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The Changing Business of IT

Historically, IT has been sheltered from most business concerns. But maybe it's time to engage. Here's how IT can participate in strategic discussions.

At the bottom of the picture, there are darkened figures of people in a conference room. Above them, there are various colorful symbols of a map, a rocket, a robot, and others.

The business of IT has experienced huge changes, but historically, IT people have been sheltered from most business concerns, as they fell to the legal, procurement or finance departments. Maybe it’s time for the people responsible for IT to be more engaged. Let’s examine several business aspects and I will suggest how IT personnel can participate in their organization’s strategic discussions.

Why Is Consolidation a Concern?

While consolidation remains a focus for IBM clients, it’s become more financially and vendor driven. Consider how HelpSystems, an ISV, acquired Tango/04, TeamQuest, Bug Busters and Linoma Software; while Sirius Computing Solutions, a national reseller, acquired Continuum Security Systems and thinkASG. Popular thinking is that consolidation usually reduces options and choices. I think that’s true. Products and markets are mature, and consolidation is the “natural selection” of the capitalistic world. The farther down the food chain your ISV’s products are, the higher the probability of their being killed off for any number of reasons, including the value in the install base (you) at some point.

What happens when a software company is acquired can vary significantly depending on the acquirer, the financial health of the target and how the market views the deal. As a guideline, if your ISV’s products are not yet the target for acquisition, learn why. Trade publications, newsletters, blogs and consultants are available to assist you. But ask yourself, “If one of my ISVs is going to be bought out, what would likely happen, and what would be the best response?”

I suggest being proactive, early and upbeat. If your ERP system will be unsupported after a conversion period, it’s best to present such facts to your management as soon as possible so that your company has a chance at success. Offer to be a beta test site for the successor or, better yet, a whitepaper subject. For even higher stakes, agree to be featured in a commercial or an ad campaign. Early adopters get to be experts.

The Special Role of Leasing

Leasing provides a special bond between client and reseller that is an intangible but valuable benefit for the reseller. While it’s not impossible to get out of a lease, it can be difficult and costly for the client. When it comes time to renew, the reseller has an opportunity to sell hardware, software and services under the lease, bringing the financial decisions down to a dollars-per-month discussion. Every purchase looks trivial in cost when boiled down to dollars per month over three to five months. The lease can, in most cases, eliminate the need for the dreaded capital appropriation request.

Renewal is the time for IT to load up on items that are nice to have, along with the must-haves. Huge differences in lease prices can occur based on your credit, the value of the collateral and term of lease. Renewal is the obvious occasion to negotiate new terms. Having a prior conversation with IBM Global Finance is certainly worthwhile, even if only as a sanity check on the terms and conditions in your current leases.

Return to the MSP Business Model

Enter the managed service provider (MSP) model. A growing number of Power Systems* resellers are retuning their businesses to this model, providing hardware and software access, managed and bundled as-a-service offerings for companies that no longer feel compelled to run a proper data center on a daily basis.

MSPs are on the front lines of the business of IT. Both MSPs and clients like the security of having professionals managing systems, along with the added comfort of having servers located in hardened buildings, redundancy in electrical power telecom, and spare servers and storage available locally for hot-swap replacement or growth. All Power Systems sites must address these functions, but the economics of having specialized facilities and the associated personnel required work better when the costs of these facilities and skilled labor can be shared across multiple client companies.

The MSP model is likely here to stay and grow in appeal, particularly for the IBM i space. If you are considering the MSP option, just remember providing floor space and electricity for a Power* server does not mean the service is enterprise class. When choosing an MSP, reputation is obviously an important factor, but do your own due diligence. Find out if the firm is responsive, fairly priced, flexible and professional. Ask to talk with a customer that quit the MSP. Ask how often they role-swap their high availability/disaster-recovery application. Don’t forget that IBM is also in this business.

The Light at the End of the Tunnel

IBM Power Systems products remain market leaders. I constantly read about the “graying” of the technical talent in the Power Systems marketplace causing labor shortages. It’s not a bad place to be in for career seekers. I’d say that the business of IT is a sweet spot right now.

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