Archive for July, 2010

Dynamic Allocation in the New World of IT Finance

July 27th, 2010

The world of IT finance is changing. As we’re entering a new era of dynamic allocation, brought on by the rise of virtualization and cloud computing, Digital Fuel enables companies to allocate usage of cloud computing resources, and to track which application installed on top of an instance of a VMware virtual machine is active at any given time.

IT organizations can readily use the Digital Fuel models and templates to create an out-of-the-box experience that allows them to get started using Digital Fuel not only faster, but in a more meaningful way than other solutions.

Read more here: IT Business Edge

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A Different Business, My Wife’s Business

July 20th, 2010

It is hot. Actually, hot is an insult to the actual temperatures this summer. My wife, who just started her 8th month of pregnancy, starts her day sitting on the ground, weeding or picking vegetables! Sounds odd? Sounds bizarre?

It all started when we first moved to California. My wife, a straight-A student with scholarships out of the wazoo, was trained as a psychologist and practiced with the mentally ill. She decided she was sick of the mainstream and even more than that, she wanted a job where she wouldn’t need to talk all day. She checked her options and found an organic gardening course and a carpentry course. I, in a last attempt to stick to productivity and something useful, pushed towards carpentry, but lost the battle as she missed the registration’s close date, so she went to study organic gardening in San Francisco. Life is what happens while you are busy making other plans.

She was hooked. She found her destiny! Before I knew it, she became an organic advocate, what you may call tree hugger, earth eater, and I became the enemy of the world representing the corporate capitalism in all the “interesting“ gatherings and new friends she attended and made. What’s life without some excitement?

She graduated her course and started working on different farms and CSA’s (Community Supported Agriculture) and even completed her Master’s degree in community agriculture. In 2003, she had her mind set – she wanted to open her own community supported agriculture farm. We sat down and wrote a business plan, invested some money, got some ground and started. In less than a year the business was profitable. No aggressive marketing and promotion, just word of mouth and reputation.

Today, my wife, her business partner and their employees supply fresh vegetables once a week to 400 families, from the field straight to the house. Organic vegetables are usually 3-4 times the cost of conventional produce, but my wife was not willing to charge that much – she agreed to a maximum of 30% on top of conventional market price. Agriculture workers get paid minimum wage if they are lucky. My wife insisted on paying way above minimum wage even at the cost of hurting margins, just because that is what’s right in her mind! A lady with core values.

I saw this business will catch wind and told my wife that after we succeed with this one, we will open a franchise and open a network of 200 of these farms worldwide based on our expertise. She looked at me and smiled gently as if forgiving a little child and said, “keep your capitalist colonial aspirations to your business, I don’t want to grow beyond the point where I know personally and talk once a month with each one of my customers.”

And so it was. Despite growing demand and a waiting list double the amount of customers she has, my wife is not willing to grow the business. She believes in small and personal and that’s it, end of story. In the meantime, to address the demand that my wife is not willing to fulfill, she helps some of her employees and other farming entrepreneurs open similar CSA’s , coaching and mentoring them. When I ask about competition and what if they end up cannibalizing the business, she smiles again, saying competition is good and there is enough for all of us. Interesting concept .

I can go on and on about this business that operates in a whole different approach and set of values than what we know from the high-tech industry. I can go on and on with stories about happy customers and missed business opportunities. It won’t change the basic fact that it is an amazing business, ran by amazing people who do good to lots of families.

This post is dedicated to all the folks out there who believe that business is about the creation of good products and services, and doing good to employees, customers, partners and the communities we live in.

Happy birthday my dear wife.

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IT Financial Management: Where to Start?

July 12th, 2010

Good to be back.

I apologize for slowing down in the last few weeks. I was extensively immersed in an amazing flow of new customer engagements, a new version moving to QA and lots of company foundation work that really bumped us several levels ahead, enabling response to the growing demand in the market. Stay tuned!

On a separate subject and more on a professional aspect, I am being asked by customers again and again, “Where to start with IT Financial Management?” Well, here is a quick maturity road map we have developed for organizations to follow when starting down the path of IT Business Management.

Phase 1 – Understand & Communicate TCO of IT Services

• Create a cost model for highest cost applications. Mostly use percentage allocations in the cost model.
• Provide cost visibility to selected business units.
• Compare to industry or internal benchmarks.
• Data: general ledger, timesheets, blended rate for labor, invoice breakdown from external service providers, industry benchmarks.

Phase 2 – Plan and Track IT Budget, Optimize IT Cost

• Expand cost model to additional applications and new business and technical services.
• Introduce more and more usage-based cost allocations.
• Establish a formal budget and demand planning process based on service-based costing.
• Provide cost visibility to all business units and involve all business units in budget planning.
• Define and compare various what-if and forecasting scenarios.
• Consider selected cost optimization approaches as possible scenarios, e.g. server consolidation.
• Compare actual to plan on a monthly basis and re-forecast.
• Data: service usage, CMDB, utilization.

Phase 3 – Optimize IT Demand Through Chargeback

• Define cost model for majority of IT services.
• Move most of cost allocations to usage-based.
• Set service unit rates and publish a price list.
• Establish a formal chargeback process. Produce monthly IT bill for business units.
• Track cost recovery margins.
• Increase the number of evaluated cost optimization approaches.
• Data: currency conversion table

Best served cold and built one at a time!

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