Virtualizing Your IT Service Business
12/31/08 at 12:37 PM by Frank Coker In the past 6 months, 71% of IT service companies (MSPs, VARs, and other IT service providers) surveyed by CoreConnex have continued to grow in spite of the global economic down turn. Of these growing companies 80% continue to show healthy profitability. All evidence shows that the economic down-turn is good for IT service businesses.
As we look closer, we see a number of important changes occurring in many growing IT service companies. One change that is particularly note worthy is a movement toward “virtualized business.”
As we all know, small businesses can benefit greatly when they virtualize systems. This broadly includes virtualizing internal servers, outsourcing computing utility to third-party hosting services and running systems on servers that you host in co-location (rented server facilities) sites. By virtualizing, businesses can reduce many forms of overhead and optimize the costs of infrastructure. This strategy is beneficial to IT companies and to their clients. And of course the IT service provider can play a key role in helping their clients select and implement virtualized resources to get these benefits.
But let’s take this a step further. We also see many IT service companies taking steps to virtualize their staff and their offices. Some of the most profitable IT service providers use a combination of employed and contracted engineers to get a balanced blend of skills and yet avoid the overheads associated with experts that would be very expensive to put on a payroll.
It’s very common to see IT service companies contract for accounting and bookkeeping services, but a much smaller percent have figured out how to support their network operations center (NOC) using contracted staff. A few have figured out that there can be great savings by hiring a qualified, part-time contractor to work specific hours each day to help with peak loads.
Some IT service providers have employed engineers that work at client locations and/or at home and therefore do not have a dedicated office space. In fact, there is a growing number that don’t even have an office other than their home. Some have worked out deals with their major clients that allow the engineers to have a dedicated desk and phone at the client’s office. In these situations the engineer may work part time, say 15 hours per week, for the client and is available on site for emergency situations while supporting other clients.
The idea of reducing the office footprint and therefore the overheads associated with rent and utilities can make a big difference in profitability, but it takes the right systems and processes to support this working environment. One example of this form of virtualization is the company that reduced its office space from 5 single offices, a server room and a conference room down to one office, and a shared work space. This saved a lot of money and made it clear to their staff that the office was not intended to be the place where they spend their working day. They helped each engineer set up at home and at client offices such that they only needed to come to the company office for weekly meetings and occasional problem-solving meetings. This ended up saving a lot of drive time for the engineering staff and created a real gain in employee satisfaction.
Of course none of these moves to virtualization are as simple as they sound. There are many examples of failed attempts to have engineers work from home and many situations where the cost of contractors far exceeded the benefit of outsourcing. To make this work requires a combination of tight management processes and solid infrastructure that can allow all team members to function as a whole.
The ConnexITTM Service Management System is specifically designed for virtualized teams and for clear management oversight (www.coreconnex.com). In addition, a good VOIP system along with a virtualized network monitoring system can open the doors to entirely new forms of business flexibility.
The real key is to question all old assumptions
- All employees need and want an office
- Employees cost less than contractors
- Working at home results in lower productivity.
Not only do we have a lot of evidence that these assumptions can often be wrong, we know that many highly successful businesses have turned conventional thinking on its head and are growing because of it.
In fact, this is just like the big challenge IT service companies face when selling their services. They must get their prospects and clients to rethink their conventional wisdom. Relying on conventional full-time on-site employees is not always the best answer. Taking advantage of outsourced (contracted) IT support can save money and improve the overall operations stability.
