Top Tips for IT Spending in a Recession

Feature from: BUSINESS MAN TODAY - MARCH/APRIL 2009

What an interesting Christmas period of recollection this has been for New Zealand business. The new year is full steam ahead, America has a new president and the New Zealand government looks set to pump millions into technology infrastructure, all to reboot the economy.

Again, the question that is coming back to me most often is what this means for the technology industry in New Zealand and what are the current trends to be watching.

I believe possibly, and actually hopefully, this economic downturn will signal the end of the ‘break-fix’ technology company. That being, those that make their primary source of income from ‘fixing’ IT based things that break in businesses sites.

These companies tend to give the technology industry a bad name. Why? Because they need businesses infrastructure to break so they get continued work, and businesses need it to keep working. A rather interesting clash of interests and not exactly a symbiotic business arrangement. This may be dressed up in perplexing ‘Service Level Agreements’ or just in standard charge out rates. Either way, if your infrastructure keeps working well. These businesses do not have a business!

I believe the difference is that your technology supplier should be considered a form of professional services, just like your accountant or lawyer. However I doubt right now that many businesses consider this the case. The reason for this is firstly because the technology industry in NZ is only around 30 years old, and because many simply decided to become ‘specialists’ because they liked playing with PC’s and then turned this into a job, creating a sub-culture of ‘anyone can do IT’. This has led to many businesses being terribly exposed when things do go wrong.

It was also interesting to note in a recent report in the Sunday Star Times that four out the five top paid professions in NZ were in technology. I can assure you that the people that fill those top spots have skills that can only be classed as a professional service.

Irrespective, I hope that the ‘break-fix’ industry dies a natural death.

What then is the alternative? Telecom has already started educating the market about ‘managed services’ and will ramp this up substantially over the coming 24 months. What this entails is essentially outsourced supply of your technology infrastructure at one level or another. This makes a lot of sense if approached from a pragmatic level.

Firstly, it should be cheaper, far cheaper actually for outsourced suppliers to give you every part of your infrastructure, from your internet to your servers at a price below what you could do for yourself. The benefits of this are the leveraging you get from buying power, centralized management  and of course price.

It makes very little sense for most businesses in New Zealand, and there are exceptions, to have servers sitting in their offices that they own and manage directly. The costs of maintaining this equipment running at its intended levels is a cost centre that is unnecessary as well as the risky. You will notice that the companies I referred to earlier as ‘break-fix’ will advise on having as many moving parts as are possible on a site. More moving parts leads to more business for them. But does more moving parts mean the right solution for you. Probably not.

The integrity of a businesses data is now, if not the primary, then one of the top three most important things within a business. Without your data, what do you have? Do you know when you last restored from a backup?

Managed services entail fixed price cost centres for everything from hardware to software. The days of paying CapEx for either does not seem to make sense whenever I break down the numbers for clients. In reality it should be, and will be a ‘pay for what you use’ environment with the scope of being able to upgrade and downgrade seamlessly month to month. That is true dynamism. Not shelling out $3k to buy a laptop and software and then $200 to have someone set it up properly, for it to be worth $0 in 30 months.

 I believe the end is nigh for those snake oil salesmen in the technology industry and I do not believe it is a minute too soon

Patrick Kershaw is a Business Partner for Horizon Pacific, a nationwide technology support provider specialising in assisting SME’s with all their technology requirements. For further information, go to www.horizonpacific.com

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