TAC Talk Episode 3: Reducing Baseline Costs through Better Demand Management

Recorded July 24, 2015
A conversation about Demand Management between TAC president Peter Schay and TAC expert Patrick Savard, who consults with Fortune 500 businesses to provide solutions which help companies optimize their IT spending and maximize the value of their IT investments.

Why You Should Rethink Making That New Software Purchase

Investing in new software to resolve an issue within businesses is a common but often misguided solution, since many times the required functionality already exists within the business’s software portfolio or is available at some level for free on the Internet.

Investing in new software to resolve an issue within businesses is a common but often misguided solution, since many times the required functionality already exists within the business’s software portfolio or is available at some level for free on the Internet.

An investment in software always deserves a lot of thought. Even SaaS (Software as a Service – internet-based software accessed through a browser) software can be expensive for the enterprise, and comparatively more so for the small business. So how can a business determine if and when it’s time to commit to spending the money?

Look at the software you already have. You’d be surprised at the amount of functionality you have in the software you already own/lease that you’re not using (or not using properly). By some estimates, a full 75-80% of the functionality engineered into some software goes unused. The reason for this is that software is usually purchased to solve one immediate problem, and, once solved, the user goes no further in learning about other features/functionality of that software. As a business grows, other needs arise and, since the previous software wasn’t purchased to solve the current problem, little or no thought is given to investigating the unused features of that software. In addition, software is constantly updated, and the functionality you are looking for may have been added since you made the original purchase.

Is there freeware/shareware that will solve your problem? For the larger businesses, enterprise-class open source software is a very real option these days. Almost every type of business productivity tool is available for free online either for a trial period or for an unlimited time for a small group of users – usually with some limitations. Available on most platforms, this type of software is great for small groups looking to “kick the tires” on new functionality within the enterprise without any financial outlay for software acquisition. Cost usually enters in only when customization and support are needed from the software vendor.

Small businesses need to keep in mind that nothing on the internet is really free (you may not pay with cash but you pay with your eyeballs or data instead – banner ads on the screens you’re using, sharing personal and/or business data with the vendor). However, there is a wide range of productivity tools and CRM (Customer Relationship Management) software that you can use with no immediate financial outlay.  Software companies give free access to their software for individuals and small groups with the idea that as your business grows, you’ll pay to expand your use and the functions you need. Using freeware/shareware even for a limited time, gives you the opportunity to evaluate various options and to determine whether you really need to make the investment in time and money. Keep in mind any regulations, like HIPAA, when dealing with personally identifiable information and financial/health records.

Examine the business case and timing of the purchase. Will the purchase, training, and ultimately the use of the software increase sales and/or reduce cost? What are you currently spending (in person hours) to accomplish what the software will automate, and how much less time will it take after implementation? If this functionality is new to the business, what is the expected ROI (return on investment) and when will it be realized? Only once all of those questions have been answered to support the business case does timing come into play. Budget is usually the biggest factor for putting off a purchase, but one also needs to look to see if an imminent major release for this software is scheduled. If so, it may pay to wait until that new release comes out.

The Takeaway:

There are almost as many criteria for selecting software as there are software packages available for use. The key for the business is to leverage what you already have for the new needs of the business, and find adequate free or low-cost solutions online (again keeping in mind security concerns/regulations) that will serve the immediate need. This way you get what you really need without incurring additional cost. As your business continues to grow and you’re in a better financial position or have a bigger budget, you may feel the need to upgrade to pay versions of freeware or transition to software that meets the new needs of your bigger business. In the meantime, you’ll know that you’ve gotten your money’s worth out of the investments you’ve already made.

What existing unused features did you find in the software you already have, before you went out and purchased the same features from another vendor? do you use freeware/shareware? if so, what are you using and how? We’d like to hear it from you.

Is the Information You Get the Right-For-You Information?

There’s a lot of information floating around on the Internet. Some of it is good, but a lot of it is bad. And to make matters worse, a lot of the information may look good and be  good, but may not be the right information for you.

Here’s what I mean by that.

Much of the information on the Internet is written by (or commissioned by) vendors and is aimed at and written for Fortune 1000 companies. These companies have vast IT departments and large budgets. They can afford to buy in-context information and hire the full-time personnel with the experience and expertise they need.

But what if you’re not a Fortune 1000 company? What if your IT department is small and maybe even understaffed? Or has a tiny budget or a budget that gets smaller and smaller every year (but the business expects more from you)? Or you’re a government agency or not-for-profit, and have to ‘play by different rules’? How do you get the information and services you need, in context and scaled to fit your circumstances?

As an example, TAC was flooded with questions from clients surrounding iPad adoption in the enterprise (and SMB space) when they first came out. Many clients asked identical questions but were at times given vastly different answers. Why? Because the answer given to a Fortune 500 company could in no way be scaled down to a small or medium-sized business, and conversely, an answer for an SMB may be inefficient and costly if scaled to enterprise sizes.

Answers require more than facts, they require context. and that’s the difference between the right information and the right-for-you information.

Have you ever gotten the right information only to find out that is wasn’t the right-for-you information? We’d like to hear about it.

So You Want To Innovate? Embrace The Risk!

As with ideas, the same factors: need, broad knowledge base, environment, and timing all come into play. We can, In fact, start with the notion that an idea becomes an innovation when it fundamentally changes the way we do things. The more change a new idea makes, the more innovative it is.

Just about a year ago, I wrote a blog posting entitled “Daddy (or Mommy), where do ideas come from?  In it, I talk about what it takes to conceive an idea.  But what does it take to innovate?

Webster’s Dictionary defines innovate:

  • To effect a change in
  • Do something in a new way

As with ideas, the same factors: need, broad knowledge base, environment, and timing all come into play. We can, In fact, start with the notion that an idea becomes an innovation when it fundamentally changes the way we do things. The more change a new idea makes, the more innovative it is. As an example, being hungry and solving the problem by eating is hardly an innovative idea, but carrying too many devices and solving the problem by combining the phone, the mp3 player, and the internet connected computer into a single handheld device is.

Many excellent, potentially innovative ideas are not used widely enough to cause the greatest change. This is because promoting change, especially in large organizations, is avoided due to the risk and cost involved.

Executive officers are constantly told of the need for them to innovate. The call to ‘innovate or die’ is heard throughout the land, yet when these same leaders attempt to innovate, they are hamstrung by the boardroom’s resistance to change (inertia), and the shareholders’ mandate to keep risk and costs low and revenue high.

While innovation does not necessarily have to be expensive, the idea that innovation comes without risk is absurd; innovation is inherently risky. Examples are plentiful. Galileo’s heliocentric model of the solar system and Apple’s Lisa and Newton are just two of them. Galileo was met with personal harm for his innovation, and while the Lisa and Newton were both highly innovative products, they both failed miserably. Does that mean that Galileo was wrong to take the risk for the truth? Should Apple not have undertaken those risks? Certainly not.

In order to innovate, one must have the fresh, new idea, but equally important is the commitment to take on the risk. While everyone would like risk-free innovation, it just doesn’t work that way. In today’s economy, companies (and the people who run them) refuse to embrace risk, and therefore refuse to embrace the very same innovation they desire.

Business After the Fiscal Cliff

While the Federal Government seems to want to act out the final scene from “Thelma and Louise” with our economy, we can’t wait for someone to hit the brakes. Regardless of what the government does (or does not do) in the next few days to avert the fiscal cliff, we do know that taxes will go up on those making at least $400,000, including small businesses.

While the Federal Government seems to want to act out the final scene from “Thelma and Louise” with our economy, we can’t wait for someone to hit the brakes. Regardless of what the government does (or does not do) in the next few days to avert the fiscal cliff, we do know that taxes will go up on those making at least $400,000, including small businesses. We know this because if the government takes us over the cliff (which, in actuality works well for both parties), the “Bush Era” tax cuts will expire, and they won’t all be coming back. We also know that there will likely be changes to the tax code in the coming months as part of the “fiscal cliff deal”, but there seems to be no consensus on what those changes will be.

So, assuming that is the case, business must still go on. Because of the continuing uncertainty, the likely scenario will be more belt-tightening, fewer hires, and maybe even a few layoffs, depending on how long the government allows this to go on. In the IT world, most organizations have already cut to the bone, and many are unable to keep up with demand as it is, and we all know that demand is likely to increase.

So what can an IT director or CIO do to ensure minimal impact on their organization?

  • Increase efficiency – collaboration and better use of time makes the need for overtime hours or more staff unnecessary.
  • Re-prioritize – look at what is important rather than merely urgent.
  • Find high-value/low-cost services that make it easier for you to make decisions, and faster for your team to get things done
  • Structure your financial model to be lower fixed-cost with more variable cost options.
  • Get more and better buy-in for projects from the business stakeholders.

As we move into the new year, IT needs to be able to plan for the unknown, be ready for changing demand, and become a more flexible and agile organization.

The Advisory Council can help.

Daddy (or Mommy), Where Do Ideas Come From?

Ideas are the result of the exposure to a certain piece or pieces of key information in an environment conducive to solving a perceived or subliminal problem at a critical moment in the thought process. In other words, ideas happen in much the same way babies “happen”; it’s a matter of being in the right place at the right time doing the right things to produce them.

Those of you with kids over the age of 5 (I have two, now college age), have undoubtedly heard this question asked before, albeit slightly differently. Answering that “other question”, likely with some discomfort, required a firm grasp of human anatomy, patience, and the ability to distill a complex biological function down into something that a 5-year-old could understand.

Studies have been done using sophisticated medical equipment that tell us which parts of the brain are in use during the formation of an idea, or the process of “ideation”, but that still doesn’t give us the “how” or “why”, only the “where”. Computers lack the ability to ideate; that may change in the future, but for now they only do what we ask them to in the manner we tell them to do it.

So where is it that ideas do come from?

Ideas are the result of the exposure to a certain piece or pieces of key information in an environment conducive to solving a perceived or subliminal problem at a critical moment in the thought process. In other words, ideas happen in much the same way babies “happen”; it’s a matter of being in the right place at the right time doing the right things to produce them.

So what are the critical factors to conception? And yes, we’re still talking about ideas:

1)      Access to information – In order to ideate, one must have unrestricted access to information. Since one never knows which piece of information may trigger an idea at that particular time, it is important that information flow freely.

2)      Collaboration – Access to people with diverse backgrounds and knowledge bases increases the amount of information available to ideate on. It also allows many people to throw fresh ideas back and forth to help them grow and become more full featured.

3)      Environment – A culture that allows people to present their ideas in a non-judgmental atmosphere is vitally important, as it sustains the ideation process by encouraging team members to add to an already born idea, or to publicly give birth to their own without worrying how their idea will be accepted. This type of atmosphere is very difficult to promote as we know that, just like babies, we tend to favor our own.

Some ideas are born in group conversation, others by an individual thinking to him or herself. Some people need to be relaxed; others ideate best under the pressure of deadlines. Therefore, a combination of environments must be provided to allow people to ideate in a manner that suits them best.

4)      Time – Just like babies, the conception of an idea is unpredictable. All of the elements to form the idea must be there, but it’s all in the timing. Some ideas take seconds to be born, others take years. On the plus side, the more people you have, the more likely a viable idea is born.

Once the idea is born, it of course needs to be nurtured so that it can grow and mature. Nurturing an idea a great responsibility, and one that comes with having the idea in the first place.

But we can talk about that when you’re a little bit older.

EaaS 101: The Fundamentals of Expertise-as-a-Service

EaaS is an extension of the SaaS philosophy, allowing the procurement of information, expertise, performance management and measurement and other necessary IT services the same way. This way of thinking is not new to the enterprise; legal and finance departments have leveraged outside counsel and accounting firms for decades.

In today’s economic environment, IT departments are seeing higher demand without an increase in budget. In addition, CFOs are demanding more accountability and want to be able to measure return on their IT investment. Corporate boards want to see IT transform from cost center to profit generator. Smart CIOs have been able to reduce infrastructure and software costs by leveraging SaaS and IaaS, and now, with EaaS (Expertise-as-a-Service®), other IT costs be reduced or contained, while increasing the IT department’s flexibility to handle fluctuating demand.

In order to understand EaaS, one must first understand the fundamentals of SaaS (software-as-a-service) and IaaS (infrastructure-as-a-service). These services reduce costs because they are:

  • On demand – rapid startup with no “installation” or maintenance
  • Ubiquitous – Instantly “there” and easy to use, with no additional infrastructure or personnel needed
  • Scalable – can quickly add/remove service as demand requires.
  • Cost effective – economies of scale and no additional hardware or personnel  keep costs low

As an example, since SaaS means that you no longer have to have software running on your own in-house servers and PCs, you save by reducing the size of or eliminating your data centers, reducing the number of full-time employees tasked with maintaining the software and the hardware it runs on, and in many cases, reducing the need for the company to provide computers, as more organizations have adopted BYOD (bring your own device) policies. Extending this trend, many companies are now implementing IaaS strategies, moving data storage and servers “to the cloud.” Again, this reduces the number of full-time employees necessary to maintain an in-house infrastructure, but allows growth instantly as it is needed.

EaaS is an extension of this philosophy, allowing the procurement of information, expertise, performance management and measurement and other necessary IT services the same way. This way of thinking is not new to the enterprise; legal and finance departments have leveraged outside counsel and accounting firms for decades. The IT department is one of the last of the major departments within the corporation to move to this low-fixed-cost model, relying on outside sources for as-needed expertise. Just like SaaS and IaaS, EaaS brings cost savings by enabling IT to reduce and reallocate resources while having “on demand” access to the needed expertise, information, and performance measurement to use whenever and however it is needed.

CIOs and IT executives are finally transitioning their IT departments to the lower fixed cost financial model that EaaS allows. With the budgeting cycle starting up again very soon, IT departments that embrace EaaS are finding that staying within a flat or shrinking budget, while dealing with increasing demand from the business, is less of a problem.

IS Outsourcing Transforming?

IT organizations clearly need to change their financial model, and introduce technologies and platforms that create more variability. At the same time, they need to migrate more effort to new initiatives rather than supporting existing ones.

by Alan Guibord, TAC Founder

Recently Randy Mott stated that he was changing the outsourcing model at GM. I have been hearing similar suggestions from many of TAC’s clients as well. Clearly there are no hard savings from outsourcing, so companies have been looking for other justifications. Many like the variability of staff to help them control fixed costs, others use outsourcing as a means for replacing old applications with services. Whatever the reasons, firms are now taking a much harder look at their reasoning.

The cloud has enabled us to create a virtual model, where we can personally control resources. This was not available before. Being able to create this virtual base gives firms the capability to gain access to selective talents and services with minimal effort.

IT organizations clearly need to change their financial model, and introduce technologies and platforms that create more variability. At the same time, they need to migrate more effort to new initiatives rather than supporting existing ones. Most organizations spend 80% of their resources supporting existing resources. This will no longer be tolerated by the business. The cloud and other virtual services are the only way for IT to keep up with the ever changing demands and economic activity. TAC has been assisting several progressive organizations in their transformations. Interestingly enough, IT is supposed to be the innovators, and yet we have been the last to change. It is survival time.

Overcoming the Inertia of Complacency

CIOs and senior managers all understand that change is a part of corporate life.but a number of these same people have become complacent, insisting on doing things the same way they have always done them, because it is comfortable and “it has always worked before”.

I have been trying to get more exercise of late, so I decided to start getting up early and going for a walk. Not a terribly long walk, I haven’t even measured the distance, but it takes me about twenty minutes. The first day was easy. I shut of the alarm, took a minute to remind myself why I was waking up early, got out of bed, got dressed and went for the walk.

The second morning didn’t start as easily. The alarm went off, and I hit the snooze button twice before I was able to convince myself to get out of bed and get dressed.  Once I got outside into the nice, bright, New England morning, my spirits lifted, and I was, of course, glad that I had gotten up to take the walk when it would have been so much easier to stay in bed, as I had always done before.

I’ve always found it interesting how much we are creatures of habit. Once the inertia of doing things a particular way takes hold, it becomes very difficult to change, for example sleeping late instead of getting up early to take a walk. From an evolutionary standpoint, it makes perfect sense. When humans were hunters, once we learned a successful hunting technique, we used it without change, precisely because it was successful…enough. Our primitive brains went into “auto pilot”; we no longer had to think too much about what we were doing, which meant that we could devote our brainpower to other things… like preventing ourselves from being eaten by other predators.

But what happens when what used to be successful no longer is?

We have two choices, continue doing things the way we always have, or change.

The CIOs and senior managers I talk with on a daily basis all understand that change is a part of corporate life. Technology advances, needs change, new services become available, and staffing levels and budgets fluctuate.  The interesting thing is that in spite of these sweeping environmental changes, a number of these same people have become complacent, insisting on doing things the same way they have always done them, because it is comfortable and “it has always worked before”. You can meet these people at trade shows, networking events and conferences; they’re usually in the group of executives “in transition”.

Success today means being able to embrace change.

Being adaptable, flexible, able to anticipate and react to change is the key to survival in the corporate environment.  Finding newer, better, and more flexible, scalable services and technologies to help achieve the goals of the business, and discarding the old, ineffective ones, regardless of how used to them you are, is difficult, but it is what ultimately brings both individual and corporate success.

Alan Guibord, Founder and Chairman of The Advisory Council (TAC) has been spending the last two years traveling around the United States and Canada speaking to leaders about transforming themselves and their departments. His sessions “Transform or Die” and “Migrating from a Technologist to a Trusted Leader” detail the change process on personal, professional, and corporate levels.

Overcoming the inertia of complacency is difficult but doable. It takes serious sustained effort and requires you to step out of your comfort zone. However, through repeated and sustained effort to see and accept change as the new normal, change itself becomes the habit, as comfortable as a walk on a warm, sunny New England morning.

Another Key to Business-IT Alignment

Most IT departments either make no attempt to measure the value of IT projects or, if they do, they invent methods that are not based on proven scientific methods and not proven to improve decisions.

by: Peter Schay, President and CEO of TAC

I recently attended a presentation by a large research firm. Boiled down to its essentials, the presentation made two points:

  1. IT activities are still not aligned with business priorities — no profound new insight there.
  2. IT projects should only be initiated when there will be a measurable financial benefit to the enterprise.

It’s hard to argue with the second point, but it begs the question of how one should measure the financial benefit of an IT project. The presentation was silent, however, on that question.

Currently, most IT departments either make no attempt to measure the value of IT projects or, if they do, they invent methods that are not based on proven scientific methods and not proven to improve decisions. If “intangibles” around business benefits are considered at all, they are merely a subjective “weighted score.” Typical business cases for IT projects are, at best, simple accounting exercises with no way to measure risk statistically.

Fortunately, methods exist which can enable IT managers to measure risk like an actuary, value like an economist, and portfolio optimization like a financial analyst.

Among The Advisory Council’s professional development workshops, we have one specifically designed for this purpose — the “TACometer” workshop, which has been one of our Expertise-as-a-Service® offerings for several years. Created by TAC Thought Leader Douglas Hubbard, author of How to Measure Anything: Finding the Value of “Intangibles” in Business, TACometer provides three days of intensive training in methods that have the most evidence of improved decision performance.

Clients that have brought in our TACometer workshop have never again had to wonder about how to measure the financial benefit of an IT project.