Solving the Final IT Dilemma

Before I get into the meat of the discussion, I wanted to go back to where it all started — Cloud Computing. Did you know, the first known mention of cloud computing was by former Google CEO Eric Schmidt in August of 2006, 15 years ago. Seems much longer than that. Who doesn’t remember in the late people at the office talking about cloud, having no clue what it was all about, unsure if it was the weather or some new CIA project.

Now, I think most understand it as paying for the availability of data storage and computer power without having to manage the network. Who doesn’t like using someone else’s stuff and letting them manage the 24/7 uptime, sort of like my kids and the refrigerator. While there are many public clouds out there, certainly Amazon — 1, Microsoft Azure — 2 and Google — 3 are leading the market with IBM and Oracle and others rounding out the players in the market. While many large organizations run their own private cloud (their own equipment in their own Data Center) or hybrid cloud (Mixture of public and private clouds), most of the SMB world has migrated to the public cloud, whether directly (building their network/AD in AWS or Azure, for instance) or indirectly (using NetSuite, Salesforce, Office 365, etc).

However, one thing has yet to be solved by the cloud, end-user devices. You can build your whole environment in the cloud but your employees need to get access to it. While they may use a laptop, desktop (do these still exist?), Smart Phone or tablet, they still need that device to access email, applications, documents, etc. If this is one of the last physical IT asset many companies are still investing in, why do so many small businesses still take the same approach, looking to cut corners, maybe only buying when employees can no longer duct tape the screen to the keyboard.

Like all technology, laptops/tablets are developing at lighting speed and can significantly improve productivity, or crush it, when not upgraded. These cloud companies are updating their technology all the time to host the applications your businesses are running on, why are you not ensuring you are doing the same? Politics aside, what if we do get all this new infrastructure, like roads and bridges, and people ride their bikes to work. That is what you are doing to your employees, making them ride their bike to work, when they could have a Ferrari, for a small % of your revenue. By not having a proper asset management strategy in place, you are heading down a black whole of IT infrastructure.

For the CFO’s out there, or anyone who is leading an IT strategy, please, if you do nothing else before Memorial Day, put a simple asset management strategy in place. What should that strategy look like you ask:

• List all the assets your employees have, purchase date, end of life date. You can do this in Excel, it works just fine for SMB, however maybe you need a software program to manage assets if you are a larger entity. Think of this in line with your employee benefit plans. Employees like getting a new device, they feel wanted and appreciated that you want to give them the latest technology and not slow them down while working.
• Identify how those assets were acquired, so you know what to do to dispose of them (lease, buy, etc)
• Every 30–36 months tops those devices should be used and then retired. There are many second hand opportunities to sell these devices for a few bucks or many schools/non-profits that take working computer equipment, you can get some great press out of it.
• Identify on a quarterly basis how you will replace those devices to ensure your employees have the latest technology at their fingertips (see below for purchasing devices)
• Consolidate on a couple of technologies & devices — We know it is impossible to have one, but maybe you want Dell & Mac for instance and stay within those. Within those, have a couple styles you will buy, for instance 1 build/sizing for sales & admin and 1 for engineers/project team.

Now that you have your strategy, how should you purchase those devices? There are 4 main ways to purchase devices in today’s environment, see below. Your company may lean toward CapEx or OpEx, and certainly everyone cares about cash, so pick which one works for you. Clearly work with your procurement arm because you now have the strategy to go negotiate discounts with vendors. You know exactly how many devices each quarter you need and when you will buy them. Discounts can be significant with this in place, the larger your company is.

1 — Upfront purchase — CapEx model, spending a lot of cash upfront but obviously you will get the best price. The issue is, you may try and steal a few months at the end of the useful life, since you don’t want to buy that new device and save capital. However, you then get stuck in the vicious cycle of not getting the latest tech in your employees’ hands.

2 — Lease with $1 buyout, likely pay 7–8% interest, and it remains a CapEx, but low cash outflow per month. However at the end, for $1 you will buy it out, and likely remain in that vicious cycle as point 1.

3 — Lease with a Fair Market Value Buyout — OpEx, low initial cash output, likely no value at the end, so will just roll the assets into new assets in 30–36 months. Can be a great way if CapEx is not your main driver, but you will pay a higher interest rate and lower recovery rate than……..

4 — Tech as a Service (TaaS)— The holy grail, if you ask me, just has an awful name. As you know, the laptop makers tried to jump on the as-a-Service train but in theory, you can buy this way without any service. While there are companies who add on a service of supporting the device, most of the time it is just the device itself. The selling entity takes the device back after 30 or 36 months, identifies an estimated recovery/resale value at the end, and looks to sell you a new one in 30–36 months. This is the lowest cost, shade lower than FMV lease, certainly an OpEx but it can be procured through your IT provider, identify that long term plan, have discounting built in and they will manage the device end date for you, along with your asset management strategy, and they will work with you to get new laptops when the term is up, and your employees are like kids on Christmas morning. Typically a seamless transition each quarter with your employees who are rolling off the old device and new one is waiting for them to play (work) with.

Whichever direction you go in buying these assets make sure you have an asset management plan in place for your company. New hires will love to here that upon onboarding, your noise within your IT support area will be reduced and you will be at the forefront of end user technology for less money that you think. Oh by the way, I am happy to help!