In Or Out? Achieving The Right IT Balance
Central Paper Products, Manchester, N.H., has long been ahead of the pack when it comes to technology. All of its salespeople had laptop computers in 1991, and it was among the first in the industry to launch a Web site and add online ordering.
Along the way, the company learned a valuable lesson many of its competitors have not — often, the most strategic approach to information technology (IT) maintenance and upkeep is to divide the tasks between an in-house crew and an outsourced agency. Central Paper’s own staff manages its off-the-shelf software, online catalog and computer network. It calls in experts to deal with physical maintenance of computers, integrate its multiple systems and develop customer-specific software.
“I think a mix of both is smart,” says Fred Kfoury, Jr., president of Central Paper. “The combination has worked pretty well for us.”
IT options have moved beyond the simple outsource vs. in-house debate. Today’s executives want to leverage a proactive combination of both options. In fact, about half of all IT services purchased in North America are outsourced, according to The Gartner Group, a Stamford, Conn.-based technology consulting firm.
Although more and more businesses are discovering the benefits of outsourcing some IT needs, there are still many that refuse to let go of the responsibilities. A salesman handles about 99 percent of technology issues at The Mop Bucket in North Kansas City, Mo. Owner Karen Adams has hired IT contractors a few times, but not without much trepidation.
“It scares me,” Adams says. “That’s like letting someone from the outside in to know all of your business. It’s like opening your financial statement and letting them see it all.”
Companies that shun outsourcing are typically concerned about costs, but they’re also unwilling to give up control and are afraid of sharing proprietary information. This do-it-myself attitude is most common among small and upstart businesses.
“The more entrepreneurial you are, the more you tend not to go to outside consultants for whatever it is, not just IT,” Kfoury says.
As his business has grown, Kfoury has slowly let go of bits and pieces of his tech responsibilities — but only when there is not a better in-house option. “If you have somebody who has the ability to do it and knows the product then it’s easier to do it internally and it’s far less expensive,” he says.
Change Of Plans
Being too possessive may prove to be shortsighted. A business that tries to do everything itself will probably not see the maximum benefit of its resources. Even a company like Microsoft, with unlimited technology resources at its disposal, uses IT contractors.
“Everybody uses them, from the smallest to the largest company,” says Mike McGovern, president of Odyssey Consulting in Columbus, Ohio, an IT consulting firm. Odyssey’s consultants work on-site at its customers’ businesses on a contract basis.
Even with his large staff of tech experts, McGovern finds it cost-effective to hire out portions of his company’s IT needs.
“No matter what size you get, you’ll always have part of your business outsourced or subcontracted because there’s always some piece of technology that your people don’t understand,” McGovern says. “There’s no such thing as a master of all, there’s just so much software out there, and things change.”
Most businesses employ just one or two full-time IT staff members. Smaller businesses may simply rely on a tech-savvy employee to pull double duty and help with IT needs. Even if they are well-trained, one or two people simply cannot know all there is to know about the myriad technology used in most businesses. It is also impossible for them to stay on top of constantly evolving trends.
“Technology is always changing,” McGovern says. “Our industry is not standardized and every three to five years there is always something greater, smarter, faster and better. Consultants are the first ones to get this technology because they are all over the place.”
A distributor’s primary business is not technology. Other than online ordering, technology typically costs more money than it appears to earn. That makes it difficult for many distributors to justify pouring a lot of money into technology.
“Technology provides the ability for us to do our business better, but it doesn’t drive our business,” says Adam Kestin, vice president of sales for United Sanitary Intl., Springfield, NJ.
Technology is small potatoes at The Mop Bucket. The company has just seven employees and four computers. “How can you justify a full-time person for that?” Adams asks. “And outsourcing is so expensive. The hourly rate is unreal. I gasp for air when we’ve had to call them in.”
That’s precisely the reason these businesses need to pay someone else for IT assistance, McGovern says. After all, technology works for you, not the other way around. When a distributor deals with a server problem, he or she is not doing the things that make the business money.
“When you spend time on that, you’re bringing down your revenue,” McGovern says. “It’s something all of us have to learn as we grow.”
Handling IT in house with an understaffed or under-trained crew can also lead to costly mistakes. An improperly installed firewall can lead to the loss of important data and an undetected virus could destroy systems.
“Wouldn’t it have been better to spend a few thousand dollars?” McGovern asks. “If your computers are zapped and your people aren’t working, you’re losing productivity. All that time you’re not making revenue.”
Hoarding control of IT isn’t wise but neither is giving it all away. There are plenty of tasks that can and should be handled in house. Installing software and conducting routine system backups are simple activities — it would be a waste of money to hire someone else to perform these duties. Companies with dedicated IT staff members should also rely on that person to identify business processes that could be automated and to then write programming to make the changes.
Best Left To The Pros
Setting up networks or writing complicated programs, on the other hand, are bigger responsibilities that involve more expertise and are typically best left to the professionals.
“We use an outside firm if it becomes too involved,” Kfoury says. In fact, his company has a computer consulting company on retainer for maintenance needs. The company also has an agreement with a former IBM employee who writes sophisticated programs as needed and helps integrate the company’s IBM AS400 mainframe with its other machines, including an all-in-one Xerox machine. “If something goes down, we can’t deal with that, so we would have somebody come in and fix it.”
When working with contractors, view them not as outsiders but as part of the team. It’s to your advantage to create a symbiotic relationship where each party is working to reach the same objective — improving your business.
Clearly identify objectives so you and the contractor know who will perform what functions. In addition to routine day-to-day chores, your staff should also be in charge of thorough documentation. Always have your IP address and passwords, current server settings and a log of software being used safely filed.
“If you have nothing [documented] and a catastrophic event like a fire or stolen data happen, they have to start from ground zero,” McGovern says. “If you have that, they can get the workstation back to where it was faster.”
If a consulting firm is not in the budget, take advantage of outside IT help where you can get it. Software manufacturers will often offer help with their programs, particularly when they are personalized programs. When United Sanitary Intl. recently purchased new bar-coding software, the program manufacturer helped with the change.
“We had the manufacturer onsite with us for 30 days and then we had support from them after,” Kestin says. “They were here to help us install it, to train us and then we went forward from there.”
This is the perfect model of a strategic internal-outsource partnership, McGovern says. Whether support comes from the manufacturer or a hired consultant, companies should call on outsiders at the onset of a new or big project and then, once things are up and running, take back the reins.
“You need three to five people to write a system but only one to maintain it,” McGovern says. “You don’t want to hire a staff of three to five people, so outsource the initial work and let that company set up the thing, and then assign one of your own employees to the project.”
When hiring an IT contractor, be sure to do your homework. The person or company will have overwhelming access to your business’s records so be sure you have hired someone you can trust. Don’t randomly choose from the Yellow Pages. Ask peers for recommendations and always check references before hiring anyone.
Finally, be sure to identify a consulting firm long before you need them, McGovern suggests. “The smart thing is to have somebody lined up, because that day you can’t handle the problem you’ll already have someone set up.”
Becky Mollenkamp is a Des Moines, Iowa, based freelance writer and a frequent contributor to SM.
Wholesaler Web Site Upgrades
Two companies recently made Web site upgrades to enhance their Internet presence. Advantage Marketing Associates, Chicago, recently upgraded its Web site, www.advantagemktg.com, to allow users access more information and marketing tools through three new sections — “news flash,” “more news,” and “products.”
By clicking the sections’ buttons, visitors will automatically be sent to the most up-to-date news and marketing products.
A.W. Mendenhall Co., Inc., Elk Grove Village, Ill., has also made improvements to www.awmendenhall.com.
The new home page provides links to product information, service area maps and job opportunities. Vendors can also use a private pin number to securely log in and access sales information on their products.
Recycling Option For Old Electronics
One of the byproducts of tech-savvy businesses are the old, outdated rechargeable batteries and cell phones that inevitably get cast aside for newer models. Rather than have these items wind up in the landfill, The Rechargeable Battery Recycling Corp. has a Web site you can use to locate the drop-off site nearest you. Visit www.call2recycle.org for details.
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