Platt Perspective on Business and Technology

Virtualizing and outsourcing infrastructure – 4: expenses and savings

Posted in business and convergent technologies, strategy and planning by Timothy Platt on April 17, 2011

This is my fourth installment in a series on developing and implementing business infrastructure (see Business Strategy and Operations, postings 127-129) and I turn to one of the most important sets of criteria for determining how to proceed: cost effectiveness. One of the consequences of our emerging system of ubiquitous interconnectivity through ubiquitous computing and communications is that businesses can reasonably and realistically chose between a wider range of business models and still meet their strategic goals and priorities. And I will propose three possible business models here by way of working example.

1. The more traditional model where a business owns or single-user rents its own information management and storage facilities and resources, its own office and supporting physical space and office space equipment for its employees, and so on. And when employees are away, for example working on-site with clients or prospective clients at their physical locations, desk and office space and other resources simply go unused but they are always there and available when and if needed.
2. A temporary availability-as-needed model, where for example a business’ road warriors – its employees who primarily go out to work on-site with clients use transient office space as needed, close to client offices. For information storage and access, and for an increasing range of information processing and application software support this can mean virtualized and cloud-based solutions and that can work very effectively for keeping these road warriors effectively and consistently connected wherever they are working. And in fact that type of third party information service can be used for fixed office and even headquarters support too and this is becoming an increasingly attractive option for more and more businesses.
3. A virtual presence model where even road warriors may meet with at least some clients via web conferencing, telepresence and other means – and not have to travel, perhaps at significant expense to meet face to face except where that would specifically make more sense. For some businesses web conferencing and telepresence can even mean not needing road warriors per se who are always physically away.
4. And of course real world businesses can employ all of these approaches where they would each individually make more sense, and with effective customer impact, information security and a host of other factors adding into their cost-effectiveness calculations along with per square foot office ownership or rental costs, physical travel expenses, etc.

With that, I want to switch focus and turn to the way ubiquitous computing and communications are in effect commoditizing business infrastructure, and I add in this context that this process only begins with cloud computing and the accessing of remote, third party owned and maintained server space and computational capacity. This developing trend impacts on physical space requirements and on scale of resource requirements for anything and everything that would be wholly owned or single user rented in that space. And let’s consider a model case there to help take this out of the abstract.

Let’s assume by way of example that you have a business employee headcount of 156 and that 78 of your people either work on the road meeting with clients or on their feet much of the time, in your showroom, working with in-house clients and stakeholders in their office areas or otherwise away from “their own desk.” Here, “much of the time” means greater than 50% and perhaps for many up to almost full time. Business model one, above would still have everyone assigned their own desk, chair and so on and probably their own desktop computer – often unused. And while some costs to the business will drop simply because these desk areas are unused, most will be unchanged whether the desks are occupied and in productive use or not. Heating and cooling this office space will remain roughly the same in many if not most cases, for example and so will utilities expenses for keeping office areas lit with overhead lights – consider cost effective cubicle areas here where the entire area is lit up if any portion is in active use.

Reducing the numbers of desks needed while still offering every employee the physical support services and resources they need would reduce fixed operating expenses and for this test-case business, that could mean reducing expenses by a considerable amount.

• Floating in-house employees could use kiosk desks where they could wirelessly connect in using their laptops, notebook computers and handhelds.
• Distant employees such as sales and support staff who have to go to client’s offices and facilities could use rental office space where they would be able to connect in through secure, firewall protected networks to your in-house and cloud-based IT systems.
• And they too, could use kiosk desks and other in-house transient work areas as needed when they come back to their business’s offices.
• And well run transient office rental businesses offer receptionist and other personnel support, conference rooms and an attractive environment for when a client has to come into “the office” while a road warrior is working on-site.

For office space, look at cost-effectiveness as a function of cost per square foot of available space, per hour occupied and in use. Similar calculations can be made for desk and other resource availability, where it may be much more cost-effective to have 10 well positioned kiosk desks and a casual work area with tables people can quietly meet at or use their computers from, than keeping 78 largely vacant desks set up and with all of the extra physical space that would require.

When it is possible to connect into the home office or any fixed satellite office of a business and into its information infrastructure easily and securely from anywhere, this makes cost-effective and attractive transient office space provision a very attractive business in and of itself and with a very good potential return on investment. Information access and availability, and in ways that meet real world due diligence and risk remediation concerns makes this industry possible and that in turn opens the door for client businesses to use any combination of the three business models I touched up above, as well as any of several others.

I have been writing here about how information technology can drive cost effectiveness determinations for a much wider range of infrastructure issues that just information management per se. Next in this series I am going to look more closely at information technology itself in this.

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