Small Businesses: Good IT Investments for a Bad Economy

My brother is chief operating officer for a real estate company in Manhattan. He's running a small business facing some very familiar challenges: Rising energy prices, unpredictable operating costs, and tenants who are facing rising unemployment.

In addition to those first-hand business challenges, people like him worry about Wall Street's financial mess spilling over into Main Street USA. The flood of bad financial news from AIG, Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers and Merrill Lynch will force small business owners to rethink their financial bets in the months ahead.

Some entrepreneurs may wind up cutting their IT budgets in order to conserve cash. Fact is, they don't want surprise bills for emergency server repairs or break-fix services.

A Smarter Strategy
Instead of saying no to new technology investments, my brother is pursuing a far wiser IT strategy. He's reaching out to so-called managed service providers (MSPs). Generally speaking, MSPs charge a predictable monthly fee for ongoing network and system maintenance.

In many ways, my brother believes in the emerging Business Technology as a Service (BTaaS) mindset. The idea is to outsource as much of IT as possible to drive the business forward.

Start by transitioning on-site applications to the software as a service (SaaS) business model. Explore so-called Hardware as a Service (HaaS) approaches, where your physical infrastructure (servers, printers, PCs, laptops, etc.) is owned and operated by your service provider. Push your antiquated PBXes out the door and embrace hosted voice-over-IP (VoIP) services.

Simply put: Whenever an IT consultant or integrator tries to sell your small business a new IT product, ask if you can evaluate an outsourced alternative instead. Avoid big lump-sum costs, and pursue predictable monthly fees. And shop around to see how the fees and service level agreements (SLAs) vary from MSP to MSP.

Calling for Help
My brother is starting to pursue the so-called BTaaS strategy right now. When his company's IT help desk bills mounted, he reached out to me for advice. I told him it was time to treat his technology infrastructure the same way he'd treat his cable bill or cell phone service: Get a fixed-fee monthly service.

He started by investigating the MSPmentor 100, which tracks some of the world's top managed service providers. Yes, that's a shameless plug for a Web site I run as part of my day job. But my brother found the list valuable, and he's now in discussions with a few MSPs to nail down a service contract that involves predictable monthly fees.

You Can't Ignore IT
As a small business owner myself, I know now is not the time to cut my IT budget. Rather, now is the time to reallocate my IT budget. Aside from our basic network infrastructure, PCs and printers, our company doesn't purchase any IT assets.

The bulk of our business innovations -- and IT investments -- are directed toward our hosted Web sites. Our monthly IT service fees are built into our annual operating budget. With a few rare exceptions, there are no surprise IT costs.

That approach provides peace of mind -- for my small business, and soon for my brother's small business -- especially as the economic storm swirls around us.