Rafael Sosa’s Weblog

As I become aware of efforts to create technological platforms or to mechanize operations, the dominant theme across the board seems to be the lack of understanding of the evolution in IT resources and the dramatic cost reductions it offers to enterprises looking to create or manage their IT departments. One possible explanation for this is the chasm that exists between management (business educated), IT engineers (university educated), and current technology. Management appears to have been taught that IT is expensive, complicated, and incomprehensible to all except IT engineers. College educated IT engineers, on the other hand, appear to have been trained and polished in programming languages that were hot five to ten years ago. Current technology, however, has migrated mostly to the cloud and developed the tools and solutions necessary for most small and medium sized organizations, in order to allow them to create their projects on top of the cloud for a fraction of the original cost.

As such, the current modus operandi of small to medium businesses seems to be circumscribed to the acquisition of local technology consulting resources, oftentimes headed by IT engineers who hold on to the retrograde assumption that IT platforms must still be programmed from scratch and deployed in local (and oftentimes expensive) server farms. This presents three mayor costs – 1. Time from conception to deployment rises by a factor exponentially higher, relative to current pre-packaged cloud solutions; 2. As a result, monetary cost of the project also increases drastically; 3. And third, because the solution is custom programmed on the spot, operational and security bugs pose a continuous inconvenience, risk, and recurring cost and dependency on patches, which can render the IT project obsolete in a short period of time or exorbitantly costlier across time.

To visualize this conundrum, let us see an example of a real project currently being launched for a medium sized business, whose name I will not mention for obvious reasons. They are in the service industry and currently run a proprietary software solution that has been customized to serve their HR, CRM, and accounting needs. The solution runs in a local server farm, hosted at company headquarters, managed by the company’s IT office and assisted by the external consulting expert. Apart from being highly sophisticated, making it impossible for most users to make any use of most of the features the software has, the software is in continuous needs of interventions by the external consultant and of periodic upgrades. To get an idea of cost, the price tag on the next upgrade is a little over $1 million.

It is unquestionable that such software was the obvious and right choice at the time of its deployment, nearly ten years ago; but to continue investing in that solution now is pure economic madness and an evident example of complete ignorance in the current state of technology. For one, there is an enormous cost in the daily operation of maintaining the servers up-to-date. Then, there is the huge upgrade price tag, which usually comes around every two years. And to top it off, the software still requires constant support from outside consultants. A modest estimate in dollar costs for this project is around $1 million per year.

The Cloud is here to Stay

Cloud solutions are real, they have been with us for several years now, and they are not just the future of IT – they are the present. Similar HR, CRM and accounting solutions are already available through SaaS and PaaS solutions. Such alternatives represent clear benefits that outmatch those of local IT deployments in almost all of the times. Companies like Salesforce.com, one of the pioneers in this industry, revolutionized the software industry years ago, yet very few recognize it. Many IT engineers are trained in programming locally and have turned a blind eye in the reality of current IT solutions. And it is perhaps because they have failed to learn the single most important lesson in IT, and that is that a year in technology is equal to 10 years in any other industry in terms of change. Ferociously fast change is the only constant in technology. This means, that whatever you thought was best five years ago, it is most likely obsolete or highly inefficient by now.

And so, going back to the million dollar yearly operation of the midsized business IT department, that same operation can be ran on Saas and Paas solutions for less than $250,000. Aside from the economic benefits, there are the benefits of generally higher uptimes and lower costs in IT equipment purchases and maintenance, since users can run on thin clients.

To sum it all off, if you are a medium or small business, you should push your IT consultant to find a ready-made, cloud-based solution that fits your needs, rather than spending the time and money having a custom program developed for you. The cloud solution will upgrade itself without your business having to invest any further resources, and you can increase or migrate into larger or different solutions as your needs change, only paying fractionally more as you grow.

In the end, I like to compare the current change in IT to that of a car. Asking for someone to build you a platform and program you custom software to meet your IT needs is like asking an engineer to build you a car, because you need to get from point A to point B, when instead you should be shopping around to buy the best car that fits your needs.