How midsize companies can ensure IT efficiency
For midsize companies, speed is everything. New opportunities in the digital economy are emerging all the time, and midsize companies must constantly battle against not just their established competitors but also smaller upstart firms with disruptive new ideas and the large established entities that have an abundance of resources to crush competitors standing in their way.
It’s tough being in the middle of the mix, which is why many companies are considering offloading responsibility for a particularly complex part of their business—IT infrastructure—to pay-as-you-go service providers.
“Midsized businesses have limited IT resources, and they are suffering from IT efficiency deficit,” says Anurag Agrawal, founder and chief global analyst at Techaisle, an SMB midmarket and channel IT research firm. “Our recent studies show that a midsized business has an average of 12.7 IT staffers, which is 1/20th of what you find in an enterprise. Eighty-three percent of midsized firms expect IT staff to deliver more with less, but in 79 percent of cases, they’re already overloaded with time-consuming support and maintenance tickets.”
Obviously, if IT staff is consumed with mundane tactical activities, they are hardly in a position to focus on more strategic matters, such as helping their growing businesses keep pace with the rate of technological disruption, which could make or break a company.
This is where IT consumption (or as-a-service) models come into play. With this approach, midsize companies get access to a well-managed hybrid cloud environment—from on-premises to the cloud and the edge—enabling them to hold their own and be competitive with the capabilities of much larger enterprise organizations. It also allows IT departments to scale up or down at a moment’s notice and gain access to on-premises and cloud expertise, something that’s often hard to find in today's competitive job market.
Balancing cost, efficiency, and productivity
What’s more, when adopting an IT consumption model, companies pay for services and resources only as needed, eliminating upfront equipment purchases that often lead to overprovisioning. By some estimates, midsize companies overspend by 40 to 50 percent on their initial computing or storage outlays because they don’t have a solid method for predicting their future growth-related IT requirements. By shifting to an IT consumption model, they can ditch their current spending approach and potentially save up to 30 percent in the process.
“Twenty percent of midmarket firms are moving toward more OpEx-based agreements, and 38 percent report they use a mix of CapEx and OpEx,” says Agrawal. “These firms are looking for flexibility and prefer to acquire technology based on usage, namely the IT consumption model.”
The ultimate aim is to achieve a balance between cost, efficiency, and productivity. Companies work with a trusted IT adviser that can support and help improve IT operations. Such a partner also provides access to the latest innovations and technology midsize businesses need to compete with larger organizations with deeper pockets. At the same time, companies can also get dedicated IT security staff to keep cybersecurity and privacy policies current and compliant with government regulations.
It’s a level of IT management that most midsize companies would struggle to establish on their own given their budgets and ability (or lack thereof) to compete for top talent. But they still need a solution in order to grow.
“Big companies can easily hire all kinds of expertise because they can offer great salaries, benefits, and advancement opportunities,” says Laurie McCabe, co-founder and partner of SMB Group. “In the midmarket, though, it’s getting tougher to recruit IT talent. This IT consumption model is attractive because smaller companies can take advantage of the same economies of scale as larger companies.”
Minimizing migration cost and complexity
An IT consumption model has another benefit many organizations don’t always talk about but recognize as being valuable: the ability to quickly and easily upgrade to new technology when older systems aren’t keeping pace.
For example, many businesses that have been around a while started on Windows Server 2008. They purchased the hardware and software they needed for that operating system, and IT staff kept it running smoothly and efficiently for a while. There was no urgent need to spend more money on subsequent upgrades, so they just stuck with what they had.
But at some point, those systems got a little old and tired. They became a little slower, buggier, and more prone to cyberattacks. As such, they also took more time and money to manage. Exacerbating matters, Microsoft announced plans to completely end support for Windows Server 2008 early next year and urged existing customers to move to its Azure cloud computing platform.
Now that’s a completely different OS model. It’s not the shrink-wrap stuff many organizations are accustomed to. As such, it requires different levels of IT expertise as well as supporting infrastructure—something not every business has readily available within their facilities.
This leaves businesses with a few options. They can stick with what they’ve got a little longer and hope it doesn’t go sideways anytime soon. Organizations that do not have a migration plan in place for Windows Server 2008 will have no choice—they will be forced to migrate or assume the risks that come with running an unsupported server platform. They can decide to completely move over to another platform, struggling with the cost and complexity of that, or they can choose the IT consumption model and let someone else shoulder most of the load.
According to Harry Brelsford, CEO of SMB Nation and a longtime Microsoft watcher, many organizations will use Microsoft’s end-of-life proclamation to finally make the move to managed IT. But he advises midsize businesses to shop around a bit because service offerings do differ on a number of levels.
“The Windows Server 2008 end of support will trigger migrations,” he says. “That said, I see the push to Azure as something akin to shopping for a puppy. You don’t want to buy the first one you look at.”
Addressing the most obvious impact
One of the key things to consider, observers say, is how a service provider goes about ensuring that its customers won’t be charged for unused capacity. One major vendor, for instance, requires its IT-as-a-service customers to forecast what they’ll use and then makes them pay based on that estimate. So even if they get it wrong, they still end up paying for their committed capacity.
“Overprovisioning is a big deal,” says Techaisle’s Agrawal. “The trick is you have to understand your past workloads, predict your future workloads, and then determine your provisioning requirements. If you overprovision, you may not be able to achieve the cost-reduction advantages associated with cloud and IT consumption models.”
This is why the concept of metering should be viewed as a critical component of the IT consumption model. You still predict your growth and related needs—say, 5 percent, 10 percent, and 15 percent. But incremental buffers are put in place, and you’re not charged for the additional capacity if you don’t hit your selected milestones. You still have the option to save some money by committing to higher ranges—but you don’t have to.
"When you’re only paying for what you use, some of the common concerns we hear are, 'How do I know I’m only being charged for what I’m using,' 'How do I know it’s accurate,' and ‘How do you control everything?'" says Katie Lenahan, marketing manager for HPE Pointnext Services. “Our answer is that there are very sophisticated metering tools available now to address all of that.”
Strong metering tools will not only track workload usage at a very granular level but also analyze usage trends over time and help predict future capacity needs, Lenahan adds. Organizations can eliminate a lot of guesswork with these tools while holding down costs.
Another consideration should be whether the IT-as-a-service option you’re evaluating will allow you to continue running critical functions on premises. In addition to the technical benefits that brings, it’s also important to recognize that not every business leader is comfortable putting everything in the cloud. Many are equally uncomfortable with relying 100 percent on outside parties to run and manage IT.
“It’s easy to map out the value where you align consumption so you only pay for what you’re using,” says SMB Nation’s Brelsford. “However, when you get into midsize firms, you definitely see an uptick of internal politics. I’ve seen outright civil war between the on-prem Luddites and the cloudies.”
For most growing midsize businesses, McCabe says the value proposition of the IT consumption model “makes a lot of sense,” and they should be looking at this as an option.
“With anything new, it takes a while for people to become aware of it, really understand it, think about it, and put it in perspective for the needs of their company,” she says. “I do feel like this is where the puck is going. I don’t know how fast. But I think in 20 years, we’ll be looking and saying, ‘Wow, hardly any companies are doing IT the old way anymore.’”
How midsize companies can ensure IT efficiency: Lessons for leaders
- It really is about maximizing the efficient utilization of staff and budgets.
- Significant IT spending, such as forced upgrades, are not optional, and dealing with them, in both budget and manpower, can be onerous.
- Having the resources you need, when you need them, without over-budgeting and overprovisioning, is a big win for IT.
This article/content was written by the individual writer identified and does not necessarily reflect the view of Hewlett Packard Enterprise Company.