Kennedy Technology Group Weblog!

Time is running out — Gain bottom line tax savings for your business

If you're still pondering whether to release that PO for new computing hardware here’s some news that may help.  There may be remaining tax savings available in 2008 that can mean real cash in your bank account today, and savings forward.

The 2008 U.S. Economic Stimulus legislation signed into law earlier this year was not just for individual citizens.  Also provided were accelerated depreciation provisions that greatly benefit small businesses. Example uses for your business include the purchasing (and immediately expensing of) new capital hardware and software.  But the equipment must be put into use by 12/31/2008!

How does the stimulus package work?

1. Businesses can expense up to $250,000 in property and equipment purchased in the 2008 tax year (the 179 Deduction), yielding real tax savings:

• Business results – tax savings effectively subsidize the purchase of new hardware and software to reap the benefits of virtualization and consolidation – including reduced operating costs and faster ROI.

2. Write-off capital acquisitions faster with two additional deductions:

• Special depreciation allowance allowing businesses to write off 50% of what you paid for property acquired and placed into service in 2008.
• In addition to the first 50% deduction, you can take a write-off on the normal first year depreciation for the remaining 50% of what you paid for the equipment in 2008.  Given the depreciation rules, this results in 60% depreciation immediately.

Example investment:

Using $50,000 to invest in new server computing hardware, the financial impact would be $30,000 ($50k * 60%).  In a 33% tax bracket that means $10,000 in cash savings immediately. 

Then the benefits of virtualization kick-in which can be estimated at $3,500 per year in power savings, reduced IT management costs, and savings in office real-estate.  And this doesn’t include value created through increased stability, uptime, and performance typical of virtualized IT environments.

Feel free to contact me at byron@kennedytechgroup.com for questions specific to your business situation.

To learn more about Kennedy Technology Group, please visit us at www.kennedytechgroup.com.

Sources and further reading on the 2008 Economic Stimulus Package:

U.S. Small Business administration - http://www.sba.gov/stimulus

Business Provisions of the Economic Stimulus Act of 2008 - http://www.irs.gov/newsroom/article/0,,id=183867,00.html

IRS To Issue Guidance on Special 50-Percent Depreciation Allowance -http://www.irs.gov/newsroom/article/0,,id=181364,00.html

2008 Economic Stimulus Act Provides Tax Benefits to Businesses -http://www.irs.gov/newsroom/article/0,,id=179227,00.html

Bandwidth — alive and kicking

Our customers often ask us for advice on Internet services for their primary, branch, and remote (home) offices. At a street price of about $390 per month T1s are simply beginning to come up short on meeting the bandwidth needs of real-time business applications featuring audio, video, and voice.  DSL also proves hit or miss depending on your distance to the local exchange office. Even more disenchanting is the fact that most homes in Japan and South Korea have enjoyed speeds in excess of 20mbps for some time.

Seeking to expand into business services, Comcast has recently launched a new business class cable Internet service to meet the smaller organization’s “need for speed”. The service comes in a few grades ranging from 6 to 50 mbps on download and 1 to 5mbps for upload. (Note the 50 mbps service is only available in the Minneapolis - Twin Cities area currently).  Additional features such as antivirus security, website hosting, and basic Exchange email and Sharepoint communications hosting are also included.

The price is nice as well. With the Preferred service coming in at around $109 per month, and with install fees included on a 24 month deal, giving the service a try is almost a no-brainer.

That said, stability and performance are the primary question marks.  T1s have been around for many, many years, and once installed they’re pretty hassle-free.  Although the initial Comcast installs we’ve been involved with have been rock solid it will be important to see the service perform over time.  It will also be critical for the Comcast business team to continue to refine processes for customer service, network security, and capacity management. But again, $109 per month for 16mbps of download speed is tough to beat! 

Happy surfing!

To learn more about Kennedy Technology Group, please visit us at http://www.kennedytechgroup.com/.

IT Systems Implementations — Lessons Learned

Successfully implementing information technologies can be a daunting task for IT managers and business leaders.  Companies must realize that IT is no “silver-bullet”, but is a vital business enabler, and must be managed carefully.  The far too common reality is that major IT systems implementations are complex, expensive, and risky.

A few colleagues of mine at USF and I recently completed an analysis and review of IT systems implementations — compiling some key “lessons learned” from cases over the last 10 years covering both enterprise and mid-market companies. In many ways these lessons can also be applied to smaller organizations.

Summary of “Lessons learned”:

• Companies must realize that the IT-Reliant system is often not the problem, it is usually the support and processes surrounding the system that prove to be the limiting factors.
• The decision making process has become more complex as emerging technology allows programs to make certain decisions for us.
• Technology alone does not solve business or personal problems.  It must be implemented by people who understand actual business requirements and are disciplined in their approach to implementing it.
• Implementation of ERP systems often involves major changes in work systems, organization, and culture.
• If a process is not core to an organization’s business strategy, there could be cost, quality, and scale advantages to outsourcing it.
• When outsourcing a system, it is generally a good idea to keep strategic direction, planning, and architecture design in-house.
• Successfully implementing outsourcing arrangements requires careful planning, monitoring, and “life-cycle” management.

This work was created by Gail Kawakami, Raymond Lopez, Charles du Mée, and Byron Kennedy at the University of San Francisco, in April of 2008, and was prepared in the context of some ongoing work with Steve Alter’s “The Work System Method” (www.worksystempress.com).

Our work is being made available for educational and development purposes. Whether you’re an IT manager, a business leader, a curious professional, or a student, we hope you find it both interesting and thought-provoking.

The complete document is here: Download IT_Sys_Imp_Apr_2008.pdf .

To learn more about Kennedy Technology Group, please visit us at http://www.kennedytechgroup.com/.

Gaining a greener datacenter

It’s impossible to catch up on the news or even watch a basketball game these days without hearing something about “going green”. It seems that going green – that is, reducing the environmental impact of your business – is the theme of the day, and the IT industry certainly has some very real responsibility – and opportunity – here.

Although, at most larger companies, power bills are often paid for out of the facilities budget, IT managers in smaller and medium-sized organizations know all too well the growing costs of power and their impact on overall datacenter costs.

Some challenges

• It has been widely estimated that typical server utilization averages somewhere between 6% and 12% in most US datacenters.
• While IT systems’ performance innovation has kept up with corporate demand, energy efficiency (measured in business value per watt) has not.
• According to the Environmental Protection Agency (EPA), the amount of power used by U.S. datacenters doubled between 2000 and 2006, and is expected to double again by 2011.
• The cost per kilowatt of energy continues to rise.
• For every dollar spent on powering systems, another dollar is required to cool them.
• Gartner has estimated that power and cooling costs are approaching nearly 50% of the average IT Opex budget.

The good news

We can make measurable progress towards environmental responsibility, energy savings and carbon reduction – while saving some money along the way – simply by running a slightly tighter ship.

Tips for reducing power and cooling costs

• Measure. The business saying, “You can’t manage what you can’t measure,” applies perfectly. Review power bills and facilities costs and map them back to the physical infrastructure (and application) drivers. Environmental monitoring software and professional power audits can help. Ensure new products provide real-time consumption data.
• Review rack configurations. Ensure servers are positioned properly to maximize airflow. Consider newer high-density optimized rack solutions from companies like APC, Rackable Systems and Egenera.
• Consolidate and virtualize. Reduce the number of physical servers, storage and network infrastructure and increase average utilization. Virtualization reduces power and cooling costs directly as physical systems are removed from service.
• Energy-spec servers. Blade servers alone are not the solution. Consider energy specifications on servers, including power-supply efficiency (>90%) and processor voltage. The useful life of equipment is three to four years. A small increase in initial costs for more energy-efficient hardware should pay for itself in a matter of months.
• Update cooling systems. Newer cooling systems are more efficient, have variable-speed fans and can be positioned in-row, where they can help optimize airflow. Checkout Liebert and APC.
• Reduce datacenter facilities. As capital and operational expenses continue to grow, it’s becoming increasingly difficult for IT managers to justify building out multiple datacenters. Consider outsourcing your secondary datacenter needs to a company like Simply Continuous (www.simplycontinuous.net). They’ll backup your data over a secure network connection, store it securely in their datacenter facilities (forget tapes), and provide you a fully accessible online replica of your production applications so you can test recovery on an ongoing basis. They can also assist with broader business continuity and disaster recovery readiness planning.

Further reading

• The Green Grid – http://www.thegreengrid.org/
• EPA Energy Star Program – http://www.energystar.gov/
• The Green Data Project – www.greendataproject.org
• Flex your Power – http://www.fypower.org/

To learn more about Kennedy Technology Group, please visit us at http://www.kennedytechgroup.com/.

Virtualization — building momentum for results

Last week I attended the Virtualization Executive Forum in San Francisco. Hosted by leading technology management magazine InfoWorld, it included an industry analyst’s perspective of how virtualization is impacting the current IT landscape, a customer keynote from David Reilly of Credit Suisse addressing how virtualization is building agility in their business processes and infrastructure, and a review of AOL’s use of storage virtualization.  A vendor roundtable session from BMC, CA, HP and other industry leaders capped a very informative day. (On a side note, the magician at the VirtualIron booth was especially entertaining!)

Based on our virtualization project experience at KTG, I’ve found that a primary challenge organizations face with virtualization projects comes from functional uncertainty in the IT ranks, not technology stability or any other limitations.  Virtualization, while delivering nearly immediate business results, and obviously working successfully for the companies at the forum I attended, comes with a host of new practices and complexities. Particularly challenging for many is the blending of numerous areas of IT management — storage, systems, networking, and security. Mid-sized and larger organizations with specialists in these areas have an understandably difficult time reconciling this blurring of responsibilities which have traditionally been more clearly defined.  This presents a unique challenge for virtualization adoption in these companies.

Some key best practices we’re advising clients to help “jump-start” the transition and reap the rewards from virtualization:

1. Start with the big picture in mind. In every instance where we’ve implemented virtualization, our clients have saved money, reduced the number of systems to manage, and improved their business continuity readiness. Every time. IT managers should paint a longer-range picture when discussing the business value of virtualization; provide clarity on roles and responsibilities; and describe how IT platforms will evolve. Communication goes a long way towards easing staff fear, uncertainty and doubt.
2. Start small. Identify a few key areas (such as testing and development, or disaster recovery) where you can gain experience with the technologies and become comfortable with the management and support changes required to maintain a virtualization platform. This will also provide you the confidence and organizational support required to move forward with broader (and higher-risk) applications.
3. Identify the right platform. The truth is, numerous virtualization technologies will work and there is room for a variety of players and continued innovation, especially around management and monitoring tools.  We’ve seen proven success again and again in the field with VMware ESX (Vi3) and are also very impressed with the continued improvements of both VirtualIron and Citrix Xen Server.
4. Get help. Partner with a firm who can assist you in the planning, implementation and knowledge transition required to ensure you get the most from your virtualization investments. Consultants who have broader experience in networking, storage, security, applications and systems in addition to virtualization are uniquely suited to help you build a more cohesive platform and steer you to production readiness.
5. Leverage service providers. There is also significant value and opportunity in obtaining ongoing support from third-party providers of managed services for smaller and mid-market organizations in areas including application hosting, disaster recovery and business continuity. By partnering with a third-party firm, you can leverage their expertise, processes, and technology investments in ways that help you round out your architecture.

Questions on Virtualization? Please feel free to email me at Byron@kennedytechgroup.com.

To learn more about Kennedy Technology Group, please visit us at www.kennedytechgroup.com.

Thinking of buying stock in EMC or VMware?

A few of my fellow USF graduate business-school students and I recently completed a financial analysis of EMC Corporation.  We've made this work available for download at the link below.

As outlined in our investment summary the company continues to dominate the storage industry, diversify through acquisition and (we believe) is a strong investment holding. Our work was based on publicly-available information up through November, 2007, including the VMware IPO in August. 

So here's my disclaimer: This work was completed and is made available for educational and developmental purposes only.  It should by no means be considered professional investment advice.  I recommend consulting your financial or investment adviser before purchasing any financial assets.  I make no guarantees as to the accuracy of contents and disclaim any liability resulting from the use of this information. Any commercial use of this work is also prohibited.

Enjoy ……. B. Kennedy

Download EMC_Analysis_Final.pdf

To learn more about Kennedy Technology Group, please visit us at www.kennedytechgroup.com

Help our troops phone home!

Whether you just got a shiny new iPhone for Christmas or just switched phone plans, chances are you have at least one obsolete cellphone sitting around your home or office. Don't throw it away -- send it to Cellphones for Soldiers. They sell all donated phones to a recycler - keeping them out of the landfill - and use the proceeds to buy phonecards for troops in need.

To learn more and print out a postage-free shipping label, visit www.cellphonesforsoldiers.com

To learn more about Kennedy Technology Group, please visit us at www.kennedytechgroup.com

The $100 Laptop and World Education

Thinking of giving a little back this holiday season? The One Laptop Per Child foundation (OLPC) is opening doors for tomorrow’s minds and bringing the priority of world education to families all across America. The foundation's mission is to “... provide children around the world the opportunity to explore, experiment and express themselves.” Working towards this goal, OLPC is nearing completion of a first-generation $100 laptop, “XO”, which is expected to hit initial mass production this month.

According to the foundation’s website, "many countries have insufficient resources to devote to education ….. By giving children their very own connected XO laptop, we are giving them a window to the outside world, access to a vast amount of information, a way to connect with each other and a springboard into the future.” Most importantly, the XO laptop will help less developed countries build a critical resource: informed, educated children.

This “green machine” has been uniquely designed to be durable, flexible, and power-efficient given that many children in developing nations live in rural areas with limited electricity.  It runs on freely available “open source” software, contains on-line chat, local language support, engaging wireless communications and tools to create music, read e-books and play games.  Also interesting is the revolutionary user interface which is both flexible and easy to use for teachers and students.

Recently announced by the foundation is a donation program for the holiday season where you can “give one, get one”; you buy two laptops for $399, one is sent to a child somewhere in the world, and one you get to keep for the young mind in your life! Both T-Mobile USA and Intel have joined the bandwagon with the former including one free year of wireless hot-spot access across more than 8,500 locations throughout the United States. The fact that $200 of the promotion is tax deductible is also alluring.

The holiday season has always represented a time for sharing magical memories with those you love. I think of those children throughout the world who’ve never heard the word Christmas or felt the magic in Dickens’ “A Christmas Carol”.  OLPC has designed an important and innovative piece of technology and has a unique opportunity to change the lives of millions.  We have a chance to help them succeed.  Having just ordered a pair of XO’s myself, I’ll be overjoyed to see OLPC garner the global support needed to make this successful.

To learn more about Kennedy Technology Group, please visit us at www.kennedytechgroup.com

Welcome to our weblog!

This online client resource will provide valuable insights into IT management for smaller to mid-sized organizations; including topics on:

• Cost management
• Product evaluations
• Emerging technologies
• Security and Risk mitigation guidance
• Industry-specific best practices

We'll continue to add postings over the coming months.

To learn more about Kennedy Technology Group, please visit us at www.kennedytechgroup.com