The Utility Company - Press Releases

The Utility View – August 2007

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Technology is Converging (and So Should Your Suppliers)…

Over the past few years we have started to hear the term “technology convergence” and its impacts on the way businesses will leverage technology now and in the future. In parallel to this, we have seen the proliferation of Software-as-a-Service and managed services as a better means to consume technology in a subscription-based manner. More recently, we have heard about virtualization technology, whereby hardware, operating systems and software can be consolidated, replicated and centralized as a utility.

Nowhere is the term technology convergence more discussed then in the telecommunications industry under the banner of “unified communications” - fueled by Voice-over-IP (VoIP) or IP telephony. The discussion on the merging of data and voice technology and how and when they will converge is now a priority among the major technology vendors with significant interest and investment in this area.

The real question to be asked is “What does technology convergence mean for most small and medium-sized businesses (SMB) from 5 to 100 employees? Is it just another technology industry buzzword that is all hype, or could it actually have a positive impact on business productivity and profitability?”

First, let’s take a step back and understand the five major areas of technology for SMBs: network/desktop, business applications, Web/Internet, copier/printer and telecommunications and how most businesses consume and utilize these investments.

SMB pie

SMB Technology Pie

Understandably, the technology supply chain is focused on technology innovation marketing to businesses and consumers on the premise that “you need our latest and greatest” technology to make you more productive, efficient, save costs, etc. Unfortunately, this has left many businesses in a position today where the two major issues with respect to technology are:

Over-spending – the fact the average SMB spends $360 per user per month on technology for an industry total of $400 billion annually.
Under-utilization – the fact that only 15% of this investment in technology is actually utilized by these businesses.

Although it is easy to point the blame toward the large technology vendors, the underlying problem is the fact that the SMB market and traditional channel of service providers serving them have diverging goals with respect to new technology adoption. Specifically, looking at the five major categories of technology and the over 100,000 service providers offering these solutions there are some key observations and realities:

IT Channel – the value-added resellers that have been selling and supporting networks and desktops are in many ways chameleons that re-invent themselves time and time again. However, the sea change now facing the IT channel of moving to subscription-based, highly predictable managed IT services (more likened to insurance) has been very challenging for most providers. Today, what the IT channel practices as managed service providers (MSP) are primarily break/fix contracts with remote monitoring. The evolution to “true” utility services where hardware, software and service are all delivered for a user or usage-based fee leveraging virtualization and Web services, will create even more challenges to the current incarnation of the MSP.

Telecommunications – this multi-faceted industry has gone through tremendous evolution over the past few years to a point where today the telecom reseller (“the phone guy”) you are used to dealing with is now forced to adapt to the new VoIP solutions now available. What this means for the telecom reseller is that they must be able to design, develop, monitor and maintain data networks – no business is going to unplug their legacy phone system to have their new VoIP system work like most networks do, irrespective of the benefits of unified communications! Being able to sell and service managed VoIP and networks is a necessity to compete today and to survive in the future.

Office Equipment Dealers – when the Internet was first introduced as a key tool for business in the 90’s, the early predictions had us moving toward the “paperless office”. Since then, paper consumption has actually increased by multiples each year, because of the Internet as a limitless source of information. With that, has come the need for more sophisticated devices, known as multi-function printers that are connected to the network. Like telecom, traditional office equipment dealers are now “in” the IT business even though a vast majority of them have resisted. Demand for managed printers/copiers (toner/meter/service automation) and service models like cost-per-copy will continue to force the office equipment market to adopt. Interestingly, the printer/copier will remain a critical tool for business that can not be virtualized!

Website/Internet – no longer an area to entrust to your Web-savvy nephew in University, a corporate website remains one of the most poorly utilized business tools yet is likely the #1 influencer of how the world views your business. It is estimated that 50% of SMBs do not have a website and over 90% of those that do are static and outdated. This, despite the availability of simple Web content management systems along with scalable marketing vehicles such as Web advertising, customer portals, search engine optimization, electronic campaigns and,now Internet access being a low-cost commodity. One key barrier to adoption, for small businesses in particular, is ineffective website pricing and service models.

Business Applications – Software-as-a-Service is re-writing the rulebook for line of business applications, such as accounting and customer relationship management (CRM). Unfortunately, the channel, which influences 95% of SMB technology decision-making, is not listening. Why? The industry has struggled with how the “middle-man” makes money off subscription-based software. Stay tuned, as the same challenge is playing out with hosted vs. on-premise Microsoft Exchange, and with hosted vs. on-premise VoIP. Both business and productivity (desktop) applications will increasingly be demanded as hosted services by SMBs due to far superior performance, much lower cost and the increased security and business continuity benefits.

As we have discussed, despite all of the innovation in technology over the past 30 years, to a large extent, the business models of most service providers in the technology supply chain are still locked in the 1970’s. Ultimately, the challenge remains the fact that most providers still want to “sell you a box” and then wrap a time-based service contract to maintain it. Why would you spend 10’s of thousands of dollars for an on-premise Exchange email system, when it is available for $15 per user per month at a far superior performance level? Why would a small business purchase a CRM platform or on-premise VoIP system when hosted versions are available?

Let’s look at how technology convergence can change this…

Technology Convergence and the “Single-Source” Provider

With our increasingly reliance on the Internet for information, including the fact all devices, applications and forms of communications are now connected to the network, comes the need for a new approach. Before businesses adopt more new technology, the model for how it is purchased, delivered and maintained must move into the 21st century.

What’s interesting is the fact that technology convergence, where most forms of technology operates on a network over the Internet, actually makes it easier to rationalize budgets, improve performance and most importantly predictability and accountability. Technology convergence allows for the evolution of a new type of technology supplier – the Single-source Provider. No more calling three people and still not getting an answer to your problem. No more dealing with 3 to 5 different point suppliers for your technology requirements. Time to receive technology insurance instead of just service.

Once your Single-source Provider is in place you can then start to plan your technology needs mapped to your business requirements. Here are the 10 Steps to the Connected Office to help you get there:

Spending assessment – see Utility Meter Reading by clicking here
Utilization assessment – see Utility Meter Reading by clicking here
Business needs preliminary assessment
Technology/network assessment
Stabilize IT operations through managed/utility services
Business-technology alignment and plan
Develop budget/skills inventory requirements
Establish internal user training regiment
Investigate technology that improves business performance
Develop virtualization roadmap to reduce onsite technology and complexity

The convergence of technology ultimately provides businesses with the power to consolidate (or converge) their suppliers. The traditional model is about businesses paying a service provider or technician to put them back where they were yesterday. This new approach focuses on providing businesses with the ability to stabilize operations and budget while improving predictability and utilization - any new investments in technology are geared toward expanding revenues and streamlining business processes and costs.

Technology convergence will propel a new type of Single-source Provider, which will improve the adoption and utilization of new technologies such as unified communications, hosted services and virtualization of infrastructure and applications.

About The Utility Company™

The Utility Company is a global managed service franchise that provides information technology as a utility to small and medium-sized businesses, delivering the required hardware, software and service for a monthly fee per user. Our Connected Office™ technology service program empowers people to operate, communicate and manage their business more effectively to increase productivity, performance and ultimately profit. Our customers are supported by the Utility Service Network delivering on-site service and business-technology consulting across North America – our Beyond Managed Services™ franchise opportunity is available by prospectus only. Learn how to make technology work for your business today at www.theutilitycompany.com

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