Match Technology Spending to Your Core Business Needs

Chris Bjorklund: You’re listening to the AllBusiness podcast. I’m Chris Bjorklund. If you’re getting this through iTunes, an RSS feed or an online streaming-media player, you can hear interviews with other experts at AllBusiness.com.

Bjorklund: Do you manage the technology for your business like a business? You should, according to Heinan Landa, founder and president of the consulting firm, Optimal Networks. He says the challenge for many small to medium-size businesses is trying to match up technology to core business needs. Heinan, do I have to be a tech expert to do that well?

Heinan Landa: No you don’t but you do have to know something, quite a bit actually, about your business and what you’re trying to achieve.

Bjorklund: Isn’t it tempting though for the small-business owner to try to look at the technology first and see if it fits their business?

Landa: It’s very tempting. It’s almost impossible to resist. We’re bombarded day in and day out with media advertisement and publicity from all the major software and hardware vendors. So it’s very hard not to get caught on that and find something like the iPhone or whatever the next cool gadget is and see if there is a way to bring that back to your business. And it’s not a bad thought process to go through. But you have to be very careful when spending like that. You normally want to reverse it and to think through very carefully what your business goals are and what your business needs are and then go back and fit the technology to that.

Bjorklund: What about going to some of these trade shows, for instance? Isn’t this where all this technology for your particular industry is displayed? Should you prepare before you go to one of these shows and sort of think through what you might be shopping for?

Landa: Yeah, it really helps. You can get completely overwhelmed at these trade shows. There’s hundreds and hundreds of vendors and they all want to tell you that their technology is going to be the best for you. So if you sit down and think through where you are, then you can be better prepared to evaluate these barrage of technology that you’re looking at.

Bjorklund: When you say barrage, you mean as you said everything from I’m going to upgrade my computer network at work to should I outsource my accounting or keep it inhouse, though if VoIP makes sense for me, I mean, it goes on and on. Are there other things like that, big categories?

Landa: Yeah, it doesn’t stop, I mean, from Microsoft we hear a lot about sharepoint these days. You know, from Apple we’re hearing now that the iPhone is going to be business-ready, and we have to look at all this stuff very carefully in the context of our needs. I’ll give you a couple of examples. We have a law firm client who acquired an attorney and brought him in to the firm and he was deadest on having his iPhone. So he came in and said I must have my iPhone and it must work. Well this really kind of upset the apple cart because this firm had decided on the Blackberry as the standard and so we had to do some backfoot for them to get that up and running. If they had taken the time or really if he had taken the time and maybe the right way to go about it is just to say, “Which platform or what am I trying to do? Am I, number 1, trying to look cool? That’s not a bad thing because image is very, very important for lawyers and other business people. Well in that case, the iPhone makes sense in a business usage or am I trying to surf the internet remotely on my phone. That makes sense. That’s a good use if that’s a business need. Or am I trying very hard to get my corporate email? Is that something I want all my attorneys to have? Do I want them to be able to perhaps retrieve documents from a document management system from a cellphone? If that’s the case, then there’s only one platform to go on and that’s the Blackberry. But it’s certainly not as sexy as the iPhone.

Bjorklund: What about being an early adopter of technology? Do you recommend that to small to medium sized businesses or should they wait?

Landa: Our general recommendation and we serve small and medium-size businesses across the board with their IT, our general recommendation is wait. We don’t have the time or the energy or the budget to be the beta testers for new technology. There are some very isolated cases where you really want to go ahead and do that because it may give you some sort of competitive advantage. But you must be very careful. There’s not that much more that’s introduced in Word 2007 that wasn’t in Word 2003. So why not wait six months, let the Fortune 500 companies who need those features that are in there, who need them desperately, let them go through the beta testing. Well I don’t want to call it beta testing, but let them go through the testing, the piloting, and the deployment and then we can reap the rewards of that and implement it on our sized company at a little bit more smoothly.

Bjorklund: Yeah, well that’s a great recommendation. I find that I’m that way in my personal life. I sort of want to get the new toys but I want to see what the really early adopters have to say about them first.

Landa: Yeah, and I find myself doing the exact same thing. On a personal level, give me the iPhone. Please! I’m so jealous of my brother who has one but on a business level, you must clarify your needs. You must clarify where you’re going, what are you trying to achieve. I use this concept of a soft ROI. It’s very difficult in technology to figure out a return on investment especially in the small and medium sized businesses where to kind of measure and quantify those, not the cost of the technology but the return on the technology investment. It’s very difficult to quantify. So what I look for is a soft ROI. That means what’s my gut feel? Is this going to work? If I look across my peers and when you’re in business, you must talk to your peers whether they’re your competitors or perhaps competitors in other geographic territories or things like that. What are they doing and what kind of return are they getting for their investment and is it making them more competitive? And if so, then I can see all right, now I will get a return on investment. I mean, I know exactly what it is but at least I know it’s coming.

Bjorklund: That’s an interesting concept though. You call it a soft ROI.

Landa: Soft ROI.

Bjorklund: Yeah, so it’s sort of anecdotal more than really hard numbers.

Landa: Yeah, I find the hard numbers very difficult to get unless you’re sitting there measuring people’s keystrokes and that’s almost impossible.

Bjorklund: Now for some business owners, the economics of IT in their businesses is pretty much a mystery. We kind of touched on that. Is it helpful though if you want to demystify this a little bit or separate out the kind of technology, purchases you make into a couple of buckets? The stuff you got to have and the stuff that maybe you might…it’s an investment let’s say in the future or a better competitive edge?

Landa: Yeah, I think that’s a very nice way to simplify the field and you have your dad-to-day in a sense running in operational costs of IT and these are costs that they can also get a little bit sophisticated. You know if you’re talking about an IT vendor like us or whether you’re looking at having internal IT folk that are providing support, you’re looking at your servers, your maintenance, your security, your backups, even down to the help desk for your users. All the things that are required to keep your system operating well and that’s really one bucket. The next bucket would be, at least in our lexicon would be projects. And those projects could range anywhere from upgrades, yes let me upgrade my network to a strategic technology investment like yes, let me put in a document management system, let me put in, if I’m an association, a membership management system. Let me switch sales force automation systems and put one that’s more friendly to my sales force to see if I can get some better sales. Those would be the projects that would literally lift your technology and give you a hopefully a competitive advantage. And those are the ones you really need to research because #1 they’re usually extremely expensive and #2 take a major learning curve internally. So those are the ones you really want to look at the ROI number. But I do have a little bit of a rule of thumb here on this. You need to have your core basic functions of technology working and solid and reliable before you start looking at investing on those upgrades and enhancements and technology investments, if you will.

Bjorklund: So looking at am I getting the most out of my nondiscretionary IT that’s vital to my core business. That’s really the first area to be thinking about.

Landa: Yeah, I think it’s critical for people to have functioning reliable systems, very minimal down time, the ability to get quick help when they need it. They got a problem, they should have a place to call to get an answer. And when you talk about getting the most out of that, many people look at it, many business owners look at it as a call center and they say, “My God, how can I beat down that cost so that I’m spending as little as possible in keeping my IT operating?” And I have a little bit of a problem with that, to be honest. Because I think it doesn’t take into account service and you’ll see IT companies out there providing this kind of support at all different service levels. You’ve got the equivalent of a Nordstrom, you’ve the equivalent of a K-Mart. It’s across the board. Now you have to pick the service level that’s right for your business. A law firm, for example, usually does much better with Nordstrom’s caliber service than K-Mart. But there are other folks where cost is, I mean that bottom line and that margin is so critical that they need to go for the lower level service and that’s fine. But they really need to think about when they’re talking about the costs, the ongoing operating costs. And the ones that do, actually I find they’re very successful with those ongoing operating costs,

Bjorklund: Now, can you give any examples of IT investments that might create a strategic business advantage? Could you give an example of that? Can you think of one?

Landa: Actually, I have an interesting example of this and it’s actually especially interesting because it’s happening during this almost recessionary time. I’ll go back to this law firm that we have as a client and they’ve been growing fairly rapidly. They’ve gone from about 35 people to about 70 people in the course of three or four years and one of the things they’ve had from the get go is a document management system and that’s made them very effective. And they’re doing quite well with that. Well, recently they have been looking at ways of enhancing their document management system by putting it into what’s called a matter-centric approach which means it works like their attorneys do and also by implementing this product called universal search which will let them do very wide ranging searches on any sort of topic they want; legal topics, whatever and it searches both their internal databases and the internet and external databases like Lexis-Nexis. And they are looking at implementing this right now. In fact, they’re dead set on it and I think for them, this is a tremendous strategic investment because while other firms may be experiencing the pinch of the recession; what they’re looking at is how can we be even more effective so that we can actually lower what our clients are paying during this time of recession, keep them, make ourselves really indispensable to those clients and have almost no competition in that regard. I think that’s brilliant and I think you see other companies trying to do that too. You look at associations implementing enhancements and continuing to pour money into their membership management systems because those systems are the key. It’s their life blood, how close can you get with your membership during a time when members are looking at, “Oh my God, where can I cut more money?” So I think all those are very highly strategic IT investments that people are making.

Bjorklund: Heinan, where is there the most opportunity to maximize IT value in the nondiscretionary imperative stuff or in the discretionary IT investment bucket that we were talking about earlier?

Landa: That is…

Bjorklund: Not an easy question.

Landa: It’s not an easy question but only because it depends on who you are or who’s asking. If I’m a company where my systems are crashing on a regular basis and I’m frustrated, I will get such an incredible return on increasing my spending for the IT imperatives, the ongoing day to day support, the core infrastructure. Make sure everything is working secure backed up and performing. I will get so much out of that. I have seen people when they invest in that properly just breathe huge sighs of relief and of course write as many letters of reference which is fun. But if you’ve got a system that is operating and it’s operating well and you can begin to look at what sort of strategic initiative you can put in place that will be supported by IT, you can just get some tremendous return on that. I just came back from a meeting with a biotech company that is about to put in place a bioinformatics services division. I’m not getting technical on that kind of stuff. All I can tell you is it’s going to very expensive for them and they’re going to be putting in systems that are going to have to handle terabytes and terabytes and terabytes literally 30-plus terabytes of data. And they’re going to spend half a million dollars on this and they’re expecting some unbelievable returns on it.

Bjorklund: So it depends on who’s asking the question.

Landa: It really depends on who’s asking and where you are n the process. In fact, one of the things we did was we made this little self assessment that we have on our website that anyone’s free to take and you can kind of get a sense of where you sit on that totem pole by asking those questions.

Bjorklund: So yeah, what is the website? Could you give it now and I’ll give it later too.

Landa: Oh sure, it’s www.optimalnetworks.com.

Bjorklund: And then is it easy to find on that page?

Landa: There’s a button called assess and then in there, there is a link to the self assessment.

Bjorklund: Good.

Landa: And it really kind of covers all these different areas of IT so you can kind of get decent sense of where you are on that and where you should be spending.

Bjorklund: Now let’s talk about a few of common IT traps that companies fall into. You already mentioned one, which was sort of trying to budget a little too much, you know and pare things down a little too quickly maybe. Are there any other common traps that you see?

Landa: Well, you need to the small and mid-sized business market is that we often cannot do a great job of growing our own IT groups that can handle every element of IT. Now the larger you are as you creep up past I don’t know, 200 employees, you can start having your own internal IT group which can offer some career paths and you know you can start getting some more and more talented folks but even still, even when you’re up at 500 people which I think is probably the maximum that would fit into the definition of a small and mid-sized business, you can’t have…there’s almost no way to have people internally that can handle also the ongoing day-to-day support and keep everything together and managed and running. And also be well versed in every possible strategic initiative that you. So either way, whatever size you are, you’re going to be working with trusted partners, with vendors who are going to be bringing solutions to the table and offering to implement those solutions. One of the worst traps you can fall into is taking the wrong partner. Whether it’s for a strategic investment or whether it’s for ongoing support, it seems to be one of the biggest problems is picking a partner and you have to look very carefully at these partners and you have to evaluate them like you would evaluate every other vendor but also make sure that they’re not just talking technology but they’re talking, that they’re talking service, that they’ve got deep service processes, these sorts of things. The same biotech that I was talking about was actually looking at a proposal from their existing IT office vendor that the fellow who’s just helping them with their day-to-day PC trouble to implement this bioinformatics system to the tune of half a million dollars. Now we talked about it a little bit and I think they saw that these were very different disciplines and they needed to go find somebody else and I’m glad because people who do day-to-day office may or may not have the capabilities to put in place a half-a-million dollar bioinformatic system.

Bjorklund: Yeah so very important to get the right partner for the size of the project, the right expertise, and as you said, all the other things that matter including service. Before we close, do you think you could sort of summarize the steps for lining up your tech investments with your core business? You know, kind of walk us through okay, first I do this and then I do this. Could you give us a little path to follow?

Landa: A little path to follow.

Landa: I’ll give you a few couple of bullets.

Bjorklund: Bullets, yeah. A couple of tips here.

Landa: I think first of all, you need to have a very good handle on what your business is and what would constitute strategic initiative in your business. And that is probably more important than anything else because you can find the technology to fit almost any strategic initiative. Once you’ve done that and you’ve decided that you want to make an investment there, then I believe your next step is to identify the people that you want to work with. You know, it’s goes back to Jim Collins good to great. You got to find the right people to get on the bus and you got to put together your team of technology experts and then you can start seeing the kind of solutions because that will emerge from those technology experts. And those can be internal and external and by the way, should include people from within your company who are expert at the business and at the strategic initiative and then you can start looking at, okay what are my technology needs and you can start prioritizing them and get costs and start analyzing that. I definitely think it’s very, very important to go outside of your internal mind set and look at other companies that are either in your business, in other areas, or in similar businesses and see what they’re doing and then start doing, start doing it. One of things that I often recommend in terms of the actual implementation is if you can afford it, do a pilot on a small group of folks who’s in your company and see how that works and see if it’s well received and if it gives you the benefits that you’re actually looking for and make sure you’ve got enough training to go with it.

Bjorklund: Sounds like a plan? Now how do we find you?

Landa: www.optimalnetworks.com .

Bjorklund: Heinan Landa is founder and president of Optimal Networks, an IT consulting firm for small to medium sized businesses. I’m Chris Bjorklund, thanks for listening to this AllBusiness podcast.