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Monday, Mar 18, 2024

Virtual Reality

In a struggling economy, business owners are forced to find ways to reduce costs and technology is no exception. Information technology service providers, in turn, find themselves responding to these needs and different requests and inquiries. There already is a trend toward reducing overhead by consolidating servers in a process called virtualization; using hosted applications not requiring software purchases; and co-location of servers, but industry experts said the downturn will speed up acceptance. Where a small business owner may have cast a skeptical eye toward and sat on the fence over these improvements during a strong economy, a stronger reason – saving money – now makes them look at it in a different way. Info Street CEO Siamak Farah made the comparison to a man who has gained weight and finds his clothes a tight fit. “If you see your suits don’t fit you think maybe you need to go to gym now,” said Farah, whose tech company is based in Tarzana. Cutting discretionary costs from a budget is not a difficult decision but computer and server equipment is not discretionary for any business these days wanting to stay in step or ahead of the competition. The tech sector has not been rocked as much as real estate or banking both of which were hard hit by the collapse of the sub-prime mortgage industry and accompanying credit crunch. What Lief Morin, president of Key Information Systems in Woodland Hills, hears from clients is the economic circumstances are not dire. When the economy hit a rough patch in 2002, Key saw IT projects cancelled, whereas today clients are just approaching them more cautiously, Morin said. “The businesses we are interacting with are not viewing this as dramatically as the headlines would suggest,” Morin added. “They are looking to weather the storm.” Farah had a different take. At a private dinner in Los Angeles for corporate heads, he heard anecdotes of how companies must work harder as customers comparison shop for their tech needs. “I know from talking to these CEOs everyone is being squeezed,” Farah said. Outsourcing IT <!– Backups: Co-location sites store, maintain company info. –> Backups: Co-location sites store, maintain company info. The top option for small and medium-sized businesses to cut tech costs is through outsourcing. An outside company can come to a business to maintain its tech infrastructure thus eliminating staff; or having the servers housed and maintained at a remote site called a data center. ISWest, a data center and internet service provider in with two locations in Agoura Hills, receives more inquiries of late about its co-location services. For a small or medium-sized business to have their own server room with a backup generator and a staff person to maintain it could run $150,000 to $200,000, said CEO Drew Kaplan. ISWest provides the same service at a fraction of the cost. In 2007, the firm opened up a second data center with two separate power sources, cooled by more than 200 tons of air conditioning equipment and using a biometric scanner to allow entry. But Morin cautioned that wholesale outsourcing can be risky and must be managed carefully. If done well, it results in a savings, but if done poorly can inhibit growth at a company. The physical hardware isn’t all that can be outsourced. With an application service provider, businesses no longer need to purchase or license software. This model gives a predictable monthly cost for a set number of people to access their e-mail or other programs through a website rather than having it installed onto their work computer. An advantage is the built-in scalability. If a company adds staff no adjustment needs to be made in the hardware they use. In addition, in a slow economic period when layoffs may be required companies won’t find themselves stuck with computers and licenses they won’t be able to use. While that $8,000 piece of equipment seemed like a good purchase it may only be re-sold for a fraction of the price, Farah said. “If you can get yourself out of that business, you save a ton of money and it allows you to maneuver quickly,” Farah said. The staff at InfoStreet finds itself busier these days. The same goes for SADA Systems in North Hollywood, a provider of hosted applications made available through Google. SADA President Tony Safoian is of the opinion that a move toward hosted applications would happen anyway because of the cost savings but that the slow economy is accelerating the process. In the traditional IT model, $8 out of every $10 is spent on maintenance, Safoian said, and if a company can eliminate maintenance costs that leaves more money to meet the business objective. Arnie Friedman, president of CPI Solutions in Camarillo, has been through downturns before and in each instance the company has done well as demand for its services for new software, hosted applications and network management rise. It is curious, however, that business owners tend to become more interested in data protection and consolidating internal systems only when the economy struggles, Friedman said. “For whatever reason they are more willing to listen when things are not good,” Friedman said. Virtual Software Virtualization, or creating more server space through the use of software, is another cost savings measure companies can turn to. Virtualization is also a green strategy as it cuts down on power for the servers and the air conditioners to cool them, said Morin, of Key Information. VMware, the leader in virtualization software, saw its revenues soar 71 percent in the first quarter. “The company is a cost-cutting machine,” wrote Fortune Magazine senior editor David Kirkpatrick in a recent article titled, “Big Tech: A shelter in the storm.” Jim Browning, an analyst on medium-sized businesses for Gartner, countered that he and other analysts find the price of VMware is high because there is no competition and that cost is masked by the savings company realize. But virtualization can lead to a 25 percent to 30 percent reduction in servers for companies, Browning said. Browning outlined other cost-saving measures that businesses can take advantage of. Take equipment maintenance, for example. A review of the maintenance history of a printer or scanner may show it has never needed service and that support can be reduced from a 24/7 plan to a 9-5 plan or even discontinued altogether. A growing field is in telecomm expense management where a consultant reviews the phone bills to find where a company is overpaying, Browning said. That consultant can either do a one-time audit or can stay on to become a conduit between a business and the telecom companies to assure over-payments don’t happen again, Browning said. Businesses also need to keep their networking contracts competitive and not be shy about looking around for the best deal. If the current provider knows a client is shopping around it is not unusual that they will drop their price to keep the client, Browning said.

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