Worth Paying For?

Earlier this year, I asked someone -- whose judgment I deem to be impeccable -- what he thought of Office 2K7. He said that it was an excellent product. Then I asked him a very different question... Is it worth buying... with your own money? I wasn't surprised when he said no.

And therein lies a most important matter. In uncertain times, decision makers must take a critical view of every proposition. The ultimate leverage point is value. There are many great products being released and marketed. But unless they contribute to revenue or can demonstrate actual cost reductions, then consumers (commercial and personal) won't spend real money on them. To state it a different way... there's a big difference between being willing to use a service and being willing to buy a service.

What kinds of services will be vulnerable? Here's my list:

• Instant Messaging - mobile and non-mobile
• Business oriented social networks
• Blogging - writing and reading
• Fantasy Sports support

When times are good, and people don't feel like their income stream is at risk, then they may consider paying for these kinds of services. For now, though, they are definitely useful, but they likely don't currently make anybody's "indispensable" list.

Even in tough times, profits exist

Dell (NASDAQ: DELL) posted a posted a 5% drop in net income and a 3% decline in revenue for its fiscal third quarter, according to an announcement made earlier today. That sounds like bad news, and it is. But it's not terrible news. Even though the company experienced its very first year-over-year drop in revenue, they still managed to earn over $720 million in the quarter ending October 31, 2008.

Read that again.

In what will likely go down as being among the worst 90-day periods of the post WWII era, a single company earned almost three quarters of a billion dollars. Last month's quarterly reports had to be interpreted with the understanding that, in July, we hadn't yet gotten cold-cocked by the events of August and September. But the quarterlies for this month will account for all of those system shocks.

I believe that the next 90 days will be absolutely critical. If firms come out of that period with a sense that, "Yeah it was bad, but we are still in one piece," then things will turn around in the 2nd and 3rd quarters of 2009. But if firms look at final 2008 results and find themselves in jeopardy, then these tough times might extend into 2010.

Is the IT Labor shortage real?

For several years, we have been hearing about a shortage of skilled technology labor in the US. In some specific areas - geographic and skillsets - the reality of a shortage is undeniable. Senior developers, system architects and application-specific experts (like SAP, Oracle, etc.) seem to perennially be in short supply.

Yet, some research published by Duke University earlier this year suggests that the shortage of skilled IT resources is not as dire as some would suggest. Certainly, business leaders testifying before Congress have little to lose with hyperbolic claims of not being able to find enough workers to keep the US economy going. But out here in the real world, the story is not quite so simple. Dr. Michael Teitelbaum, vice president of the Alfred P. Sloan Foundation, testified before Congress a year ago that ...

The RAND Corporation has conducted several studies of this subject; its conclusions go further than my summary above, saying that not only could they not find any evidence of shortages, but that instead the evidence is more suggestive of surpluses.

To me this conclusion is too generalized and vague to be of any use in the micro-economic world of the individual firm. The dynamics of the labor market are still very localized, even in a "global" economy. A company in Pittsburgh doesn't care if there are plenty of .NET developers in Denver. So while - on average - there may not be an overall labor shortage across the US, the situation may be dramatically different in specific markets.

What about your market? Are you experiencing difficulties in hiring technology resources? Or are you getting more résumés than ever?

A perspective on this question from Baseline Magazine : Is there really an IT labor shortage

Rethinking SLAs

When was the last time you examined your Service Level Agreements, especially for those for which you pay a premium for response time guarantees? It may be time to rethink all of those contracts, especially as you explore cost-cutting opportunities.

For instance, the most valuable part of any software maintenance agreement is upgrade assurance. Beyond that, is it really worth an extra 15-20% to pay for 2-hour response time when your own team will likely have the problem diagnosed and resolved well within that timeframe?

How often has your organization received actual benefits from a premium service level contract?

System reliability, clustering and virtualization have rendered most uptime promises largely irrelevant. Why pay extra for superior recovery services when your infrastructure has redundant built-in fault tolerance already implemented? And it seems that today's server components are (unlike automobile components) more durable than ever. As one executive put it...

"When we actually looked at the real world of performance of what we were getting even at the lowest level, the bronze service, because the equipment is so reliable and our processes are so disciplined we are exceeding the level contractually, and said, 'Gosh, can we bring everything down to that level?'"
-- Peter Whatnell, CIO, Sunoco Inc.

If you are searching for ways to reduce IT costs, looking at your service agreements is a great place to start. Call us today and we can help you rationalize and renegotiate.