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Cloud Computing

I am an IT Service provider. I earn a good living by providing IT services for a collection of businesses both large and small. I have also helped 32 other Computer Troubleshooters start their franchise across Canada. Our revenue comes from implementing projects and monthly support of the infrastructure once the project is complete. We have survived the cycles of the IT service provider. There was a time when we made lots of money selling hardware. Then we made lots of money doing virus cleanups and power supply replacements. More recently we have put all our clients onto managed service plans. All of these were great sources of revenue for the honest hard working IT Support provider. But here comes cloud computing. How will the IT Service Provider survive the wave that comes with hosting your entire IT infrastructure with large companies such as Radiant.

The benefits to the customer is immense. You get a team of highly skilled and certified technicians supporting your infrastructure. You pay a fixed monthly cost and little to no upfront capital expenditures. You get an SLA of “four nines” uptime (99.99%) but you still have backups, just in case. Above that, you only pay for what you use. Being that the systems are virtual, if you need 100GB of disk space, you buy 100GB of disk space. If you need another 10GB, 10 more GB are allocated. It is virtual, it is dynamic. But above all this, security. The cloud computing environment is a highly secure environment.

As a service provider recommending that a client build an infrastructure, you simply cannot beat the Cloud Computing sales person who recommends a fully virtual environment. They pitch a far more reliable environment than is possible to build for a client with a limited budget. They will produce spread sheets, projections, graphs etc all showing that the total cost of ownership of virtual environment will save them 50% over the five year life span of the servers you are proposing. And they won’t even bring up soft costs until the end, just to emphasize their cost savings point.

Do we close the doors on our IT Support business and go work for Radiant? Do we close our doors and pump gas? Or do we jump onto the bandwagon and start moving our clients to cloud environments?

The short answer is, don’t panic. Let take a look at the typical one man consultant. The biggest challenge a one man consultant has is “taking the next step”. Typically what we find is that a one person operation caps out at around $4000/month profit. It is hard to do much more than that. Hiring a few outside consultants like a bookkeeper and an answering service can offload some work, allowing that same consultant to reach for $6000/month. Most of the growth is done through referrals and word of mouth, largely because there is no time to do marketing, and frankly, there is no time for more clients anyway. Traditionally, hiring a tech is the next step. This is a very difficult step to take because the profits are entirely eaten up by the tech’s salary, and it takes too long to build the profits from $4000 to $8000 and the banks start to lose their sense of humour.

The other big challenge a one person operation has is skill set. Most consultants can build a computer, install an operating system, setup a server, build a local area network etc. But when it comes to the intricacies of building a wide area network or an exchange server, things can become much more difficult. Then technology changes and we have to re-learn all the things that we learned before, this time for the 2007 version or 2010 version.

Then there is risk management. All consultants like to think they have the best backup solution in the industry. Some might. But on that day when the client calls and says that their server won’t turn on, there is not a consultant out there who doesn’t start getting nervous. Then there are the sleepless nights when you start thinking about a client’s office wondering if their backups are as good as you initially thought because you haven’t tested a restore in 6 weeks. What would happen to the consultants company if one of the clients had a catastrophic failure. Who would get sued in this situation. And it is not just backups. What about a breach in security. What if you have a client storing personal information in a database, and that client has a security breach.

Cloud Computing solves all of these problems and more. The first step is to move a single client onto a cloud infrastructure. This eliminates all the basic day to day work that is involved with supporting that network infrastructure. After the project of moving the client to the cloud infrastructure, sure, your revenue from that client will drop quite substantially. But this drop in revenue will be far less than the cost of hiring a technician. But more importantly, the workload you have for this client has dropped proportionally more than the drop in revenue. If the client was a $1000/month on a managed service plan, but took up 10 hours per month of your time, you are effectively working for $100/hour. If that client then drops to a $600 client, but now only requires 3 hours of your time, you are effectively working for $200/hour. Not to mention a good cloud computing supplier, such as Radiant, will pay you a commission, so your client is actually a $650 client. Most importantly you have cleared up 7 hours per month of time. Within a month of marketing with that 7 hours, you should be able to find 2 new clients who pay you $600 for 3 hours work – effectively bringing your revenues from 10 hours work from $1000 to $1950. You are potentially doubling your revenue by moving clients to cloud computing.

But this only touches on the potential for the consultant. There are two other main factors to consider. The first one is by moving a client to a cloud environment, the work involved at the client tends to become much lower level. Most of the work is desktop type work, as the servers are all maintained in the cloud, and administration work such as adding users. This type of work can be done by a $2500/month junior technician rather than the challenge of finding and paying a $5500/month senior technician. Now your salary costs are cut in half. The second is projects. When a client has an environment that “just works”, they tend to be very happy with their consultant and the trust is built. When trust is established, the client will listen to the consultants for new ideas. As consultants it is our job to find projects that will enhance what we do for the client. This could be a new Phone System that will save them money. Maybe it is a SharePoint site to increase productivity. Perhaps it is a security camera system to decrease theft. The possibilities are endless. The best part about it, projects tend to be far more interesting, and far more profitable.

I do not know many people who got into the computer support business to fix computers. Most saw fixing computers as a step towards running a business. Four or five years later they are still fixing computers. By moving to cloud computing, the computer consultant can start to run a business. It is an opportunity to not only survive the next cycle of IT, but thrive in it.

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