Workplace2Go blog

The problem with the automotive repair business is they are not incented to fix the problem the first time or fix it in a cost effective manner.  I’m sure I’m not the only one that was screwed by a mechanic.  For some, the more problems you have the more revenue for them.  Many mechanics are ethical, but it’s hard to be ethical when you need to pay your bills and put food on the table.

The IT industry, especially firms that focus on the SMB market, used (I’m using past tense because the model is starting to change) a similar model – billable hours.  Companies hired an IT consultant to come in and implement the hardware and software businesses needed to run their business.  They charged a hourly rate to do so.

After the project is complete, the only way consultants made money was when a problem occurred.  Businesses call them up screaming that the system is not working and someone needs to come out and fix it right away.  Assuming the consultant was available (the good ones rarely are available); they rush out and eventually correct the problem.  If the consultant was not available, your system could be down all day or longer.  You are charged a fee for this visit.

Think about this relationship for a second.  After the initial setup, the only time the consultant makes money is when it breaks.  Sounds like the auto repair model.

Most consultants want to do the right thing and do their best to implement a system that is reliable.  However, it is difficult when someone has a morale code that is at odds with their financial incentives.

Another model that is gain popularity is managed services.  Managed services have a broad definition depending on who you talk to.  For most consultants, it means pro-actively managing the system you purchased.  For example, you are charged $100/month for a consultant to make sure your server is updated with the latest patches from Microsoft, free of viruses, etc.  This model is much better aligned with your goals (unless you enjoy calling our IT consultant to fix problems) since the consultant is incented to keep the system up and running.

However, managed services may not be cost effective for your situation.  You must purchase the hardware and software, hardware failures are not covered under most agreements and software/hardware upgrades are not covered either.  At a minimum, every 3 – 5 years you get the joy and expense of footing the bill for upgrades.

Wouldn’t it be better to have all costs included with your service eliminating the need to spend your hard earned capital to pay for new systems as well as upgrades?

What if you could buy a system that was much more reliable, included hardware, software, and upgrades, all maintenance (even unplanned maintenance) and easily scaled with your business – up or down – no long term contracts?   Would you consider it?  This model, Cloud Computing/Software as a Service, is clearly aligned with your company’s objectives.  Companies offering Cloud Computing services must provide a reliable, secure, and cost effective service.  High support costs and security problems are the kiss-of-death for cloud computing companies – they have the same goal as you do – keep your data safe and the system running so you don’t call.  Unless you enjoy calling your IT guy or gal, you should consider cloud computing as an alternative.