What Does it Cost (Part 2)

November 19, 2010

Your People and How They Relate to Your Infrastructure

If you read my previous blog, “What Does it Cost (Part 1) - The Overview,” you may be interested to delve deeper into the conversation and math behind how all of this adds up. Essentially asking yourself “is it better to build infrastructure yourself?” is a good thing and you will inevitably try to ask yourself what does it cost to do so versus looking into “what would it cost to have SoftLayer do this for me since this is what their core competencies reside in?”.

Remember that one of the big lessons we can learn and that I re-learned at the conferences I attended is that your people are your biggest assets. This lesson is showcased and repeated several times and for good purpose, since this seems to be a time tested rule. While your people are a biggest assets they can also easily be one of your biggest costs especially if they are not managed properly. Every business should have a growth model but one thing that can hold you back is the cost of growth (or your growing pains).

Think about the amount of people you need when you run everything inside and what that will wind up costing. If your business, network, and uptime are all mission critical you’ll also need to take into consideration the number of people needed to make sure a facility is 24*7. You will need someone to fix a drive that brakes and needs to be replaced at 3:42AM, won’t you? Take the number of people that you think you’ll need and now consider what would happen if you were to double in size in a single year (or you could use your own timeline in your head). Would you need double the people or possibly more when you consider the needs of managers to make sure everything was in line with your business strategy? What would the cost be that you would need to pay when considering more than just their salaries.

Think of the other things that do not jump out at you immediately like taxes, insurance, a 401K plan, office space, other liabilities, etc. Gary Kinman (VP of Accounting and Finance) estimates that the cost of each additional employee is about 15-20% more than just the cost of their salary without including things like office space. This is one of the biggest aspects often overlooked, because it not only takes new people you would need to hire, but how it can monopolize time and production you would get otherwise from people you already have on staff.

Now, if you remember from part one I mentioned how Opportunity Costs are some of the biggest costs in the differences between how SoftLayer can help you versus doing things yourself. If you reverse the previous scenario and say that after you’ve just doubled in size there is a bust in the economy which causes you to have to contract. For starters the easiest way to cut back on spending is in people, so you may have to lay people off and ultimately make you the bad guy. Now here is where ugly gets really gruesome.

If you talked yourself into how cheap it can be to buy and do everything yourself you are in a real tight spot because now you may not have the necessary people to run all of your infrastructure, or in an even worse case scenario you may not even need it. What this spells out is that you keep something that cannot be used even though you are paying for it, and you had to let people go just to keep the rest of the boat afloat. Didn’t we say that our people are our most important asset earlier? You can’t always know what kind of worker someone will be when you hire them or how things will work out, but you do want to put yourself in a position to keep the good ones that you trust to push your business forward around and happy.

All right, that is enough doom and gloom scenario. Let’s look at this subject from another angle. As you grow in size generally everything you have and everything you use will grow right along the company. We covered the fact that it will probably become more and more obvious that you’ll need more people to do the work for your business. Hiring systems administrators, DBAs, and development staff can all be good moves that would impact your business specifically; however, are you putting them in the best position for them to be successful? Have you ever seen that show “Undercover Boss”? It seems that in a lot of the episodes you would see that a CEO was not cut out for doing a lot of other jobs in the company and would have a much greater appreciation of everyone who did all of those jobs and how hard they work. Sometimes they would have comments about if they were really trying to get that job they wouldn’t last long. Keep that thought in mind when asking these same Sys-admins, DBAs, and development staff to do jobs that they do not specialize in.

Taking your people in positions where they may get a grade of an “A” or a “B+” and putting them into different positions where they may get a “C-“, “D”, or even an “F” will not likely be good for production levels, decrease levels of morale, and will also likely tank the investment value made in the employees themselves and/or the infrastructure you purchase.

Bottom line is that the way the world is evolving is to work smarter, lessen risk, and (in drawing back to part 1) get more out of having less. The best way to avoid unnecessary risk is to not overextend yourself in the first place, and to stay in a position of flexibility so that you can react and adapt to the market around you. This is what SoftLayer is built for; keeping you with the most options in order to increase your ability to innovate and execute without sacrificing any level of control and without costing large sums of upfront capitol.

I am guessing that about 9 times out of 10 if you take the time to sit down and do the math it all makes perfect sense.

-Doug

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