, business planning, Business Strategy, Business Valuation, deepika bajaj, execution, Flexible Focus, gary monti, http://activegarage.com, leaders, Leadership, management, marc watley, Social Media, steve popell, Strategy, technology, william reed, www.activegarage.com, www.datacentertrust.com, www.deepikabajaj.com

Question: A wildfire 10 miles away from your company headquarters is raging out of control. The fire captain just ordered everyone in your building to evacuate. All staff have safely evacuated premises, and now you are likewise heading out, taking one final look at your datacenter – still humming away, unsuspectingly. You have offsite data storage but no offsite server infrastructure, applications, etc.

What do you do?

I’m paraphrasing from a not-so-great movie here – Speed (Keanu may have been good in The Matrix but the predictable tête-à-tête between his and Dennis Hopper’s character in Speed still makes me chuckle) – but IT executives today are, in fact, increasingly faced with the threat of disasters – whether natural (such as a wildfire) or man-made (e.g. some ding-dong crashing a vehicle into your datacenter). I may be taking a bit of creative license here, but this could not be a more serious issue. (Recall those horrible wildfires in San Diego, California area a few years back? The example above was culled from situations experienced during that period.)

As organizations – and their customers – increasingly rely on database, server, and IP-connected applications and data sources, the importance and responsibility of maintaining continuity of the business infrastructure and limiting costly downtime in the event of a disaster, is paramount.

Though many an organization had active disaster recovery (DR) projects on the books a few years ago, the global financial crunch of the last 20 or so months has wreaked havoc on IT budgets everywhere; only now are many of these DR projects once again taking priority.

If you’re thinking that you can ‘wait it out’ and disaster won’t strike on your watch, think again. Apparently, some 93 percent of organizations have had to execute on their disaster recovery plans. Yep. This according to an annual DR survey from Symantec last year.  A few more points from this survey:

• In general it takes companies [with active DR plans] on average three hours to achieve skeleton operations after an outage, and four hours to be up and running
• The average annual budget for DR initiatives is $50MM (including backup, recovery, clustering, archiving, spare servers, replication, tape, services, DR plan development and offsite costs)
• Virtualization has caused 64 percent of organizations worldwide to reevaluate their DR plans

Whether your organization is a small recently funded startup or well-entrenched in the Fortune 100, designing, implementing, and testing a DR plan is an endeavor that takes dedication, careful planning and time (the entire process can take weeks or even months). There are many excellent resources available which can provide knowledge and detail as to the individual steps of a DR planning initiative.  (Cisco’s DR Best Practices site or Disaster Recovery are great places to begin, by the way.)  What follows is a high-level, best-practices overview of the planning process:

Executive Sponsorship

This first step of a successful DR plan involves two key components: One is to secure plan sponsorship and engagement from senior company leadership – CEO, COO, CIO, etc. The other is to establish a planning team that is representative of all functional units of the organization – sales, operations, finance, IT, etc.  This step is the catalyst to a smooth planning initiative, and requires focus and patience.  (The ability to herd cats wouldn’t hurt, either.) It may also be helpful to reduce the impact on internal resources by leveraging outside help from a consulting firm well-versed in DR planning.

Information Gathering

This portion of the planning process – information gathering, due diligence and assessment – is the most involved and most time-consuming, and a true test of teamwork across the organization.

The first step in this part of a DR planning initiative is performing a Business Impact Analysis (BIA), which helps to assess the overall risk to normal business operations (and revenue flow) should disaster strike right this second. The BIA is typically comprised of identifying and ranking all critical business systems, analysis impact of interruption on critical systems, and most importantly, establishing the maximum length of time critical systems can remain unavailable without causing irreparable harm to the business. This length of time is also known as Maximum Tolerable Downtime (MTD).  Working backwards from the MTD will allow acceptable Recovery Point Objective (RPO) and the Recovery Time Objective (RTO) to be reached.

With BIA in hand, the next steps are conducting a risk assessment and developing the recovery strategy.  The risk assessment will help to determine the probability of a critical system becoming severely disrupted, identifying vulnerabilities, and documenting the acceptability of these risks to the organization.  Engagement from the entire planning team is necessary in order to accurately review and record details for critical records, systems, processing requirements, support teams, vendors, etc. – all needed in order to develop the recovery strategy.

Also important in the recovery strategy is identifying the recovery infrastructure and outsourcing options – ideally alternate datacenter facilities from which critical systems and data can be recovered in the event of a serious interruption.  This, as they say, is the point at which the bacon hits the frying pan: Many organizations are leveraging the power and abundance of Cloud-based IT resources to lower infrastructure costs, and Cloud is particularly applicable for DR.  In fact, there are more than a few services who provide continuous data protection: typically accomplished via unobtrusive software agents residing on each server in a datacenter. These agents are then connected to a black box also residing in the datacenter, incrementally taking images of each server, de-duplicating the data, then replicating that data via secure WAN to a remote data store, ultimately providing on-demand (via secure web console) recovery from the remote location at any time. Companies such as nScaled, iland, and Simply Continuous offer such services and can even help build a business case to illustrate the ROI for this service.  Point is, do thy homework and explore if Cloud services such as these might make a sound fit into your organization’s DR plan.

Planning and Testing

Armed with a full impact analysis, risk assessment, recovery goals, and outsourced options, now the actual DR plan can be developed. The DR plan is a living document that identifies the criteria for invoking the plan, procedures for operating the business in contingency mode, steps to recovering lost data, and criteria and procedures for returning to normal business operations. Key activity in this step is to identify in the DR plan – a recovery team (which should consist of both primary and alternate personnel from each business unit) and to identify recovery processes and procedures at each business unit level.  Also important is to ensure the DR plan itself is available offsite – both via the web and in permanent media form (print, CD-ROM, etc.)

Equally important to having a DR plan is regular testing. This step includes designing disaster/disruption scenarios and the development and documentation of action plans for each scenario. Conducting regular testing with full operational participation is key to successful testing.

Ongoing Plan Evaluation

An effective DR plan is only a good plan if continually kept in lock-step with all changes within the organization.  Such changes include infrastructure, technology, and procedures – all of which must be kept under constant review, and the DR plan updated accordingly.  Also, DR plan testing should be evaluated on a regular basis, and any adjustments made (systems, applications, vendors, established procedures, etc.).

So there you have it – four key building blocks to tailoring a DR plan for your organization.  Of course, if the ‘disaster’ arrives in the form of a city-sized asteroid hurtling towards Earth, needless to say any plan will likely not make much difference. Anything short of such a global catastrophe, however, and a well-developed and maintained DR plan will keep employees and customers connected and business moving forward, with minimum downtime.

Again, this is by no means a complete recipe for designing and implementing a DR plan but instead is meant to serve as a high-level overview…offered as food for thought.  I encourage you to learn more, explore options, ask for help if needed – whatever it takes to thoroughly prepare your organization for the worst, should the worst ever occur. To loosely paraphrase our man Keanu once again from another of his, er, more questionable films from back in the day – Johnny Mnemonic – this is one topic where you absolutely, positively don’t want to “get caught in the 404″.

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Written by Marc Watley, Co-Founder & CEO of Datacenter Trust. Datacenter Trust is a recently-launched consulting and services delivery firm, providing outsourced server hosting, bandwidth, cloud services, and IT financial intelligence and analysis services to growing businesses.

Tagged as: backup, cloud, cloud computing, Data, datacentertrust, Disaster Recovery, DR, DR Best practices, iland, IT Finance, marc watley, Maximum Tolerable Downtime, nScaled, recovery, servers, Simply Continuous, Speed, virtualization

4 tips for selecting the right consultant

by Brian Beedle, Aug 16, 2010

Vendor selection process can be an arduous, time consuming, and stressful task.  Receiving quotes that run the gambit of the budgetary spectrum, deciding which product will give your company the biggest bang for the buck and wondering if saving a dollar or two is really worth the frustration of finding the “right partner”.  Every Project Manager has dealt with these issues. In this article, Brian lists some key points may provide some clarity and assist with narrowing the decision-making process when seeking a value-added business partner. more…

Character and Personality #7: Courage

by Gary Monti, Aug 17, 2010

Tiger Woods’ difficulties with his swing and Mark Hurd’s (HP’s CEO) inability to fill out expense reports correctly can be traced back to complexes. In a very public way they both show how trying to succeed simply by ego has limits and the desire to be complete as Self will, when denied, erupt and wreak havoc without any regard to the consequences. more…

Working Hard – Still no progress?

by Vijay Peduru, Aug 18, 2010

According to most economic historians, the Industrial age ended about 20Yrs ago in 1989 when the Berlin wall came down and the internet came up. In the industrial age, working hard meant, using our body and working long hours i.e physical labor. The easiest way to do hard work in the post industrial age, is to love change, train ourselves to love challenges and question the status quo all by using and exerting our mind. more…

Flexible Focus #15: Karma and Connections

by William Reed, Aug 19, 2010

You reap as you sow. Therefore if we want to achieve positive results, you need to think, speak, and act positively. There is also collective Karma, which is often thought of as collective fate, but more constructively can be interpreted as collective action. Things are connected in ways that are not always obvious. Even when the connections are not obvious, it is possible to take small actions which use the butterfly effect to create good Karma. more…

A diverse workforce: The smart thing to do

by Robert Driscoll, Aug 20, 2010

Diversity in the workplace should not be limited to race, gender and age, but differences of views and personalities as well. If this diverse workforce is guided properly, they will share their unique knowledge and discuss their differences rather than what’s common between them. This will lead to generating innovative ideas that could potentially change the marketplace you are in. more…

Magesh is an accomplished software professional focused on building enterprise value through creative use of technology. Magesh enjoys working with people and is passionate about bringing out the best in everybody to achieve results that are larger than the sum of individual accomplishments.

Tagged as: active garage, brian beedle, Business Strategy, gary monti, http://activegarage.com, Leadership, possibilities, Project Management, Robert Driscoll, Strategy, technology, vijay peduru, william reed, www.activegarage.com

The vendor selection process can be an arduous, time consuming, and stressful task.  Receiving quotes that run the gambit of the budgetary spectrum, deciding which product will give your company the biggest bang for the buck and wondering if saving a dollar or two is really worth the frustration of finding the “right partner”.  Every Project Manager has dealt with these issues, but keeping in mind the following points may provide some clarity and assist with narrowing the decision-making process when seeking a value-added business partner.

1. Prepare a well defined project scope
   • Create a list of requirements. Ensure all aspects of the project are being captured.  Alignment and agreement within the organization must occur first and foremost.
   • Project Scope must outline all roles and responsibilities.
   • Establish all high level deliverable dates and the associated milestones for the project.
   • Sign-off from the Executive sponsor of the project must occur at this stage.
2. Gather a list of recommended vendors and interview each. It is critical that the following points are addressed during the interview process to ensure that the vendor(s) have the resources available and the knowledge to deliver a final product that aligns with the project scope.
   • It is important to determine the level of experience that the consulting team exhibits.
   • Request resumes for the consultants on staff.
   • Inquire as to the specific projects these consultants have worked to qualify the expertise that exists.
     • Do they have relevant industry experience?
     • Speak to them about a “proven approach” to a similar project and how they were successful in delivering in a timely manner.
     • How many dedicated and part-time resources are available?
   • What involvement (if any) is the customer expected to contribute?
     • This is key in determining not only the resources that your organization will need to dedicate, but will also have an impact on the billable hours being allocated for the project.
     • Keep in mind, having an internal resource dedicated to the project is a great way to leverage the “hands-on” experience as a training mechanism.  In addition, these employee costs can be capitalized, reducing the expense budget.
   • Does the vendor’s Project Lead have a Business or Finance understanding or does this person strictly possess a technical background? Depending on the direct involvement of the business users, this is an important issue that needs to be considered.
   • Have a thorough understanding of how your organization is going to be billed.
     • Understand how your organization is going to be billed and at what milestones.
     • What is considered as reimbursable expenses at what percentage is this “capped”?
   • Request three business references in which the vendor has successfully implemented a similar product.  It is acceptable to ask for examples, or a letter of recommendation from former or current clients.
3. Depending on the result of the interview stage, make a request of the vendor to develop a proof of concept. Compare this document to the original project scope
   • Does the Proof of Concept support the Project Scope and required end result defined by your organization?  Ensure that all key deliverables are being met.
   • Ensure that the timelines seem reasonable. Do they align with the deliverable dates of your organization?
   • Don’t hesitate to challenge the methodology or the approach being used by the prospective vendor.
   • Compare the approaches of the different vendors – It is important to keep in mind that you are the subject matter expert, push back on what does not seem reasonable.
4. Negotiation
   • The lowest price does not always constitute the best solution. However, staying within an allocated budget is important. Do what is fiscally responsible for your organization; do not sacrifice quality or functionality just because a vendor comes in with a significantly lower price.  It is important to deliver a product that is going to meet the expectation of the sponsors.
   • It is important to understand what level of post-implementation support, training, and maintenance is included. This can be used as a key negotiation point.

These high-level items touch on a number of areas that should be considered during the vendor selection process.  Of course, there are a lot of other aspects that may need to be considered for your organization which go beyond the areas addressed here. Be resourceful. Don’t hurry off to start a project without doing your due diligence by investigating and selecting a firm that fits your needs. The results of a good implementation can change the way a business functions, the remnants of an implementation that is not successful can have even longer effects
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This article is contributed by Brian Beedle, Vice President and Senior Partner at Datacenter Trust. Brian has an extensive background in financial management in many industries including entertainment, travel and leisure, health care and technology. Brian is a practitioner of financial systems implementation and administration, and experienced with many of the top performance management tools on the market today.

Tagged as: brian beedle, data center trust, infrastructure, IT costs, IT Finance, Maintenance, Project Management, project scope, vendor management, www.datacentertrust.com

Integration: Keys to the successful merger of companies

by Matthew Carmen, Aug 2, 2010

Companies merge to increase profits through increase efficiency. But according to CNBC, nine out of ten mergers do not fully meet the goals of their acquisition. The main task that takes place in successful integrations is proper reparation within operational areas. This includes putting together processes and procedures that will need to take place to reach the corporate goals. In this article Matthew describes how he participated in a merger at a large entertainment company and what contributed to its success.  more…

Character and Personality #5: Don’t pull that trigger!

by Gary Monti, Aug 3, 2010

Sometimes you don’t want to confront your fears and uncomfortable situations. This causes blind spots into which organizations can fall an disappear. Instead of taking short cuts and jumping to action we should explore options, analyze our assumptions and manage risk. more…

Managing a project requires actions

by Guy Ralfe, Aug 4, 2010

Just because the project has a plan does not mean we simply have to conform to it. A plan is created when certain realities are true. But as the project is implemented, things change and new realities open up. We need to constantly update our plan and make adjustments based on changes that occur through out the implementation phase. Guy sites an example from his recent experience in this article. more…

Flexible Focus #13: Finding focus in the frames

by William Reed, Aug 5, 2010

Creativity happens much better when you are in your favorite cafe than when you are in your cubicle. Even better, the Mandala Chart offers a fresh approach that helps you find focus in the frames. Once you understand the value and attraction of working with the Mandala Chart on paper, you can increase your skills and improve your results with practice. Here are 8 steps that can help you get started.  more…

Author’s Journey #33: 7 Keys to Profitable Special Events

by Roger Parker, Aug 6, 2010

Last week, Roger discussed some of the ways authors can attract profitable speaking invitations. In this week’s article he takes the idea of “speaking for profit” to the next level, which involves creating, marketing, and producing special events like conferences, seminars, and workshops. more…

Magesh is an accomplished software professional focused on building enterprise value through creative use of technology. Magesh enjoys working with people and is passionate about bringing out the best in everybody to achieve results that are larger than the sum of individual accomplishments.

Tagged as: active garage, author's journey, Business Management, business planning, Business Strategy, Communication, gary monti, Guy Ralfe, Matthew Carmen, roger parker, william reed, Writing for Business, www.activegarage.com

There is really only one reason for the merger of corporate entities: the creation of more shareholder value (whomever the shareholders are) from the two, than were there separately.  The creation of more profit is done through doing business more efficiently and effectively, which takes on many forms, depending on the where in the organization one resides.

When a corporate combination of any kind (merger, purchase of business unit, hostile takeover, etc) is announced, it is usually the first time that the vast majority of employees, on both sides of the transaction, have heard this is happening.  This announcement will trigger many acts.  Executive management, the “C level” and their support will be working on the new strategy of the combined entity, the purchased entities employees will be worrying about their futures, etc.  The real work is realized at the operational levels of both entities.

In most cases, the purchasing company is restricted from speaking with the company being acquired until the purchase is finalized.  The high level executives on each side may have spoken about strategic issues of running the combined entity, but the nuts and bolts of daily operations typically have not been fleshed out.  Once final approval for “the deal” has happened, the clock starts regarding  the time it will take to integrate the two organizations into one cohesive unit.  The faster this occurs, the quicker the goals of the merger, greater shareholder value, can be achieved.  According to CNBC, nine out of ten mergers do not fully meet the goals of their acquisition. This is largely due to a failure to integrate companies properly.

This failure to integrate can be seen in the current Gulf of Mexico oil spill debacle.  British Petroleum (BP) never integrated its purchases in the United States, Atlantic Richfield Company (ARCO) and American Oil Company (Amoco).  These companies don’t even share branding with their parent company, much less financial and IT systems.  An integrated entity may have helped BP to be more proactive in its maintenance of gulf oil platforms and wells, possibly stopping or at least lessening the catastrophe that occurred with Deep Water Horizon.

During the period of time between when the corporate combination is announced and when it is approved by shareholders, government entities, etc. a lot takes place behind the scenes, often without discussion between the entities.  The main task that takes place in successful integrations is proper preparation within operational areas.  This preparation includes putting together the processes and procedures that will need to take place to reach the corporate goals.  In companies that are in a merger mode, meaning they are growing through regular acquisitions, many of these processes and procedures can be used over and over again, and usually are.  For the company that does not participate in acquisition often, creating these processes and procedures can seem like a daunting task.  There are many consulting companies, from the Accenture’s and Deloitte’s of the world down to small specialty firms (such as my own – Datacenter Trust) who concentrate on the portions of the business where they have specific expertise and can help complete or even manage the integration process.

Once the acquisition has been approved, the integration process begins.  I participated in multiple integrations while employed at one of the largest entertainment companies in the world, where I was the lead financial representative to the Program Management Office (PMO).  One example of an operational process that needed to be looked at during each acquisition was the issue of entertainer royalties, the way in which actors, musicians, etc. get paid on their current and past work.  It was the job of that department to look at the current royalty application being used and the royalty application of the acquired entity and choose which application is better, if neither was best of breed, outside solutions may have been looked at.  “Better” is a very subjective idea, one which in this case was left up to the experts in each department that needed to make a choice, regardless of application.  Anyhow, once a choice was made, a plan was put together and included cost analysis, equipment needs, software licensing needs, etc.  Once all of the application consolidation plans, hundreds or even thousands, were finished, they were turned over to the PMO.

The job of the PMO was to look for efficiencies within all the plans.  These efficiencies were all tied to being able to have more purchasing power, economies of scale.  Economies of scale says that one company with 100,000 users will get better pricing then two companies with 50,000 users each.  This is due to the fact that it is harder for the company with 100,000 users to make a future change in usage. We were able to negotiate with vendors based on the size of the new entity, gaining pricing power in the areas of hardware (PC’s, servers, etc), software (applications and packages) and services (consulting, facilities, electricity, etc).   In the finance department, we were able to leverage the major vendors in the space, for our budget & planning system and accounting system, to get pricing that was over 35% better than it had been in the past.  We also got all of our users on the same systems, making reporting easier than it had been before.  The integration, in total, saved the combined entity over $400M in annual spend.  The largest areas of savings were software maintenance and facilities.

Datacenter consolidation is an area that must be looked at closely for a successful integration of IT operations.  Back to my example above, the combined entertainment giant decided that six global datacenters was the appropriate number.  The number could have been lower, but there were many global political issues, etc.  Formerly, the two companies had a total of 18 datacenters.  In two geographical instances, the two companies had data centers right down the street from one another.  By going to six global datacenters, the new company was able to save a great portion of the previously mentioned $400M.  Disaster recover became an in-house activity, electricity usage was cut by over 33% and the location of applications became a mute point, where it had been a political battle field before.

Conclusion

Integration of operational areas between merging entities is crucial to meeting the overall goal of growing shareholder value.  When done properly, the measurable goals of an acquisition can be easily met.  When convoluted, the acquisition looks like a bad idea two, five, and ten years out.  The last thing any management team wants to do is fail in an acquisition.  Loss of employment, legal proceedings, and possible acquisition by another entity are sure to follow, and no one wants to go through that.  Everyone associated with a company: executives, employees and shareholders alike, benefit from a well-planned and managed integration.

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Matthew Carmen launched Datacenter Trust along with Marc Watley in February, 2010 and serves as Co-Founder & COO as well as Managing Partner of their Financial Intelligence practice. Datacenter Trust is a recently-launched consulting and services delivery firm, providing outsourced server hosting, bandwidth, cloud services, and IT financial intelligence and analysis services to growing businesses

Tagged as: active garage, corporate finance, corporate mergers, data center trust, datacenter, effective business strategy, Keys to successful merger, M&A Success, Matthew Carmen, successful acquisition, successful merger

Your readiness for managing your supplier after the negotiation

by Brian Superczynski, Jul 19, 2010

Organizational needs are routinely satisfied by external vendors. Letting the vendors manage the relationship will be like the tail wagging the dog. It will lead to serious issues not limited to mushrooming cost. Vendor management includes the negotiation process before the contact is signed, having an organizational structure to manage vendors and having an mature process to monitor the lifecycle of your agreements. more…

Character and Personality #3: Orientation and Energy

by Gary Monti, Jul 20, 2010

Two major components that go into determining one’s temperament are Orientation and Energy. Orientation refers to how we prefer to interface with the outside world. The two approaches are Judging (don’t confuse with Judgmental) and Perceiving. Two possibilities for gaining energy are Extroverts and Introverts. A person can have a combination of these traits and of course these are not the only once – there is a whole slew of these. Understanding these traits will help you manage people and teams better. more…

Social Media and Tribes # 6: Changing the world is addictive

by Deepika Bajaj, Jul 21, 2010

A tribe is constituted of people who care about a specific topic or interest or looking to bring a specific change. Tribes are needed to change the world and social media has created tremendous opportunity to create and lead tribes. Read this article to understand how to gain advantage using social media and not get simply distraught by its demands. more…

Flexible Focus #11: The Principle of comprehensiveness

by William Reed, Jul 22, 2010

In this article you will find an optical illusion. As you increase your field of vision, you will be able to see more white dots. The message here is, you need the ability to see the big picture, the details and the relationships all at the same time. Mandala Chart can help us regain our bearings by seeing our business comprehensively. This will enable us see the opportunities that are never obvious, because the exist in the spaces between. more…

Author’s Journey #31: Managing and Marketing information products

by Roger Parker, Jul 23, 2010

Information products are an author’s best friend; they offer far more profit potential than authors can earn from book sales alone. Last week, Roger’s post explored the 3 main issues involved in creating profitable information products: copyright, format, and topic. This week’s post takes a look at creating a process to produce, market, and schedule information products. more….

Magesh is an accomplished software professional focused on building enterprise value through creative use of technology. Magesh enjoys working with people and is passionate about bringing out the best in everybody to achieve results that are larger than the sum of individual accomplishments.

Tagged as: active garage, author's journey, Business Management, business planning, Business Strategy, Communication, deepika bajaj, Entrepreneurship, gary monti, http://activegarage.com, Innovation, invincibelle, Leadership, possibilities, roger parker, Sales and Marketing, Social Media, technology, william reed, Writing for Business, www.activegarage.com

Regardless of the size of your organization, someone is responsible for identifying the need of a service or product being purchased. One could therefore surmise this individual would also assume the ongoing ownership and maintenance of the product, providing vendor management oversight, right? Well, you might be surprised by the number of occasions on which the linear progression of identifying a need and satisfying the need becomes disconnected in technology organizations.

This disconnect often occurs when a business unit obtains approval to bring a new product to the company which in turn places new or expanded requirements on its Information Technology (IT) organization.  With their backs often against the wall, the IT department will “buy” the technology in order to meet required deadlines. What happens in this case is that the IT department ends up relying on the vendor to manage the technology, and often times let the supplier act as the IT point of contact for the “customer” – the internal business unit.  Well, as we know problems often start out small and later mushroom out of control.  This situation is no exception:  If the new product the company has developed becomes successful, IT will continue to buy more of the necessary technology for the business unit.  The next thing you know, the original contract for, say, $100,000 morphs into an agreement covering perhaps $5M in purchases – and since the vendor manages the technology, no clear internal owner exists.  A sure-fire recipe for big problems.

The process starts with the negotiation of the contract which typically initiates a rather ‘interesting” time within the organization.  The discussions with the supplier often times become stressful with both sides treating the negotiations as a form of competition to obtain the best price and terms.  This is further complicated with the coordination of the different groups who provide input and are required to approve on both sides of the agreement. For example, the finance departments will be called upon to review the financial impact to budgets and Return on Investment (“ROI”), while the procurement and legal departments review terms and conditions.  With all these organizational units involved, the final agreement ends up segregated into sections which are relevant to disparate groups within the organization, and in many instances no single person understands the agreement as a whole.  This issue can be avoided by identifying the organizational unit that owns and drives the negotiation of the agreement, and ensuring this unit also has the authority to represent the company and manage the supplier.  By insisting on thorough preparation and coordination regarding input and approval processes in advance, the individual or group acting in the vendor management capacity will not only secure a contract which is beneficial to the company but will also foster a positive ongoing relationship with the supplier.

With the vendor management role clearly defined, you will avoid the most costly mistake of relying on the supplier to manage the agreement for your company.  The vendor manager will not only monitor the suppliers’ performance, but will also leverage the vendor on your company’s behalf to provide service level and performance metrics along with other valued services such as expert consulting support.  The individual acting in this role in your company can carry the title of Vendor Manager and coordinate with the technology owner(s), or this role can actually be incorporated into the technology owner’s job description.  In any event, the most important role of the vendor manager is to routinely meet with the supplier to review performance and to insure the negotiated service level agreements are applicable and are being met.  For those of you who practice ITIL, you may even want to invite your suppliers to attend your problem management reviews.  Problem Management aims to resolve the root causes of incidents and thus to minimize the adverse impact of incidents and problems on business that are caused by errors within the IT infrastructure and to prevent recurrence of incidents related to these errors.   Inviting suppliers to problem management reviews was always my favorite way to make sure the supplier understood my business and was focused on working for my company.

Identifying issues with your existing contract will insure that your company is prepared when it is time to negotiate a new agreement. This is especially critical in large organizations with dedicated procurement departments.  These procurement teams are responsible for negotiating agreements on behalf of the technology owner(s), often based upon templates and procurement methodologies meant to cover everything from bed pans to mainframes.  In these circumstances, the vendor manager must be prepared to identify and educate the procurement manager on any issues with the current supplier. This is especially true with products that the procurement department might consider as “commodities”.   (Products are referred to as commodities when the product is seen as fungible or the same no matter who produces it.)  The commodities tag can sometimes prove to be a BIG mistake, especially with technology as this term is often applied incorrectly.  I once had a junior level negotiator assigned to a request for purchase because the procurement department perceived desktop computers as fungible commodities.   That quickly changed once we were able to quickly show – from trends in our monthly product performance scorecards that we had experienced a 20% failure rate of over 75,000 desktops that had been in service less than a year.  These failures not only had a negative impact on customer service but also negatively impacted IT service level metrics with a dramatic increase in help desk calls and required additional contracted field support to fix the devices.  The vendor manager was subsequently able to successfully team with the procurement department and negotiate product quality guarantee’s which the suppliers indicated had never before been included in their contracts.

Once your suppliers are being actively managed, your organization can maintain a fully mature vendor management model by monitoring the lifecycle of your agreements.  The hallmark of a mature vendor management lifecycle model is tracking when agreements are scheduled to terminate.    Being prepared for expiring contracts is critical because your vendor manager will make sure all necessary parties are prepared to enter into a negotiation and avoid delays which result in the original agreement being extended because the organization was not ready to negotiate.  This is often times the point where organizations which are not prepared will bring in outside assistance to coordinate the competitive bid process and subsequent negotiations.  If you believe your organization needs external assistance, make sure that whomever you contract with is not only negotiating terms and conditions, but also provides an on-going vendor management model after the negotiation.

Lastly, I mentioned the importance of fostering a positive relationship with your supplier.  You want your account manager and his/her team to be the envy of the organization for account relationships.   Obviously the amount of revenue an account team brings to their organization is a major component in determining their performance within their company.  However, don’t underestimate the importance that suppliers place on their representatives to maintain healthy relationships.  Just as within your organization, you want your suppliers’ account team to be proud to be working for their company and proudly say they are servicing your company because, at the end of the day, your success is a result of performance – and support – of suppliers’ product and services.

At this point you’re ready to begin managing your vendors.  As we’ve seen, a successful relationship with your suppliers begins not with the contract itself but with the management of the agreement after it has been negotiated.  If you haven’t met with your suppliers recently give them a call and initiate your vendor management process by asking for an account review.  Before the review, draft a list of items you would expect them to cover when they walk into the room and then compare your list with their presentation.  You’ll quickly be able to identify gaps in your supplier relationship and use your list as a roadmap for obtaining better pricing and services from your vendor.  The results are guaranteed not only to surprise yourself but will result in new respect from your vendor.

This article is contributed by Brian Superczynski, CFO and Senior Partner at Datacenter Trust. Brian has extensive experience leading and advising information technology companies on financial and business operations strategies. His combined financial management and operations background allows him to follow the development of strategic initiatives from system design to detailed implementations

Tagged as: active garage, Brian Superczynski, contracts, costs, data center trust, datacentertrust, IT Finance, ITIL, ROI, suppliers, vendor management, vendors

4 Effective cost saving techniques in a down economy

by Brian Beedle, Jul 5, 2010

In these uncertain economic times, it is imperative for businesses to cut costs to maintain profitability. Prudence in what is cut will help us be positioned to return to “normal” business cycle. With that in mind, Brian has short listed 4 simple cost saving areas that every IT organization should consider. more…

Character and Personality #1: Emotionality

by Gary Monti, Jul 6, 2010

WOW… another great  article from Gary! Strong leaders are not without emotions. But they are able to validate their emotions with their principles at play. This helps them deliver an honest expression of emotions with a statement of underlying principles (agenda). This supports communications, while emotionality tears the community apart. more…

Social Media and Tribes #5: Social by Intention

by Deepika Bajaj, Jul 7, 2010

Participating and being active on online social media does not have to be detrimental to your career. If you can watch what you say, you can create a reputation you desire. Social media is a tool to build relationships and take them offline to build stronger relationships. more…

Flexible Focus #9: The magic of mindset

by William Reed, Jul 8, 2010

Having a point of view enables us to be very clear on where we stand. But it also give us the tendency to believe our point of view is the only correct one. Inflexibility over view points can put people on the warpath. Flexible focus gives us a strategic advantage, opens your eyes and lets you frame and reframe. more…

Author’s Journey #29: Research Tips – How do other authors profit?

by Roger Parker, July 9, 2010

Very often, you don’t have to reinvent the wheel. Researching and following what other authors do to profit can be valuable. more…

Magesh is an accomplished software professional focused on building enterprise value through creative use of technology. Magesh enjoys working with people and is passionate about bringing out the best in everybody to achieve results that are larger than the sum of individual accomplishments.

Tagged as: active garage, author's journey, brian beedle, Business Strategy, Communication, deepika bajaj, gary monti, http://activegarage.com, invincibelle, Leadership, management, roger parker, Social Media, Writing for Business