Alternatives to Layoffs

8 October 2008

If you are preparing for the downturn by cutting costs, consider the advice of Mike Elgan.  In his article on “Three Ways SMBs can Survive the Economic Meltdown“, Mike highlights three alternatives to layoffs that can help reduce the overhead costs of running a business:

  1. Send people home.  Companies often consider transport and associated costs as included in employee pay.  Consider cutting a portion of this pay and let employees work from home.
  2. Use all the on-line tools to travel virtually and collaborate without actually leaving home.
  3. At the extreme, consider closing your office and becoming a Bedouin organization.

I like these ideas but I have to ask, why wait for a downturn?

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Buffett’s Law and Cloud Computing

6 October 2008

In an interesting post on the future of Cloud Computing, Jake Smith says that one of several antecedents of wide-spread cloud computing is the impact of “Buffett’s Law”.  Basically, the law states that Warren Buffett, the billionaire investor is driving change in the business world through the principles of value investing in ways that promote conservative innovation as opposed to radical or flamboyant visionary creation.  “The value of an enterprise is a direct correlation of it’s ability to deliver consistent return on invested capital, regardless of market conditions.”  What does this mean? 

Return on Invested Capital (ROIC) is a measure of the ability of a company to generate EBIT or earnings before interest and taxes compared to the amount of investment in long term debt or equity.  To maximize the ROIC, the company must do two things:  first, maximize its operating profit which translates to maximizing sales, minimizing the cost of good sold, minimizing the overhead involved and working with a low tax rate; second, the company must minimize the debt and investment required which translates into minimizing the working capital requirements and the non-current assets.

The first part is about efficiency of operations.  The second part is about business models.  Efficiency of operations is the realm of lean manufacturing – a philosophy of organizational efficiency that can be applied to just about any process.  Business models relate to how you make money and the decisions about what you do and what you outsource.  Take the decision to outsource PCB assembly rather than purchase the equipment and build the components in house.  If the cost of goods remains the same, out-sourcing is preferred since it lowers the non-current assets which will result in a better ROIC.  To make the purchase of the PCB assembly line attractive, the cost of goods would have to drop significantly compared to what could be produced through outsourcing in order to generate the same ROIC.

How does this apply to cloud computing?  Cloud computing is essentially an outsourced IT model comparable to the outsourcing of PCB assembly.  The cloud offers lower infrastructure for similar performance which means that, even if the cloud is just as expensive as tradition IT, it will be a preferred simply because it lowers the ROIC – hence the impact of Buffett’s Law.

For more on the trends in cloud computing read Jake’s article here or my own take on the changes in IT here.

MJM Consulting – Helping companies grow.


Open Source Software: an Inferior Good

2 October 2008
Image from “Romance gets a market correction”Please have a  read of Steven Vaughan-Nichols’ blog Lets Talk Cheap Software.  The comments are especially good.His point is that, in these turbulent times, expensive software licenses and contracts are not the place to put your money.  If cash is now king (but hasn’t it always been?) it is better to trade effort for a product than cash.  With open-source software, their is little cash outlay but you do have to spend the time to learn how to use it.

Like most inferior goods (I’m using inferior in the economic sense – see wikipedia definition here), open source software may not be seen as an attractive option when times are good.  When you feel rich, you have options.  It is easy to throw money at a problem and buy the expensive stuff and the consultants to install it.  On the other hand, when times are bad, throwing money may not be an option and is likely a dumb move in any case.  Its in the bad times that open source software is an especially attractive choice.

This doesn’t mean that you have to put up with something less, just something different.  An attitude adjustment is required.  Like in the article in The Globe And Mail today “Romance gets a market correction“, don’t worry that because you can’t afford expensive dinners any more, your marriage will suffer.  If you think back to when you were young and at the beginning of your relationship, those were happy times.  “You were pretty close to broke, but you were having fun.”

MJM Consulting – Helping companies grow.


Tradeoffs in Desktop Virtualization: No Showstoppers.

27 September 2008

In a recent post on ZDNet.co.uk, Jason Hiner, says that the cloud is not ready for desktop virtualization.

I’m more confident in the success of virtualized desktops.  I have, along with many others, been using them for years as remote desktops.  First with GoToMyPC and later with Microsoft remote desktop.  I would leave my desktop computer running at work and then access the desktop remotely from home or on the road.  My primary access method was a laptop connected on my home’s wireless network or the hotel Internet.  Never needing to transfer a file or install software, after two years, my laptop was in the same condition it was when I bought it.

Yes there were limitations.  Editing a Power Point presentation was annoying and multimedia files were poorly displayed.  If the Internet was slow, the mouse and keyboard screen updates could be jerky.  If I didn’t have Internet, I couldn’t work.  But there were always work-arounds and compromises.  For Power Point, I learned to turn off the background graphics or use a different template altogether.  I spent more time on content than format.  For surfing, it was often better to do the surfing locally – but not always.  I read on the plane and worked in the airport terminal.

However, the benefits of a single working desktop, of not having to sync files, of always being able to get to the desktop no matter where I was or on what machine:  these things outweighed the reduction in the “user experience”.  I was willing to put up with less in order to get these benefits.  It was a classic cost-benefit trade-off that I think many people and companies will make in the cloud’s favor.

I’d also like to point out that many companies are not using state of the art multimedia machines as desktops.  A quick walk through some local offices shows 14″ monitors, e-mail and word processing, two-tone text based data entry screens that look like they were programmed in 1970, no multi-media capabilities – basically bare bones corporate only workstations.  These are also the targets for virtualization.

What I am looking forward to with the virtualized desktop approach is being able to get rid of the corporate desktop altogether.  Virtualization has been a key term in servers since it allows servers to be consolidated.  If I had 10 servers, I may be able to get away with five or three or even one with the appropriate virtualization technology.  If you can virtualize the desktop as well, consider the additional savings.  How many computers are there out there in total?  What is the ratio of desktop computers to servers?  Its a probably more than 2 to 1.  If employees have a desktop at work and a laptop for home or the road, the number of non-server computers is even higher.  Now consider that desktop virtualization can reduce the number of redundant computers by up to a 50:1 ratio (as claimed by Qumranet’s President Rami Tamir in April.)  Yes, there will still need to be terminals with screens and keyboards but these can be much cheaper than the multi-cpu, multi-core machine that currently sits on my desk.  In all, this means a dramatic reduction in the amount of desktop hardware out there with a concomitant reduction in the IT support requirements.  The savings are too hard to ignore.

I agree with Jason that the importance of latency in the network will be important.  But just as working with remote desktops in a hotel, it is still possible to do even with tardy connections.  In return, the bandwidth requirements are significantly reduced.  A terminal for a virtual desktop will only need a fraction of the Internet bandwidth since it handles no files, transfers no data and only displays updates to the graphics.  The server in the cloud, on the other hand, has access to the Internet backbone and can deal with files over a high-bandwidth link.  For many companies, the server may have access to more Internet bandwidth than their own servers.

Jason’s article also mentions a bridge approach from MokaFive.  I realize the appeal of MokaFive’s approach, but I have lost (and given away) more USB keys than I can count and would not want to be dependent on one in order to use my computer.  I want the freedom of the web even with its restrictions.

What would you be willing to sacrifice to implement virtual desktops in your company?


Visualizing Involvement.

25 September 2008

One of the coolest things I’ve seen on the Internet in the last few years is the Code Swarm software developed by Michael Ogawa at UC Davis.  Code Swarm is an open source software project aimed at visualizing the contributions (commits) of a team of developers.  It is fascinating to watch, especially for a large project such as Eclipse.

Now imagine being able to do the same thing for the contributions of the employees at your company.  E-mails, file edits, phone calls all displayed as everyone is working together to create value.   What would your company look like and how big would your star shine?


Where is your data? Changing attitudes about on-line storage.

25 September 2008

One issue that people often mention with off-site virtualized or cloud computing systems is the loss of control of their “data”. The adults in the crowd grew up with paper, floppy disks, local storage on hard drives, removeable hard drives, CD Roms and more recently DVDs and USB sticks. The data was always at hand. We could point to it and know it was safe and we’d protect it.

The new world of virtualization and cloud computing is changing this. Companies are outsourcing their IT needs and on-line services such as SalesForce are gaining traction. In both cases, the data is no longer in the direct control of the company that owns it. This requires a level of trust that the supplier will not abuse the data or allow it to be compromised. It has been a tough sell with the adults.

Not with the kids. Kids these days are growing up with web services and social media. All the data starts being “out there” and they have grow used to it to the point that it is normal. On-line E-mail services are common, FaceBook, MySpace, Twitter, Fickr, YouTube, are all about sharing data. Google docs, Zoho, Apple’s Mobile Me and other web 2.0 services like them provide on-line storage. Virtual desktops are gaining in popularity – and the young crowd is using them at an increasing rate. . Their digital stuff is out there – on the web, in someone else’s control – and that is just fine. They do not want a local copy because they use computers like terminals and they want to get at their stuff from where ever they are, on what ever device.

When the kids reach adulthood, I’m sure they will change the attitude in industry as well.

Local storage will become, well – so 2001.


Bootstrapping your IT

23 September 2008

If you are a new startup that requires several people to work together, just how cheaply can you set up your IT network?  Very cheaply it turns out.

You will need computers – but just about any old computer will do.  You can use the cast offs from other companies that are upgrading – they often pay to have them removed.  The software on the machines is not important as long as they have a browser and a functioning Internet connection.  Don’t go buy the latest machines loaded with expensive software.  If you have to purchase computers, try to purchase used ones.  If you really want a new one, get the cheapest model with the least software.  Don`t get a laptop until you really need it.

Next you will need Internet access.  Start-out with a dial-up connection – it may work with the other suggestions I’ll make below and it is cheaper than highspeed DSL.  If you have wifi, find a free drop and work from there.  (Note that two café lattés from Starbucks cost as much as a month of cut-rate DSL.)

If the other employees are also working at the same location, you will need a router to share the internet and some cables.

Don`t buy a server!  You won`t need it.

For the software, use the web.  There are fantastic services out there that can support a new company with collaborative tools and software that is free to use or extremely cheap.  They are either web based (web2.0) or hosted desktops.  Here is my short list of hosted desktops:

  • Ghost (G.ho.st)– provides a web desktop via a browser with 5 gb storage and 3 gb of mail.  It is a fully hosted solution aimed at personal users.  It just released a version accessible from mobile devices.  It includes a full suite of applications as well as Zoho and Google apps (see below).  Very cool stuff and probably good enough for starting up.
  • Ulteo– a open-source free personal desktop that can be shared with others. It is Linux based and comes pre-loaded with applications such as the Open Office suite.  Desktop sharing is useful for collaboration and as a web conferencing application.  The number of invites is limited and fees apply as more are added.  There is no corporate shared storage.  The desktop is hosted by Ulteo or can be downloaded and run locally.  File synchronization is supported between local and server storage.
  • (TBD) – there are other services coming.  Stay tuned for more.

For web 2.0 solutions, check out the following list:

  • Central Desktop– a web2.0 collection of team collaboration tools.  While there is a free version, the memory available is limited to 25 MB – not alot.  Fees increase with the number of users, projects and storage.
  • Google– Google provides Google Docs and the more complete Google Apps which provides business e-mail, collaboration tools and on-line storage.  Very popular. Has a 30 day free trial and then its $50 per user per year.  If you can put up with advertisements, there is a free standard edition that is supported by ads.
  • Jooce– an online system for nomadic computer users.  Limited in scope and aimed at social networking from any Internet terminal.  However, it is free and there are (currently) no storage limits.
  • QTask – an web based project coordination tool.  First 5 users are free for the first year, then it is $50/user/month.
  • ThinkFree – a Korean company that provides on-line office software.  There is a free office suite and a workspace edition (in beta) for corporate use.  The applications are high quality  and look very similar to Microsoft Office.  Mobile devices are supported.  While they support on-line access, their main target is self-hosted solutions.
  • Zoho– a suite of web2.0 applications that provide most of what a small business needs.  There are a wide number of generic applications that can support small businesses.  Zoho is very similar to Google Apps but has a broader selection of applications.  Collaborative document editing is possible making it an excellent choice for a micro business.
  • Zooos – A web 2.0 office application suite.  Looks to be still in development but the blog and other parts of the site appear inactive.

Other interesting solutions that require a server:

  • EyeOS – EyeOS provides an open-source server solution that allows your company data to be accessible from everywhere.  However, they do not host the server – you have to do that.

If these solutions don’t solve your problems then you may have to purchase a server and set up a LAN.  Just beware of the costs and complexity involved.  The above solutions can be up and running in minutes.  A LAN will take days and cost you many hundreds if not thousands of dollars.  Then add the software.  By the time you get file servers, security and enterprise e-mail with MS Exchange Server installed, you can easily spend $30,000.

If you know of other web 2.0 or hosted business solutions out there, I’d like to hear from you.