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Lean and Mean IT Budgeting for the Shaky Economy

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The financial page is no fun to read these days for anyone. The 2008 housing market forecast is grim warning of an even longer slump than first predicted, with double digit drops in real estate prices anticipated in many areas of the country. Oil is trading above $90 a barrel, which a few years ago would have been considered apocalyptic for the economy. The Federal Reserve is shoring up a nervous banking industry’s shaky credit market. And 2007 was definitely the year of the Bear for stock markets, leaving lots of unhappy investors with battered portfolios. What happens on Wall Street, unfortunately, doesn’t stay on Wall Street. The year 2008 could easily turn Main Street into Pain Street. This means businesses of all size — especially smaller, younger businesses — could soon find themselves looking to downsize their spending fast for survival. If and when that happens, every area of the business will be under scrutiny for cost-cutting and proving its return on investment (ROI). Why IT is a target Because IT is typically one of the biggest chunks of the operating budget, it’s also one of the biggest and most obvious targets when it comes time to get lean and mean for hard times. “IT spending is highly dependent on economic conditions. Our survey data indicates that IT executives have already scaled back their expectations for IT spending increases in 2008,” says Frank Scavo, president of Computer Economics based in Irvine, Calif. Another attraction to slashing the technology budget: most IT departments don’t have their own revenue streams to bolster. Typically they don’t make money; they save money. This is actually more valuable to a company’s bottom line. Companies pay taxes on money they make, but not on the money they save. That $100,000 in new revenue may net only $70,000, for example. Saving $100,000 means $100,000 less taken away from the company coffers. Where to start That being said, here are some tips to save by cutting back IT expenses: Don’t start anything new. This includes avoiding new projects or implementing new technologies or applications. The biggest new commitment to avoid, however, is people. “Each organization is different, but regardless of the company size, the largest single line item in the IT budget is personnel. For some companies, this might mean delaying a planned increase in full-time headcount. Instead, rely on outside contractors to provide needed services on an as-needed basis,” says Scavo. Make do with technologies already in place. Just because the technology industry wants businesses to upgrade their software and hardware approximately every three years, doesn’t mean it’s necessary. Gregory Nelson, a technology advisor for startups and chairman at SCORE in Naples, Fla., advises businesses to save money by avoiding operating system upgrades, like Microsoft Vista or Apple’s OS X. He also recommends boosting the efficiency of PCs around the office by spring cleaning their hard drives. Run more routine maintenance chores, like defragmenting and uninstalling applications that aren’t being used. Get a little more speed out of your computers and there’s less need to buy new ones for awhile longer. Bargain shop for the necessities. Both hardware and software don’t hold their original retail prices for very long. Look at the eight gigabyte iPhone, for example, that started at $599 when it was released in June of 2007 and dropped down to $399 three months later. Wait for the big price drops that inevitably come after a new version has been out for awhile and perhaps already been supplanted by an even newer version. “A top-of-the-line high speed wireless router goes for triple that a reliable medium speed router goes for and for many companies it will do just as good a job,” points out Nelson. Play hardball with technology vendors. “Look at equipment that is coming close to end-of-lease. Does it still have useful life? Know the fair market value for that equipment and go to your leasing company with an offer. Leasers really do not want to take back equipment, if they can avoid it. You may be surprised at what they’ll take,” says Scavo. Look for hosted solutions and outsourcing opportunities. Especially for smaller businesses, it’s often cheaper to just outsource certain jobs like short-term projects and tech support. This might also be the year to hand over applications like CRM to a company like Salesforce.com that can host and manage it much more cheaply than dedicated staff in-house. What not to cut For business owners who may end up needing to quickly cut back their IT spending this year, it would be wise to do so with a scalpel and not a chainsaw. There are some technology expenses that are definitely expendable, but IT has its sacred cows. Slaughtering those areas could mean slaughtering the business itself. Here are some areas to protect from the bean counters: Security. No matter how tight the budget gets, no company can afford to compromise on network security. Firewalls, antivirus software and spam blockers are only as good as their last patch or upgrade. If a business doesn’t keep up with the latest upgrades, it makes itself vulnerable to attacks or data breaches. The severity of financial consequences far outweighs any savings. Business critical software. Its one thing to take a pass on the latest version of PowerPoint. Book-keeping software, for example, is another matter. Any application that the business itself relies on to run its daily operations must be kept up to date. “This could be software that needs upgrading to remain on a service contract. Or, for example, database software that houses mission critical data needs to be kept at a release level that is supported,” says Nelson. Licensing agreements. It’s a tempting thought to just let them lapse and keep using the software. Don’t even consider it. It puts the company under a tremendous liability. The potential risk of damages, both financial and to the company’s reputation is staggering.

Breathe New Life into Your Old PCs

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Compared to years past, personal computers are dirt cheap. Ten years ago, the big pricing breakthrough came with the era of the “sub $1,000” computer. Now, that’s the mid-range price point between the high end models that start at $1,500 and up and the increasingly more common sub-$500 PC. So why would a small or mid-sized business owner even give a second thought to just upgrading the company’s computers? Two reasons come to mind. First, the economy is shaky and uncertain. Second, while a $500 computer may sound like a matter for petty cash, it adds up fast when it’s multiplied by dozens, if not hundreds of employees. Computer experts like Dan Gookin, author of PCs for Dummies give the average computer an expected lifespan of four to six years before requiring replacement. For those business owners watching their bottom line closely these days, here are some tips to stretch those PCs from four years and closer to six. Gookin recommends taking the following steps: Get an external hard drive. They’re plentiful and cheap, costing as little as $150 for five gigs. “The idea is you want to back up your stuff. The hard drive is usually the first thing to go or wear out. So if you’re pushing the limit with the hard drive, you better keep that safety copy of your data,” says Gookin. Add more memory. Memory, too, is cheap and for a small investment of perhaps less than $100, a slow moving desktop can work a lot faster making an employee’s time more productive. Gookin also points out that memory for older PCs are inevitably cheaper than when it was first purchased. That makes a good case to upgrade memory as you need it and not pay top dollar for it up front upon purchase. Dust bunnies are not a computer’s friend. At least once or twice a year, turn off the PC, remove the hood and check out the dust that has accumulated inside. Dust insulates the tower making it hotter inside. It also blocks up vents (which also increase the heat inside). Overheated computers burn out and don’t last as long. Blow out the dust with an air cannon, but don’t stop there. Make sure you use a mini vacuum to suck it all up, as well, so it doesn’t just resettle somewhere else within the hardware. With apologies to Al Gore, leave the computers on at all times. “This is a controversial one,” admits Gookin, who argues turning computers on and off dramatically changes the range of temperatures inside the box. Cycling heat and cold naturally causes parts to expand and contract. It stresses the solder joints, loosens chips, connectors and expansion cards and can even cause parts to crack and break over time. Avoid software upgrades. How badly does the employee need all the latest bells and whistles on Office 2007, for example? Newer versions of software often require more memory, faster chips, and perhaps even an upgraded monitor or graphics card for optimal use. “Minimum requirements listed on the software packaging don’t mean it will necessarily run on your computer, just crawl,” says Gregory S. Nelson, a technology advisor for small businesses for SCORE out of the Naples, Florida office. Routine maintenance Business owners know it’s time to bite the bullet and buy new computers when the old ones either no longer work or work so slow lost productivity becomes a greater expense than just buying a new system. While adding more memory is the most obvious way to speed up the older machines around the office, there are other relatively simple maintenance checks that will pump up your PC’s, as well. Clean up the registry editor. You know it’s bad when you hit the on button in the morning, go down the hall for coffee, check the mail, say good morning to your colleagues, return to your desk and the operating system is still booting up. Chances are the computer has too many programs in the registry editor firing up during boot up and thus slowing down start-up. How-to: “Purging out all the unnecessary programs starting up along with your computer is not for the faint of heart,” says Nelson. This is a time to definitely leave it to the IT person or at least use a software program to do the heavy lifting. The way to find the registry editor (on Windows) is to hit “Start”, then “Run.” Type in “regedit” and hit okay. On the left side of the pop-up screen there’s a long list of options. Buried in that list are all those programs that are set to boot up along with the operating system. Also, uninstalled software tends to never be completely uninstalled. Remaining files are typically hiding out in the Registry Editor waiting to be cleaned out. Defragment your hard drive. Think of all those thousands of files sitting on your hard drive as books sitting on a shelf. A file gets used and then re-shelved back with the others not quite as tightly packed in and with tiny gaps left between each one. “Defragging” the hard drive means taking out those fragments or gaps between files, similar to pushing all the books back together tightly on a shelf leaving more room on the shelf for future additions. How-to: This is a task just about anyone can do. Click on “Start,” then “All Programs,” “Accessories,” and then “System Tools” where disk defragmenter is on the drop down menu. Click on it. A pop-up screen offers two buttons: analyze and defragment. The analyze button will quickly give you a report on the need to defrag and what programs have the most fragments. “Even when it recommends defragging is not necessary, sometimes it helps anyway,” says Nelson. Nelson says e-mail is usually the biggest culprit for generating fragments. If any area is over a thousand fragments, go ahead and defragment. When you do buy Eventually, all businesses have too. Again, the maximum lifespan to expect out of any PC is about six years. So when that day arrives: invest in desktops where it makes sense. Laptops get more wear and tear faster due to their portability. 

The Right Way to Respond to a Data Breach

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Gregory S. Nelson, a volunteer SCORE counselor in Naples, Fla. who advises small businesses on technology issues, had his own technology issue in recent months with an online purchase after buying some additional memory for his computer. After making the purchase, he was notified by the online retailer it had been hacked exposing his purchasing information. “They did all the right things. They sent me a letter telling me when it had occurred. They hired a credit watch company to watch over my account for a year and even sent me monthly updates to let me know if there had been any suspicious activity,” Nelson says. “You know, you get annoyed when something like this happens. But at the end of the day, they did everything possible to correct it. Would I buy from them again? Yes, I would.” What’s the moral to the story? Experiencing a data breach isn’t the kiss of death for a business. It’s the immediate response in the aftermath that will make or break the company. Develop an incident response plan “Stop it, contain it, and control it,” says Ben Rothke, a senior security consultant from the security firm BT INS, outlining the first critical steps. Rothke offers the following advice to patch up the leak and patch up any problems that may come as a result of the leak with customers or employees. Data leaks happen to all types of organization. No size business – large or small — is immune. A business owner can’t assume it’ll never happen to his or her company. Think “when”, not “if,” and draw up an incident response plan before your business suffers a leak. If it’s already too late, here are some steps to follow in the event of a data breach: Find a data breach specialist: Is there anyone on your IT staff that can handle a data breach? If not, have a security specialist handy in the company rolodex. It may be that more than one consultant is needed: someone to pinpoint the leak and plug it and someone else to assess the damage done and implement fast changes to prevent it from happening again. “Surprisingly, a lot of companies don’t take any action to prevent another breach. It’s like they believe it happened once, it can’t possibly happen again,” says Nelson. Assess the damage: First assess what data was compromised and how bad is the damage. “Disclosure can actually be counter-productive, if no one is really compromised. Not all breaches are created equal,” says Rothke. If the breach was potentially harmful exposing customers, for example, then take a page from Nelson’s experience with his online retailer. Send out a letter of explanation. Invest in ways to undo or prevent any further damage. Make the information public and easy to access like on the company website. Come clean:Remember Nelson’s experience with the memory seller? It was the full and immediate disclosure that turned a bad situation into an opportunity to build a more loyal and trusting customer for future purchases. Take corrective steps: Affected parties and the public need immediate reassurance the business is making this a top priority and taking steps to prevent it from ever happening again. It is unlikely you’ll be forgiven a second time, if your clients get compromised again. Try to limit the fall out:Call in the experts to contain and monitor the damage. Update security policies more frequently; at least once, if not twice a year. Customize those policies, along with the response plan, to target and best protect the most sensitive data. Conclusions A data breach is more than an IT problem. It’s a company wide crisis and needs to be handled that way. Whether they come from in-house or out-of-house, the IT professionals need to be supported in what they do and directed that fixing it is top priority. Since it is also a communications crisis, it needs to be handled like any other crisis management issue, involving public relations specialists and possibly media spokespeople. Finance and accounting need to assess the monetary damage, as well. Most importantly, those affected need to see leadership at the top step up and offer honest, public transparency about what’s being done. SIDEBAR: Other tips to get any business through a data leak Call the cops! “Get the ball rolling and file a police report, maybe even contact the FBI,” says Nelson. Nelson contends that’s the first important step in establishing that the company is taking full responsibility for the problem with immediate action. Lock down data where possible. Rothke recommends archiving data that is rarely accessed into a safer place. “Data is increasingly portable. Establish some security controls to make it more difficult to move it around. Not every employee needs to have their USB ports enabled. Have them sign non-disclosure agreements and get trained in what kinds of data are especially sensitive,” says Rothke. An IT department can do a lot to secure data, but it won’t help if an employee reveals too much by phone or email. Limit access to the system. For some employees, it’s best to limit the size of their e-mails. A 20 megabyte e-mail is quite large and filled with proprietary information can do a lot of damage getting out to the wrong person. Shut down the system at odd hours like the middle of the night or on the weekends for non-essential employees. Limit the size of outgoing e-mails, depending on the user’s needs. While a graphics designer may need 20 megabytes to use on a single e-mail, chances are most employees who just shuffle around text documents all day don’t need more than five megabytes for e-mail.

Upgrading to a Database

You know it’s time for your business to upgrade to a database when: Spreadsheets aren’t enough to organize the growing amounts of electronic data anymore, it’s hurting business and clients are screaming for change. The advantages of replacing stand-alone programs outweigh the time and expense of switching to something new. In this age of hackers, viruses and identity theft, it’s not safe for people to keep valuable information on desktop or laptop computers. No matter what the reason, even the smallest business can benefit from upgrading to a database to centrally collect and manage vital company information, according to analyst and industry experts. First introduced in the 1970s, relational databases consolidate and store information in tables that can be shuffled and reshuffled myriad ways, helping companies better track diverse data such as sales transactions, inventory and customer profiles. Plethora of products Today, small businesses have a wealth of database types and vendors to choose from, including: Low-cost solutions like Microsoft Access, part of the Office product suite, or Filemaker Pro from Filemaker. Open source products like MySQL or the Base database fromOpenOffice.org. Software-as-a-service offerings such as InternetOffice.biz. Entry-level enterprise database software from industry leaders such as Oracle, Sybase and Microsoft But don’t put the cart before the horse. The first step in a database upgrade isn’t picking the software. It’s deciding what you’re going to use it for, who’ll be using it, and how far it has to scale as your company grows, says Noel Yuhanna, a database analyst at Forrester Research in Cambridge, Mass. Once you’ve created the database and know what needs to be moved, automated tools can easily transfer data from existing spreadsheets and other files to the new system, Yuhanna says. With identify theft and other computer-related crimes on the rise, security is another reason companies switch to centralized databases, Yuhanna says. “If someone were to remove files from your desktop or laptop, you might not know about it. Anybody can change a figure and you wouldn’t know it. In a database, you can track that.” Who’s in charge Deciding what you need a database to do might be a group effort, but the job of putting a plan into action typically falls to a select few. At small companies, that might be the most tech savvy person on staff, or a consultant who’s hired for a month or two to get things running and train the staff. Mid-sized companies might need one or two IT people to maintain associated hardware and software, according to Greg Nelson a former software company owner and currently chairman of the Naples, Fla., chapter of SCORE, the small-business advisory group. Costs will vary accordingly, Nelson says. For a small company using Microsoft Access to create a database for 10 people, the costs would be nominal. But a database with 500 users and roll-back capabilities that minimize lost data in the event of a power failure could be $25,000 in software alone, he says. However, any forward-looking company shouldn’t think twice about putting a properly constructed database in place, Nelson says. “Having the right information available at the right time,” he says, “can certainly make the difference between success and failure.”