Category Archives: General

How IT Leaders Can Get More Bang for Their Buck

Earlier I wrote about the value proposition for IT Leaders of SMBs to engage in a Prime Vendor Model to satisfy the diverse needs of their departments. (LINK) That article was based on the principles defined and implemented across many larger enterprises across the US and the world. Much debate and discussion has been had about this topic, with many asking “How can one vendor really meet all of my needs? And if I think there could be one, how do I know which one is the best fit for my firm?” In this article, I will address these two critical questions facing IT Leaders.

First of all, we have been speeding towards the Prime Vendor Model for a number of years when procurement departments started developing an echelon of “Preferred” vendors with whom they were expecting to spend more money year after year. The goal of the procurement department was simple: beat down the vendor’s price to insure the budget numbers were met. This is a way of being from the 20th century, where someone has to win and someone else has to lose. Our firm, and really the avant-garde set of firms like us, is not interested in a 20th century model. We embrace the 21st century models of co-opetition, win/win business scenarios, and loyalty generated by consistently delivering value and exceeding expectations.

The Prime Vendor Model can be constructed a number of ways. The most simple (and thus easiest to implement) is a pre-determined cost sheet for products and services that are purchased year-over-year. The best example is laptops or server purchases. In a Prime Vendor model, the single vendor will provide the required hardware for the same price for a set period 12-24 months. The price should be low enough that the customer feels that the deal is pretty good (it doesn’t have to be the absolute lowest), and the vendor will take on the responsibility of delivering machines in the timeframes required and at the lowest cost the vendor can secure. This scenario requires a consistent purchase pattern and few changes on the product mix in order to operate seamlessly.

The next easiest model requires more transparency: The cost-plus or fixed-margin model. In this model, the vendor shows the customer actual costing numbers from orders and there is a pre-determined margin percentage determined for the duration of the contract. The margin number will obviously be impacted by the make-up of the annual purchases, but when a customer shows their annual spend, the vendor will be ready to have a guaranteed revenue stream for the coming year or two. This scenario allows for a bit more fluidity in purchases (type, number, frequency, etc.) because both sides will know exactly what they are getting.

One of the more advanced models is a SLA-based model. In this model, the vendor guarantees delivery of the services required by the customer and the price up-front, but it is the choice of the vendor how to deliver those services. More advanced contract techniques can be employed here as well, including bonuses and penalties based on SLA performance. This model requires the most trust between the customer and the Prime Vendor and can even be tied to metrics outside of the IT Organization to insure alignment.

Now that we’ve discussed how the business relationship of this model can look, how will an IT Organization know which of their vendors to promote to this “Prime Vendor” position? Remember, it’s not just a guaranteed spend amount, but it’s transparency in intimate business details and requires rigorous planning to provide the Prime Vendor the information necessary to support the business. And the level of involvement of your Prime Vendor in more business conversations will increase if you want the maximum value out of the relationship. Because of these increased expectations on all sides, the Prime Vendor could look very different from firm to firm. There really isn’t a set description for a Prime Vendor, but there is a good framework of expectations that you can use to assess your vendors to determine if any could fit this role, or which could fit the best.

When determining the best “fit” for a Prime Vendor, the critical areas to focus are:

Proven track-record – Measuring the relationship not only by the times the vendor achieved the expected service level, but also by the times when things went sideways (supplier shock, disaster, etc.)

Capabilities match needs of organization – Insure the skills the vendor has (or has access to) match the needs of the organization long-term. It’s better to get high-value skills at a discount with the power of large purchases. The vendor must also get you access to something your firm needs but hasn’t/cannot acquire.

Knowledge of the firm/industry – The Prime Vendor should know your organization very well based on length of time in the relationship or by industry expertise. While neither of these are absolutely required, having a vendor versed in your industry might also gain some contextual and comparative information during the arrangement.

Willingness to engage – Vendors not willing to do business in this manner might have more to hide than you think. And if vendors are not willing to help build new operating models with shared responsibilities, you might re-consider where to spend your firm’s resources.

Once you have chosen to go down the Prime Vendor path, you will also need to consider the impact to your own organization. For instance, the procurement department will not need to be as large if all the business terms are agreed-upon during the contract. Also, your internal planning meetings will need to include representatives from the Prime Vendor so they can get the inside scoop on what to expect for upcoming orders. Your Prime Vendor should also be providing you expertise in things like hardware selection, service delivery, and solution requirements/capabilities.

These are just a few of the things to consider when embracing a Prime Vendor model for your organization. The business case is there, and the benefits are significant for all involved, as long as you and your Prime Vendor are willing to do business in a more open, more transparent, more 21st century way.

Karl Burns is the Chief Strategy Officer at VirtualQube. He can be reached at

Part Two: When Should an IT Leader Use a Vendor?

In the IT space, as in all business areas, there is a constant need to do more with less every year. If you are only producing the same amount of revenue, while still requiring the same amount of resources to produce that revenue, you may not be long for this world. I know that sounds harsh, but in this accelerated day of contracted business model lifetimes, you have to keep speeding towards growth else you may be left in the wake by your competition. We had a fun saying: “You don’t have to be the fastest when running from a bear, you only have to be faster than one person.” In business, it’s more like a long distance run where you need stamina, ideas, and sharp elbows to keep tight competition from getting into your lane and taking over your place.

As businesses grow, their needs change. That’s true to support new products and services, to manage more diverse customers, and to constantly improve the internal mechanics of the organization. The old way of doing business looked something like this: A company buys infrastructure one year, but services for the next 5 to get the most out of that hardware. And it may also require new add-ons and additional services during the life of that hardware.

The company of the future will not get handcuffed to assets (depreciated or not) and will instead look for suppliers that can be as dynamic as the business itself. In the old model, companies needed multiple vendors to get the best price. GE was famous for this. They would offer an RFP, have 3-5 down-selected, then take the cheapest price, subtract 30%, and offer that price to the firm they thought could do the best work. It was a great strategy, for GE only, and is not one built for the long-term. But this is still how many SMBs operate, asking for multiple quotes and going for the cheapest. That may have worked in the past, but now with the value of Vendor Management Offices (VMO) and Procurement Departments chasing smaller and smaller margins, SMBs need to adopt the strategy of the larger enterprises and engage in a Prime Vendor Model.

The Prime Vendor Model ( source ) is one that puts the responsibility of the company’s IT spend on both the supplier and the buyer. Shared responsibility, shared benefits. The model is enabled by a service-oriented supplier and a client who wants to get out of the margin squeezing business (zero-sum game) and trust a specialist to deliver value, while sharing in the reward (positive-sum game). A Prime Vendor Model requires new styles of measurement too. Gone will be the days of looking at the cost of every contract/item, and instead will be the day of your supplier providing valuable service that the SMB can depend on, for a reasonable (agreed upon) margin, while lowering the costs (FTE efforts) to identify, spec, solicit RFPs, assess, and finally manage delivery.

When this model is put to the test, a SMB will experience better overall performance from their IT staff because of these key reasons:

1)      Reduced time (FTE) managing the RFP process (identify, spec, solicit RFPs, assess, manage and enforce)

2)      Reduced knowledge required to plan and execute complex services (time spent researching, debating,

3)      Reduced annual spend on IT

It’s the third one that will get the most attention, and may not occur every year, but will occur over the course of a contract. It has been around for larger firms which needed a blend of products services, and strategic advice. ( source ) When we implemented this model for a client, we understood that we would face significant competition on a number of purchases (hardware, contracts, etc.) and that many vendors would “drop their shorts” to try and gain entry into our client’s annual budget. It took a lot of patience and commitment to not be short-sighted, and to trust another organization to deliver on the promises made to each other. Luckily, we had the full backing from Leadership at both organizations, and the annual spend is being reduced. It doesn’t mean the client gets the lowest price point on every purchase, but year-over-year, we are seeing the downward trend. And that’s build a relationship between both organizations that will benefit all of us for years.

At the end of the day, do you want to do business the old way, constantly spending days and days or weeks to define what you think you need, hosting vendor bake-offs, and ultimately having vendors deliver their service to the “T” with little regard for your company after taking a haircut on every deal? Or do you want to do business the way of the future, with limitless skills available at the ready, and the entire stakeholder set committed to year-over-year improvement, and reduced headcount to justify? I choose the latter.

Karl Burns is the Chief Strategy Officer at VirtualQube. He can be reached at

Part One: When Should an IT Leader Use a Vendor?

Build vs. Buy Decisioning in IT Organizations

Many of our clients are constantly challenged by a growing number of technologies to manage and understand in order to support the growing needs of the business. Our clients have experienced this growth quite a bit recently with the amount of technological advancement in both hardware and software creating even more product options for IT. Coupled with the dynamic and rapidly changing business opportunities available, IT Leaders have a lot of opportunities to manage, which includes placing bets on where to build capability versus buy it as a service. In this case, it could be simply described as “EXaaS” or “Expertise as a Service”.

The breadth of technology needs for SMBs is not that different from the breadth of technology needs for the large enterprises. Many in the IT Organization get caught up in trying to be the one-stop shop for all of their firm’s needs. Often the list of technology skills required to run the organization (not to mention grow) gets longer annually while budgets get tighter and tighter. One of the most common struggles is trying to get the skills required for an ever expanding set of technologies from the current IT staff. Sending engineers away for a week to learn additional skills takes away from the capacity to manage and monitor the technical services required by the business. IT Leaders have to constantly juggle the time to train versus the time to fight. But how much time should they allocate for each? And what fighting methods (software and hardware) are we going to commit to mastering, and what fighting methods are we going to allow others to do for us?

Once an IT Leader sets a training ratio, the organization needs to figure out which technologies it will continue to deliver, and which it will source. There are a number of ways to think about this, but here are two methods for identifying which technologies you need to focus on with internal resources. If you plot the skills (or OEM or topics) against their annual frequency, some surprising insights come about. Firstly, that many technologies come up frequently, and there is a significant drop-off quickly. In Marketing and Statistics, this is called “The Long Tail”. The way it occurs in an IT Organization is needing to send an engineer to training to implement the newest version of a software that is only used by IT. An example might be SDS solutions like DataCore, or a Citrix XenApp Farm migration. The critical assumption on this graph is that the less frequently a technology is used or referenced, the less knowledge an engineer will have about the technology. I spoke Spanish (Catalan, actually) while I lived in Madrid, but within 2 years of arriving back in the US I could barely carry a conversation with the guy working in a Mexican restaurant. We all know that if you don’t use something regularly, you lose the capability rather quickly. And investing the resources for an engineer to learn a technology and then use that skill once for your organization is low cost, but low ROI as well. It’s also higher risk because your organization just became the guinea pig for your engineer to practice; not at all a great scenario all around.

The example I use is car maintenance. The activities you have to do very often and are low skill (change oil, refill windshield wiper fluid, refill brake fluids) you can and should do yourself. The activities that happen very infrequently and you may not have the right tools to do (head gasket replacement, control arm replacement, trans-axle replacement) you should find a car mechanic to take care of. It’s the activities in the middle of those extremes (e.g. spark plug replacement, brake pad replacement) that you will need to decide if you want to develop the talent to deliver those services. One of my close friends has restored Mustangs for years, and has personally done just about everything to service all of his various vehicles for the 20 years I have known him. Yet he will not replace brake pads or touch any part of the braking system himself on any car. He simply doesn’t want the responsibility.

Relating this to your IT Organization, you should determine what is needed to run the organization, and then make a framework for choosing which technologies you will invest the time and resources into mastering versus which technologies you will “rent” the skills. When you build your own graph for the IT Organization, it might looks something like this:

On the far left are the areas you want to have skills in-house. On the far-right are the skills and technologies you will want to rent. With a plotting of the needs of the organization like this you will quickly see the obvious. The trickier part will be choosing where that line should exist. In metaphorical terms, you will have to call everything Black or White. There will be obvious colors that are easy to see, but there will be many shades of Grey that you will have to choose a home for. Don’t worry, it may take 2-3 tires to get this correct, but if you make the effort consistently, your abilities will improve.

And the critical last step is to develop the budget for all of these internally developed skills as well as the costs to source them so the CFO has all the data required to understand the costs of running the business as well as growing.

Karl Burns is the Chief Strategy Officer at VirtualQube. He can be reached at

The Big Data Challenge from an SMB Perspective

Big data is a hot topic throughout the IT and business industry. I’ve seen many new start-ups trying to capitalize on the needs of firms to store, manage, and derive value from large databases with both structured and unstructured data. High storage needs and even higher processing power are required to play in this game, driving the fastest growing job description to now include some sort of combination of “data” and “scientist”. Source. Even Harvard Business Review has touted this role as “The Sexiest Job of the 21st Century”. Source.

But in the SMB space, big data can mean something very different, with a slightly different set of challenges. Last week at the Exact Macola Evolve 2014 conference, Scott and I met a number of small business owners / managers who faced challenges with their data structures and file sizes. One President of a manufacturing company said to me, “My CFO has this spreadsheet full of pivot tables and graphs, and it’s now 100MB. We cannot e-mail it, and it takes forever to open. I don’t think I can virtualize our workstations if this is what is going on…” Well the actual answer is that yes, that can be virtualized and yes, that file can be re-structured to smaller pieces so that it’s not as much of a burden on the system resources when it needs to be accessed, edited, saved, or sent around. And the real answer is that there is a way out of this predicament. By and large, this is what Big Data actually looks like to the SMB.

Moving large files is not exclusive to the SMB, but the infrastructure to allow for ease of transfer isn’t generally there. To escape the clutches of e-mail transfers, some SMBs look to inexpensive storage/retrieval tools such as ShareFile or DropBox in order to collaborate. While these tools get the job done, some come with access hiccups while others are blatant security risks. And dividing up data into smaller pieces that can be updated consistently is easier said than done, easier planned for than retro-fitted. Alternatively, SMBs can invest in higher performance network hardware (think Ciena), but these have large pricetags associated with them. And although this is a generalization, the percentage of SMBs of the total number of businesses in the area increase as you move further and further out of major metropolitan areas. Another complicating factor as you move towards more rural areas is lower speed internet connectivity. Still, the SMBs face these “big data” challenges and they can consume many resources in determining how to deal with them.

Over the years, VirtualQube has learned a thing or two about how to deal with these challenges. Here are some helpful tips when it comes to managing your SMB information:

  1. Use a collaboration tool to keep large files OUT of e-mail / inboxes, insuring the tool does not increase the security risks noted earlier
  2. Have reference files as read-only and store them in a protected area to maintain integrity (e.g. a protected network file server)
  3. Create separate files for each type of analysis
  4. Create graphs in separate files as they are graphically intense and the program will have to re-calculate and render on every edit, or every open

In a future article, I will write about the impacts of business intelligence being stored in employee Inboxes, instead of the tools designed to store and harness information. They are significant, and are felt across organizations of all sizes, so stay tuned.

2nd Annual Customer Appreciation Event

A huge thank you to all our customers who were able to stop by yesterday for our second annual customer appreciation event. A great time was had by all! We love having the time to enjoy a drink and some good conversation with our customers. Please enjoy a few photos from last night.

Ashleigh was a pro on the simulator. Jeff and Norman from Teknon sized up the competition. While Jason recorded race times for our giveaway.

Francois from ESET took a spin while Karl looked on.

Some of the group.

Ashleigh and Laura thought something was very funny while Karl autographed his book for a customer.

James, Tim and Ryan.

Scott offered to keep a tab on phones so everyone could enjoy the party.

Norman from Teknon, Rodney and Jason from Stemilt growers with their favorite sales guy, Jeff.

Jason and Dave shared some conversation and good food.

The food was to die for!

We took this opportunity to wish Scott a very happy birthday.