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Monthly Archives: September 2016

The Financial Benefits of Moving to the Cloud

1. Fully utilized hardware

Cloud computing brings natural economies of scale. The practicalities of cloud computing mean high utilization and smoothing of the inevitable peaks and troughs in workloads. Your workloads will share server infrastructure with other organizations’ computing needs. This allows the cloud-computing provider to optimize the hardware needs of its data centers, which means lower costs for you.

2. Lower power costs

Cloud computing uses less electricity. That’s an inevitable result of the economies of scale I just discussed: Better hardware utilization means more efficient power use. When you run your own data center, your servers won’t be fully-utilized (unless yours is a very unusual organization). Idle servers waste energy. So a cloud service provider can charge you less for energy used than you’re spending in your own data center.

3. Lower people costs

Whenever I analyze organizations’ computing costs, the staffing budget is usually the biggest single line item; it often makes up more than half of the total. Why so high? Good IT people are expensive; their salaries, benefits, and other employment costs usually outweigh the costs of hardware and software. And that’s even before you add in the cost of recruiting good staff with the right experience.

When you move to the cloud, some of the money you pay for the service goes to the provider’s staffing costs. But it’s typically a much smaller amount than if you did all that work in-house. Yet again, we have to thank our old friend: economies of scale.

(In case you worry that moving to the cloud means firing good workers, don’t. Many organizations that move to cloud computing find they can redeploy their scarce, valuable IT people resources to areas that make more money for the business.)

4. Zero capital costs

When you run your own servers, you’re looking at up-front capital costs. But in the world of cloud-computing, financing that capital investment is someone else’s problem.

Sure, if you run the servers yourself, the accounting wizards do their amortization magic which makes it appear that the cost gets spread over a server’s life. But that money still has to come from somewhere, so it’s capital that otherwise can’t be invested in the business—be it actual money or a line of credit.

5. Resilience without redundancy

When you run your own servers, you need to buy more hardware than you need in case of failure. In extreme cases, you need to duplicate everything. Having spare hardware lying idle, “just in case,” is an expensive way to maximize uptime.

Instead, why not let a cloud computing service deal with the redundancy requirement? Typical clouds have several locations for their data centers, and they mirror your data and applications across at least two of them. That’s a less expensive way of doing it, and another way to enjoy the cloud’s economies of scale.

Bonus benefit: climate change

Whether or not they believe in global warming, many organizations want to do something about it. This is either because their customers want to do business with green companies, or simply through a genuine desire to emit less CO2 , or other gases believed to warm the planet.

By moving to the cloud, you’ll be greener in two ways. First, you’ll be saving energy, as we talked about earlier. Second, you’ll be taking advantage of the work that your cloud service provider has done to reduce its data centers’ carbon footprint. Think of it as saving money that you might otherwise spend on carbon offsets.

Business Models for the Digital Age

Digitization, which is of course happening all around us, is opening up a whole new spectrum of opportunities to create value. But how do you navigate this new horizontal world?

Peter Weill and Stephanie Woerner offer some useful insights on these challenges in their 2015 Sloan Management Review article, “Thriving in an Increasingly Digital Ecosystem.” In exploring these insights, and some of their implications, leaders can gain a fuller understanding of the landscape they face.

Opportunities for companies in every industry are occurring on two critical dimensions: knowledge of the end customer and business design, i.e., breadth of product and service offerings. These dimensions combine to form four business models for creating value (see exhibit): Suppliers, Multichannel Businesses, Modular Producers, and Ecosystem Drivers.

Suppliers, in the lower left quadrant, have little direct knowledge of the preferences of their end customers, and may or may not have a direct relationship with them. These companies sell their products and services to distributors in the value chain. Due to the ease of digital search, they are vulnerable to pricing pressures and commoditization as customers look for less expensive alternatives. Washing-machine manufacturers are a good example of Suppliers, as are companies that create mutual funds sold by someone else.

If you are a Supplier, you need to make sure your operations are as efficient as possible, but that’s only the first step. As digitization continues, end customers will increasingly expect you to cater to their likes and needs. So if you don’t know much about your end customers and aren’t intent on solving their problems, you’ll need to find other ways to ward off commoditization. That means making sure that your product is highly differentiated or that it goes through a distribution channel other than one controlled by an Ecosystem Driver, another of the business models, which has a broad supply base. Otherwise, you risk losing all the value your enterprise has created.

Haier, the world’s largest manufacturer of white goods, has deployed various strategies to differentiate itself from competitors. It has developed a variety of niche products, including washing machines that accommodate the long gowns worn by women in Pakistan, and freezers that can keep food frozen for 30 hours in the event of a power outage in Nigeria. More recently, Haier used the Internet to open up its innovation process to people outside the company, enabling an unprecedented level of customization.

Multichannel Businesses, in the upper left quadrant, have deep knowledge of their consumers because they enjoy a direct relationship with them. Companies in this category provide access to their products in various digital and physical channels to ensure the seamless experience their end customers have come to expect. Many banks and brokerage houses are Multichannel Businesses, as are some retailers and insurance companies.

If you are an Multichannel Business, there’s no such thing as too much customer knowledge. Broadening your understanding your customers’ life-event needs is essential for building out the integrated experience that will retain existing consumers and attract new ones.

IKEA, the world’s largest furniture company, is an example of an Multichannel Business that continues to find ways to enhance the range of offerings within its value chain. Building upon its global presence — currently more than 300 stores in 41 countries — IKEA used its extensive knowledge of its customers (gleaned through visits to homes, for example) to develop “products for an everyday life” — from bedroom furniture to prepared food, all under IKEA’s iconic brand. After decades of focus on the customer experience in its stores, IKEA recently launched online shopping, making the purchasing experience truly seamless and gaining a way to learn even more about its customers.

Modular Producers, in the lower right quadrant, offer a distinct capability that spans the ecosystem, but they have little direct knowledge of the end customer. Their plug-and-play offerings can work with any number of channels or partners, but they rely on others for distribution as well as for guidance on what the customer needs. A good example is payment companies that enable the consumer to pay for a wide range of goods and services, such as groceries and college tuition.

If you are a Modular Producer, you need to be the best at everything. As is the case with Suppliers, competition is fierce, so your offerings need to be innovative and well priced.

Square Inc. fits the profile of a Modular Producer. Founded in 2009, the B2B payments company has continuously launched innovative software and hardware products that are ecosystem-agnostic. Square’s point-of-sale, payroll, employee management, and appointment apps can be used on Apple and Android devices alike, as can its chip and magstrip readers.

Ecosystem Drivers, in the upper right quadrant, have the best of both worlds: deep end-customer knowledge and a broad supply base. They leverage these dimensions to provide consumers with a seamless experience, selling not only their own proprietary products and services but also those from providers across the entire ecosystem. Thus, they create value for themselves while extracting rent from others. Large internet retailers in the U.S. and China are good examples of Ecosystem Drivers, as are some healthcare providers.

If you are an Ecosystem Driver, you’ll want to keep pushing the boundaries in both dimensions, increasing your knowledge of end customers and the breadth of offerings available to them.

As Weill and Woerner’s research demonstrates, the prospects for creating value are greatest for companies that participate in ecosystems rather than in value chains, so Ecosystem Drivers have the greatest potential for value creation and Suppliers the smallest. All four paths are viable routes to enduring success, provided you are clear on what your generic strategy is and what that strategy requires. If, however, you are losing customers or growing more slowly than your market, you should consider moving to a different quadrant, either by expanding your knowledge of your end customers or by becoming more of an ecosystem.

Or even by doing both: GE is moving from being a Supplier of industrial products to an Ecosystem Driver in the Industrial Internet of Things, with the help of Predix, the cloud-based operating system it launched last year. Serving as a platform for services provided by third-party vendors as well as GE business units, Predix helps companies collect, analyze, and leverage operational data so they can optimize the performance of their entire system. As Predix’s customer base grows, so will GE’s status as an Ecosystem Driver.

As digital becomes the new normal, the paths to success are there for the taking. But be sure you know your destination before setting out.

5 Elements of the Company’s Program BYOD

The corporate workforce is changing: Employees used to stay chained to their cubicles, plugging away on company-issued PCs. Today, remote workers perform the same tasks on their own high-tech tablet or laptop while soaking up the atmosphere at their local coffee shop.

Employees are increasingly using their own devices as the mobile workforce grows in importance. A Computing Technology Industry Association study found that 84 percent of professionals surveyed use their smartphones for work, but only 22 percent of their companies had a formal mobility policy. The upshot of this mobile shift is that corporate networks will be increasingly vulnerable, unless these devices are reined in with a BYOD enterprise program.

If your company lacks a mobility policy, consider incorporating the following five elements into your BYOD program to save time and money.

1. Include clear, written rules

Eliminating risky end user behavior through clear BYOD policies saves IT expenses right off the bat. Some of the most salient points to cover in writing include:

  • Prohibited devices, such as jailbroken phones
  • Blacklisted applications
  • Procedures for lost or stolen devices, including the possibility of wiping out all data on a device
  • Privacy disclosures, such as what personal information the enterprise has access to on a device

Some of these issues, like whether the company can legally wipe out data on a device they do not own, should be cleared with your human resources and legal departments to minimize the risk of lawsuits.

2. Make sure it’s formally presented

It is not enough to have employees sign off that they have read the policies – formal classroom or online training is recommended to ensure comprehension and compliance – especially for less tech-savvy workers who might not understand that seemingly innocent actions can expose the company to risks.

3. Ensure that it’s scalable and flexible

Make sure your security software can be painlessly installed on new devices. Cloud-based services do this particularly well and are typically available on a per-user subscription model, which saves money by protecting only what is needed at any given time.

Also, consider exceptions to rules, such as allowing peer-to-peer networking programs for certain users who might benefit from these tools. Otherwise, employees may risk bypassing your security protocols in order to use forbidden applications.

4. Secure against the greatest number of threats possible

Risky behavior such as opening email attachments from strangers or visiting dubious sites on BYOD devices should be addressed in the written policies and further safeguarded via antivirus software.

There are other exploits to be aware of, which might not be as obvious, such as fake antivirus scanners that users might innocently install, and social engineering (or phishing) threats. A good endpoint protection program will keep employees up-to-date on these lesser-known attack vectors and continually inform them on how to best protect their devices. This does not require much expense but does involve staying abreast of threats and implementing a solid communication plan.

5. Allow for remote monitoring and control

You have to have a degree of oversight over which BYOD devices are accessing your corporate systems. This is where a third-party mobile device management tool (MDM) can pay valuable dividends. MDM services provide benefits such as malware blocking, policy enforcement, logging, encryption and remote wiping, all from a single, centralized platform.

In summary, leveraging the benefits of BYOD while minimizing potential pitfalls is a tightrope act, but the BYOD trend can’t be ignored. Each business must strive to develop a program to protect its systems and data from breaches, while allowing workers the freedom and convenience they seek.

Ways to Register a Business Name

The first step to creating your small business is choosing the right name. The name should represent your industry, field or expertise while being catchy, memorable, and relevant to your customers or clientele. However, there are a few simple steps to consider before registering an official name for your future business.

Although you might already be infatuated with the name of your small business, you must ensure someone else hasn’t already claimed it. This helps you verify your company’s name is unique. Otherwise, it could violate trademark law by being too similar to the name of an existing business, in your state or any other, and whose operations are in close relation to your product or service.

Conducting a thorough due diligence check before registering the business entity or buying the domain name will help you avoid future costs in marketing, rebranding and even a possible lawsuit.

Before conducting even the simplest of searches, brainstorm a short list (preferably of five to ten) of possible business names. If you’re stuck, use different words and phrases to say your business name. Get creative! Play around with adjectives, nouns, and adverbs. Not only will this list help you search for pre-existing business names, it will also come in handy if someone else has already claimed your business name. To be sure that you are in no danger of encroaching on a business name or trademark, also add variations in spelling or wording of your potential business names.

Now it’s time to conduct a basis online search with a major search engine, because similarities to your chosen moniker will likely show up here. You should investigate further to see if that business offers a product or service comparable to yours. If there are no readily apparent matches, it does not necessarily mean you are in the clear.

Continue your investigation by entering your business name in more specific and targeted databases. For instance, consider searching in the following business databases, which offer ways to locate a matching or similar business name before you commit to it:

  • U.S. Securities and Exchange Commission
  • ThomasNet
  • Network Solutions
  • Trademarkia.com
  • U.S. Patent and Trademark

When you are nearly certain you can use your business name, go to the Small Business Administration’s website and find the contact information for each state’s secretary of state’s online business registry database. Search your selection as well as variations in each one. If there are no matches, then move to checking with your county clerk’s list of Doing Business As (DBA) names.

Don’t panic if your preferred name is already taken. You may still be able to use it if you are offering a clearly different product or service or are in different states. You can contact your state’s secretary of state’s corporations division. They can work with you to determine that you meet the legal requirements to still use the name.

Once you have a confirmed business name, register it right away, even if you are not ready to conduct business operations. The name may not be available six weeks or six months from now, and the small cost of ensuring it is yours to use early in your preparation will be worth it.

You can register your name through your state government. Procedures will vary depending on your chosen type of legal entity (sole proprietor, LLC, corporation, etc.). Most states require you to at least register as a DBA if you are conducting business under any name other than your given legal name.

Your business name will be the cornerstone of your marketing efforts. By protecting it from the beginning, you ensure it will stand strong against any branding or legal challenges along the way.