February 2010

You may not have heard about cloud computing but it has been stirring a lot of buzz this past year within the telecommunications industry. For those of you that are wondering what I’m talking about, the term cloud is used as a metaphor for the Internet, in network diagrams we use a cloud to abstractly represent the internet since the technical infrastructure behind the actual internet can become very complicated. Essentially, cloud computing allows a user to provision applications via the Internet using software and data stored on virtual servers.

Some basic examples of cloud computing are your everyday search engines and email sites such as http://www.google.com/, http://www.yahoo.com/, & http://www.hotmail.com/. These companies allow you to access your e-mail and search the entire web through their virtual applications. You don’t need to purchase any software, hardware, or have technicians come to your home to use these sites and all of your emails and documents are saved virtually not on your machines hardware.

Now that we have a good understanding of what cloud computing is let’s look at a couple advantages and disadvantages of utilizing this technology.

Some Key Advantages:

  • Less physical on site infrastructure offers a couple of advantages of it’s own. The first being the most obvious; more room! Infrastructure is being offered as a service with cloud computing, so you won’t have to worry about capital expenditure on equipment. Usage is normally billed on a consumption or subscription basis versus a monthly recurring spend for the actual hardware.
  • The second advantage of less on site infrastructure is lower management overhead. Since none of the working infrastructure is on premise its not necessary to have a management team/person in charge of everyday operations of this equiptment.
  • Another advantage of cloud computing is time. There’s virtually no lead time on access to the cloud applications. Users don’t have to install and run the applications on their computers instead with just a click of a button they can conveniently access it through a site.
  • The next advantage is that cloud computing allows users to access resources from any computing device. Since the infrastructure is virtual and can be accessed through the internet a user can connect from a phone, laptop, or home desktop- any device that has web browsing capabilities. If you forget documents at the office you can access them from your home desktop or if you switch machines at work you can easily access all documents and applications via the web from your new computer. You can also give access to colleagues so that you can collaborate on projects and not have to worry if your applications are compatible with their machine's applications.
  • The final advantage I’m going to discuss is data reliability. With cloud computing you do not have to worry about your computer crashing and losing all of your valuable documents because everything is safely secured in the cloud! You also don’t have to worry about your computer’s performance because you will not be storing programs or processes in it’s memory.

Some Key Disadvantages:

  • The basic fundamental element of cloud computing is the Internet. So if you don’t have the Internet or have a slow connection, cloud computing can be miserable for you. Most applications will require a significant amount of bandwidth so if you have dial up this may not be up your alley.
  • The second disadvantage I would like to point out is that features may be limited. Some cloud applications may not offer as many features as it’s desktop based versions. I have a feeling that this may change relatively soon though. Once the cloud computing name ventures into mainstream I think providers will step up their game and develop more
    feature rich applications.
  • The last disadvantage to cloud computing is security. Of course cloud computing suppliers/companies are promising our data is secure in the cloud but how secure is the cloud? Also, with cloud computing you have NO BACKUP! Your data could be lost or stolen for one reason or another and you have no physical backup (unless of course you save the documents to a safe place as well).

At any rate, relying on the cloud this early in the game may not be for you or your business. In my humble opinion, I do believe we will see some of these disadvantages evaporate (pun intended) in the near future with the impending popularity of less infrastructure and lower costs.

We have all heard a lot in the news recently about the stimulus packages, bailouts, government spending, etc. Not too long ago the $787 billion American Recovery Act, aka stimulus law, went into effect. That number seems so ridiculous and surreal it’s difficult to wrap your head around it. Where does that money go in terms of Philadelphia and the surrounding areas? After everything was said and done, $16 billion of that is expected to flow into Pennsylvania and $17.5 billion into New Jersey. I started to think about how the city and state governments are spending this money. On an everyday basis, where are our tax dollars going? I have friends that are “civil servants” for the city, state, and federal governments so I decided to do a blog series on government spending, looking at some of these questions:
· What does the government spend all this money on?
· What products and services are they sourcing and how?
· What is the government doing to try and save our tax dollars?

I decided to start with an overview of local government spending and move up from there. The following is an overview of some of the things I discussed with a high city official that has worked for Philadelphia for over 37 years.

The City of Philadelphia provides public services to the 1.5 million residents of the city. There well over 30,000 employees (police, fire, doctors, lawyers, engineers, accountants, etc.) that work full time to provide these services. These employees determine and request the supplies and services (both professional and general services) to fulfill their daily job responsibilities.

The local government has sub-divided into around 80 departments (police, fire, water, streets, etc.) to perform the required public services. Each department is assigned specific duties and responsibilities. Some supplies are specific to certain departments, like road salt for the Streets Dept. or chlorine for the Water Dept. while many supplies are generic (office supplies). At some point, the city realized it was economically sound to establish the Procurement Department to take advantage of the discounts that would be available from ordering in large quantities.

The Procurement Department has established rigid procedures to establish an ethical and fair arena so that no vendors would have an unfair advantage over any other. All supplies and service requests are advertised in newspapers and professional trade journals to encourage competition. The award of a bid is always given to the lowest responsible bidder of the requested supplies or services.

The Procurement Department always accepts the lowest responsible bidder except in the case of professional services, i.e. engineering services. When engineering services are required, an RFP is prepared and may be publicly advertised. For services that may be very specialized, several appropriate firms may be invited to submit a proposal which would include information on their past experience, references, and current staff credentials. They would also submit hourly rates for the individuals that may be working on the project and how many hours and cost to complete the project. A departmental committee is assigned to review the various submissions and make recommendations to the commissioner of the department who then makes a final recommendation to the Procurement Commissioner for the final decision.

When the Procurement Department receives a request for a quantity of items, they may be asked to get quotes on a per unit basis or a lump sum. If the product needed has a definable quantity (500 bullet proof vests), bids may be solicited on a lump sum basis. If the quantity needed of an item (a few tons of road salt, which has been in quite high demand recently) is indefinable, a price per ton may be solicited with an approx. quantity provided with no guarantee of amount to be purchased. Often the Procurement Department runs into issues on items like this due to lack of planning and poor communication between city departments. They often do not have the time to effectively source these products and services which of course translates into wasting our tax dollars.

One of the pitfalls the Procurement Department has run into with product ordering has been computers and software. Every department was ordering what they thought they needed and the Procurement Department was slow in responding. The industry has been changing so fast, that equipment was obsolete by the time it was delivered. At some point, an IS&T (information services & technology) unit was established to review and determine computer and software needs for the entire city.

I will discuss some of these issues further as well as specifics on the city’s sourcing process and how it can be improved in later posts.

Hopefully the city can identify these issues and improve on them so our tax dollars are spent a little more wisely in the future
I think at this point we are all looking for ways to save every dime we can. One important thing to remember is that we can realize excellent savings opportunities during tax time. Two big issues that people have in this regard are that 1) they do not know the opportunities available and 2) they do not bother taking the time to learn about and use them. I came upon this article from CNN that lists five new tax breaks that have come about from the American Recovery and Reinvestment Act, aka stimulus bill. The basic idea is that the more tax breaks we achieve the more money we have to dump back into the economy.

First time homebuyers were able to receive an $8,000 tax credit if they purchased a new home in 2009. This law has been expanded and now new homebuyers have the chance to get the credit if the home is purchased through April 10th, 2010. They have also extended this credit to “almost” new homebuyers. Those who have had a home for five years or less can receive a $6,500 credit if they purchase a new home by the April 10th deadline.

The IRS is offering the American Opportunity credit for college and graduate students’ tuition and can be claimed for 2009 or 2010. “If you're a student and your income is $80,000 or less, you can qualify for a credit of up to $2,500 a year, an increase of $700 from the previous Hope Credit”, according to the article.

The government is also expanding opportunities to those homeowners that make an effort to go green with energy-efficient upgrades. The new law allows taxpayers to claim up to 30% of these costs. The law mainly pertain to heating and cooling so you may want to do a little more research on what is and is not included. Check out this link for more information: http://www.energystar.gov/.

If you are currently working, the Making Work Pay credit provides a refundable tax credit for married couples. This credit may have already been deducted from your pay because of federal income tax adjustments but people will still need to claim the credit. As stated in the article, “the Tax Policy Center estimates that 75% of all taxpayers filing their returns this year will benefit from the credit and see a savings of $375 on average, said Roberton Williams, a senior fellow at the Tax Policy Center”. Be careful though of stipulations associated with this particular credit, some may end up owing.

The last credit mentioned in the article relates to new car buyers. Those applicable will have the opportunity to claim deductions on state and local taxes from new car purchases from February 17, 2009 through the end of the 2009 calendar year. This credit should be fairly widespread and those who participated in the Cash for Clunkers program will certainly see the benefits.

So, don’t give up just yet, there are chances for everyone to get some of their hard earned money back from the government. Well….some anyway!
Things seem to be going well up north for the Canucks. The Winter Olympics are in full swing, the local economy is buzzing, and Bilodeau has even earned the Canadians their very first gold on home soil. On top of all this, according to the US Trade Representative’s Office, US and Canada have finally “resolved” the key disputes they have recently had over the Buy American provisions listed in the US Economic Recovery and Reinvestment Act of 2009. Unfortunately, the Ontario Federation of Labour does not share this opinion.

According to a statement from USTR Ron Kirk "This agreement resolves key outstanding US-Canada government procurement issues and creates tens of billions of dollars worth of new job-supporting export opportunities for American companies and workers." The leaders of the OFL, however, claim that the resolution signed yesterday is “lopsided” and “unfair” because of particular terms that favor American interests. An excerpt from the article I originally found on this subject will help to explain why this sentiment may exist:

“The agreement gives US firms permanent access to Canadian provincial and territorial procurement contracts consistent with the WTO's Government and Procurement Agreement (GPA). American companies will also be able to compete for Canadian construction contracts not covered under the GPA through September 2011, Steel Business Briefing understands.

In turn, the US will provide reciprocal access for Canadian companies to 37 US states already covered by the GPA, but will only give access to "a limited number of Recovery Act programs," according to a statement from the US Trade Representative’s office.”

As you can see, it is not very hard to believe why some Canadians may feel slighted. While I’m sure their were many factors, issues, and points of leverage that made this agreement make sense in the immediate future, the US has also committed to considering a long term procurement agreement within the next 12 months "to deepen on a reciprocal basis, procurement commitments beyond those in the WTO GPA and NAFTA."

So, in actuality, it seems that the US and Canada have found a short term solution to alleviate immediate pressures. Time will tell if US representatives honor their commitment and create agreements that align the best interests of both the United States and Canada. While “winning” in a negotiation with Canada may benefit Americans in the short term, it will be more beneficial for the US over time if we can use this opportunity to strengthen our relationship with Canada as an economic ally. For more info on this trade spat, please see the following four posts (1, 2, 3, 4).
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Since I can remember, the Social Security Trust Fund has been going broke. Politicians tell us that we have to fix the system or payments to seniors will be in jeopardy. Social Security has taken in more money than it has paid out just about every year since inception. In 2009 alone, $121 billion more came in than went out. The fund balance is $2.5 trillion. Depending upon who you believe, there is enough money until 2035 -2045.

Some fund! There is not a penny held in any account. There is no return on the funds. The government spends the surplus each year. We are paid back our own money in the future with discounted dollars. Whenever the fund approaches a year where payments will exceed receipts, politicians usually start screaming for a revamp. This usually results in a tax increase of some sort.

What about paying us some interest on the fund balance. At 4% this would immediately add $100 billion to the fund. A simple fix, if only the payer had some change to spare.
The makers of BlackBerrys (BlackBerries?), Research in Motion, announced Tuesday at the Mobile World Congress Expo in Barcelona that they will begin offering a slightly watered down version of BlackBerry Enterprise Server for free. This new product, labeled BlackBerry Enterprise Server Express is compatible with Microsoft Exchange version 2k3 through 2010. The product is specifically targeted at medium and small businesses that want the functionality and security of BlackBerry devices, but have not made the move because of the historically high costs of purchasing the enterprise server package. Their traditional paid server software will be rolling out new features such as integration with Video Conferencing and PBX systems on their customer's premise.

I see this as a good move on RIM's part, as the competition in the Smartphone market is really heating up. With the iPhone and Android based phones slowly gaining adoption in corporate environments, and the announcement of Windows Mobile 7, they needed to do something to remain competitive in the marketplace. It will be interesting to see if Microsoft can regain market share with it new Windows Mobile 7 later this year, as preliminary reviews show that it is a much more consumer friendly device than previous versions, and it has the inherent integration with Microsoft Exchange, without any specialized software to manage security (unlike the BlackBerry, Androids, and iPhone).

If your organization is currently licensing BlackBerry server software, you may want to follow RIM's development and release schedule to see if you can drop your licensing fees without sacrificing functionality of your staff's devices.
While some of the country is still on sub-Mb/sec Internet connectivity, Google is rolling out 1 Gb/sec fiber connections 'in a small number of trial locations' around the country at prices competitive with today's leading home broadband solutions. That small number is going to be somewhere between 50,000 and 500,000 homes. Google started strictly as a search engine and has set the bar for which competitors strive has expanded it's offerings over the past decade into e-mail, applications, voice services, and mobility all with good success; it will be exciting to see what comes of their latest endeavor.

What might be Google's motivation here? According to Google's blog, they are working to promote new applications which take advantage of the bandwidth, experiment with and tweak fiber-to-the-home deployment, and to promote more open access to broadband. They also view this initiative as complementary to the US government's national broadband deployment plan, which makes sense. We could only hope this would also encourage other broadband leaders, Verizon and Comcast (xfinity), to continue to invest and roll out additional fiber nationwide which also certainly has a significant impact on business network pricing. Regardless, 1 Gb/sec to the home doesn't sound like a bad thing -I just hope Google means it when they repeat their mantra, "Don't Be Evil".
As I sat and watched the snow pile up today here in the great North East and procrastinated shoveling for the umpteenth time, I thought about the green possibilities of snow removal. Thankfully my neighborhood does not have sidewalks and does not warrant a snow blower but I am not sure I would buy one for the air pollution it causes. Although it would certainly save a few backaches in a lifetime!

Green snow removal option #1 is using a shovel versus a snow blower. You can even save some money by shopping around for the best priced one (and ergonomic don't forget). That is if you had the forethought to buy one before a blizzard like we are currently experiencing. Aside from feeling green you can also feel good about contributing to your local mom and pop shop that may just have that miracle shovel for less than the big orange and blue general industrial shops.

Green snow removal option #2 has to do with melting and/or adding traction to the ground. Salt may seem like the green ticket compared to chemical mixtures but think again! Salt can harm concrete costing you money for repair/replacement and also is harmful to plants and wildlife. Your green options can include sand, wood ash or kitty litter (not used of course!). There are other Eco-friendly materials out on the market as well but these are a good start if you are making the switch.

There you have it. Now relax and go make a snow angel!
A recent article by Michael Ryan in Parcel Magazine(and referenced last week on our blog) provides great insight into a trend I’ve seen in the parcel industry, that of consultant, or “third-party” avoidance.

FedEx and UPS have always been adverse to any discussion surrounding rate negotiations (what supplier isn’t?). In past years, the standard play would be for FedEx and UPS to use DHL as an excuse to disqualify requests for pricing concessions during an RFP or latter stage negotiation. They would posture that DHL couldn’t handle the business, that their service levels aren’t there, or that they might not last another year.

To some extent, the big two were right, and eventually they won that battle. DHL, the low price leader, exited the domestic market and tariff rates from both UPS and FedEx have shot up substantially since (2010 alone will see base tariff rates increases of 6-7%!).

Now that DHL is gone, UPS and FedEx are taking aim at their next biggest perceived threat, consultants, or what they like to call “third parties”. In the course of the last year, several parcel projects I’ve worked on have had the incumbent supplier attempt to cancel the project by threatening to terminate their relationship with the shipper (our mutual customer). Their rationale includes everything from, “we prefer to negotiate directly with our customer” to “we have a policy of not working with third parties” to “it’s not fair to us or the customer for you to be involved”. While the article referenced above does a great job providing a counter to these arguments, the fact is, UPS and FedEx will continue to look for ways to disengage from consultants.

So what are we “third parties” to do?

The main thing is to build strong sponsorship at the customer level. Each time the carrier tells a customer they are going to terminate, they are hoping the customer will blink, and in many cases that customer will. After all, why upset the applecart?

As a consultant, we have to call the play before the carrier. Tell the customer what to expect before starting a parcel project. First, the shipper will request a three way NDA. Their hope is the NDA will land in legal, changes will be made, and that process stalls for a month or more. Next, the carrier will try to end around the process, telling the customer they would prefer a direct negotiation, that the consultant doesn’t understand their business, or that the situation is not fair. If they are feeling particularly lucky, the next step will be to inform the customer that they’ve been told by “someone” in management that they must issue a letter of cancellation if the third party is not disengaged.

Telling a customer all this up front might scare them into cancelling the project, but if that’s the case sponsorship was probably weak anyway. Most customers will still engage, and have a good time laughing as they see the carrier run those plays. FYI – the carriers will eventually back down if the customer holds their ground.

The bad news is that the carriers have the mantra down, and they are going to keep running this play for awhile. The good news is, if you keep your customer informed, you can run a successful block.
Wedding planning is full of ups and downs, I should know, I am knee deep in it! There are so many decisions to make and prices to consider. What is the best price for a cake? Do I need the five hour open bar or will four do? Do I really need the blow up guitars and fake plastic Hawaiian leis? Everything in the wedding industry is marked up way beyond its par value. Typical markups can range from 10% to 200% depending on the item or service and can get as high as 500% to 600% in some instances. Vendors bank on the idea that this is the most important day of your life and you are planning to spare no expense. Let’s not lie, not all of us have that luxury. This article by Kelli B. Grant gives some insight into where the markups are focused and what to pay attention to when planning your wedding. In some cases, as the article states, vendors are reasonable in adding extra costs due to the labor involved in wedding affairs that may not be involved in a standard event. The term “Bridezilla” did not develop from a single instance. Brides want the day to go perfectly and are going to fret over the minutest details. With that understanding, vendors apply a cost to that extra attention needed.

Now to get down to the nitty gritty….the wedding wear. According to the article, gowns are marked up anywhere from 100% to 600% from their wholesale price! (Is your jaw on the floor, because I know mine is!) It’s like highway robbery, but they get away with it because brides want what they want and are willing to pay in most cases. There are ways to avoid spending the most you can when it comes to bridal and bridesmaids gowns. First, spend some time doing online research. This way my first avenue and it’s where I was able to not only find “The gown” but I was able to locate a store that was offering for 20% off. Second, don’t be afraid to haggle with the bridal salons. Now that you know the typical markup you know they have room to budge, a lot. I know this from experience as well. I visited two salons in one day, both carried the bridesmaids gown I was interested in, but for different costs. I started at the first shop where the gown was $226 with a 20% discount. The second shop offered me $200 with a 10% discount. This brought the dress to the same cost at both places. So I went back to the first shop and told them the deal I was getting at the second shop and they knocked another 5% off. I have yet to visit the second shop again, but I certainly plan to take my new deal back to them for a second round of offers! Check back for “Isn’t Everything Negotiable? Part 2” and you will see what happens with the gowns and for more wedding planning negotiations!