A Business Case for Sharing

We blogged about sharing services in a decentralised business context recently, and explained why we think why these should be IT-Based for speedy delivery. This is not to say that all shared services projects worldwide have been resounding successes. This is often down to the lack of a solid business case up front. We decided to lay out the logic behind this process.

Management Overview ? The overview includes a clear definition of why the current situation is unacceptable, the anticipated benefits of sharing, and an implementation plan were it to go ahead. The project should not proceed until the stakeholders have considered and agreed on this.

Alternatives Considered ? The next stage is to get closer to the other options in order to determine whether an alternative might perhaps be preferable. Substitutes for shared services are often doing nothing, improving the current method, and outsourcing the service to a third party.

The Bottom Line in Business ? Sharing services comes at an initial cost of infrastructure changes, and the impact on human capital (the latter deserves its own blog). The following need careful consideration from the financial angle:

Numbers to Work Through

  • Manpower to design and roll the project out in parallel with the existing organisation.
  • Capital for creating facilities at the central point including civil works, furniture and equipment and IT infrastructure.
  • The costs of travel, feeding and accommodation. These can be significant depending on the time that implementation takes.
  • The opportunity loss of diverting key staff – and the cost of temporary replacements – if appointing line staff to the project team.
  • Crystal-clear project metrics including (a) the direct, realisable savings (b) the medium and long-term effects on profit and (c) where to deploy the savings

Risk Management

Shared services projects don’t go equally smoothly, although planning should reduce the risk to manageable levels. Nonetheless it is important to imagine potential snags, decide how to mitigate them and what the cost might be.

We believe in implementing shared services on a pilot basis in the business unit that eventually provides them. We recommend building these out to other branches only when new processes are working smoothly.

Moving On From a Decision

We recommend you revisit your management overview, the logic behind it, the assumptions you made, and the costs and benefits you envisage before deciding to go ahead

The final step in proving a business case is doable should be fleshing out your roadmap into a detailed operations plan with dependencies on a spreadsheet.

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FUJIFILM Cracks the Energy Code

FUJIFILM was in trouble at its Dayton, Tennessee plant in 2008 where it produced a variety of speciality chemicals for industrial use. Compressed-air breakdowns were having knock-on effects. The company decided it was time to measure what was happening and solve the problem. It hoped to improve reliability, cut down maintenance, and eliminate relying on nitrogen for back-up (unless the materials were flammable).

The company tentatively identified three root causes. These were (a) insufficient system knowledge within maintenance, (b) weak spare part supply chain, and (c) generic imbalances including overstated demand and underutilised supply. The maintenance manager asked the U.S. Department of Energy to assist with a comprehensive audit of the compressed air system.

The team began on the demand side by attaching flow meters to each of several compressors for five days. They noticed that – while the equipment was set to deliver 120 psi actual delivery was 75% of this or less. They found that demand was cyclical depending on the production phase. Most importantly, they determined that only one compressor would be necessary once they eliminated the leaks in the system and upgraded short-term storage capacity.

The project team formulated a three-stage plan. Their first step would be to increase storage capacity to accommodate peak demand; the second would be to fix the leaks, and the third to source a larger compressor and associated gear from a sister plant the parent company was phasing out. Viewed overall, this provided four specific goals.

  • Improve reliability with greater redundancy
  • Bring down system maintenance costs
  • Cut down plant energy consumption
  • Eliminate nitrogen as a fall-back resource

They reconfigured the equipment in terms of lowest practical maintenance cost, and moved the redundant compressors to stations where they could easily couple as back-ups. Then they implemented an online leak detection and repair program. Finally, they set the replacement compressor to 98 psi, after they determined this delivered the optimum balance between productivity and operating cost.

Since 2008, FUJIFILM has saved 1.2 million kilowatt hours of energy while virtually eliminating compressor system breakdowns. The single compressor is operating at relatively low pressure with attendant benefits to other equipment. It is worth noting that the key to the door was measuring compressed air flow at various points in the system.

ecoVaro specialises in analysing data like this on any energy type.?

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A Small External Enterprise Development Team is Cheaper than Your Own

Time is money in the application development business. We have to get to market sooner so someone else does not gazump us, and pip us at the post. We increase the likelihood of this with every delay. Moreover, the longer your in-house team takes to get you through the swamp, the higher the project cost to you.

Of course, in theory this should not be the case. Why bring in a team from outside, and pay more to support their corporate structure? Even going for a contract micro team ought not to make financial sense, because we have to fund their mark-up and their profit taking. Our common sense tells us that this is crazy. But, hold that thought for a minute. What would you say if a small external enterprise development team was actually cheaper? To achieve that, they would have to work faster too.

The costs of an Enterprise Internal Development Team

Even if you were able to keep your own team fully occupied ? which is unlikely in the long term ? having your own digital talent pool works out expensive when you factor in the total cost. Your difficulties begin with the hiring process, especially if you do not fully understand the project topic, and have to subcontract the hiring task.

If you decide to attempt this yourself, your learning curve could push out the project completion date. Whichever way you decide to go, you are up for paying advertising, orientation training, technical upskilling, travel expenses, and salaries all of which are going to rob your time. Moreover, a wrong recruitment decision would cost three times the new employee?s annual salary, and there is no sign of that changing.

But that is not all, not all by far. If want your in-house team to keep their work files in the office, then you are going to have to buy them laptops, plus extra screens so they can keep track of what they are doing. Those laptops are going to need desks, and those employees, chairs to sit in. Plus, you are going to need expensive workspace with good security for your team?s base.

If we really wanted to lay it on, we would add software / cloud costs, telephony, internet access, and ongoing technical training to the growing pile. We did a quick scan on PayScale. The median salary of a computer programmer in Ireland is ?38,000 per year and that is just the beginning. If you need a program manager for your computer software, their salary will be almost double that at ?65,000 annually.

Advantages of R&D outsourcing

The case for a small externally sourced enterprise development team revolves around the opportunity cost ? or loss to put in bluntly ? of hiring your own specialist staff for projects. If you own a smaller business with up to 100 people, you are going to have to find work for idle digital fingers, after you roll out your in-house enterprise project. If you do not, you head down the road towards owning a dysfunctional team lacking a core, shared objective to drive them forward.

Compared to this potential extravagance, hiring a small external enterprise development team on an as-needed basis makes far more sense. Using a good service provider as a ?convenience store? drives enterprise development costs down through the floor, relative to having your own permanent team. Moreover, the major savings that arise are in your hands and free to deploy as opportunities arise. A successful business is quick and nimble, with cash flow on tap for R & D.

The Future of Cloud Backup and Recovery

We came across a post on Docurated that pulled together thirty-seven suggestions for the top cloud storage mistakes user companies make. Given that cloud storage seems to be the best backup solution for now at least, we decided to turn these ideas around to sense the direction cloud backup and recovery needs to take, if it is still to be relevant in say ten years? time.

Has Cloud Storage Largely Saturated the West?
It probably has. Outside of major corporates who make their own arrangements ? and SME?s that use free services by email providers ? the middle band of companies in Europe and America have found their service providers, although they may have never tested the recovery process, to see if it works.

The new gold rush in the cloud backup and recovery business is, or should be emerging markets in Asia, Africa, South America, and the Middle East. There, connectivity is brittler than over here. To be relevant in these fragile, more populous areas our cloud backup and recovery industry need to be more agile and nimble.

? It must provide a simpler service emerging commerce can afford, refresh its user interfaces in third world languages, have more accessible help, and be patient to explain how cloud storage works to newbies. In other words, it must source its call centre operators in the areas it serves.

? It must adapt to local connectivity standards, and stop expecting someone with ADSL broadband to keep up with cloud server networks running at up to 1GBPS compared to their 10MBPS at best. For user sourcing and retention purposes, these new cloud backup and recovery services must be the ones who adapt.

? It must facilitate disaster recovery simulations among its clients in calmer moments when things are going well. Are they backing up the right files, are they updating these, and are their brittle ADSL networks able to cope with their cloud service providers? upload and download speeds?

? It must develop lean and agile systems slim enough to accommodate a micro client starting out, but sufficiently elastic to transfer them seamlessly to big data performance. The Asian, African, South American, and Middle Eastern regions are volume driven, and individual economies of scale are still rare.

? It must not expect its users to know automatically what they need, and be honest to admit that Western solutions may be wrong-sized. Conversion funnels in the new gold rush are bound to be longer. Engagements there depend on trust, not elevator sales letters. Our competition in these countries already works this way.

? It must be honest and admit cloud storage is only part of the solution. To recruit and retain users it must step back to 1983, when Compuserve offered its customers 128k of disc space, and spent an amount of effort explaining how to filter what to put there.

Cloud Storage of Data is Only One Part of the Solution
Governance reports and stock certificates burn just as easily as do servers in a fire. We must not transfer bad habits to exciting new markets. We close this article with the thoughts of John Howie, COO of Cloud Security Alliance, as reported in the Docurated post we mentioned, and these apply across the globe, we believe.
There is no single most important thing to carry forward into the future of cloud backup and recovery. We must be mindful when moving data that this can be fragile too. We must also create layers of backup the way insurance companies re-insure, that make any one cloud backup and recovery business redundant if it happens.
We hold the trust of our customers in our hands but trust is delicate too. We must cease trying to make a pile of money quickly, and become more interested in ensuring that data transferred back and forth is synchronised. The cloud backup and recovery industry needs only one notorious mistake, to become redundant itself in the ten years we mentioned.

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