I run an IT Service and Media company, Chunk Munk Technologies (yes that was a shameless plug). I have years of experience owning and operating IT related companies, helping start-ups get off the ground, helping small to medium sized companies be profitable, and working with large billion dollar companies looking to create or enhance their products and applications.
I’m going to help you understand the world around IT Service companies. The information I’m about to share will essentially be the same no matter where you are.
Choosing the right IT Service Company is not a black and white decision. There are lot of factors such as your type of needs, your size, where you are in your business plan (Start-up, small sized looking to grow, medium sized looking to scale), and of course, your budget.
Let’s tackle the first, your type of needs. This can vary drastically. You may need in office wiring and network installation, network configuration and administration, web site development, 3rd party software installations, custom application development, application integration, email support, Active Directory, Cloud,…, …, … this list goes on! Yes, if you’re not a technical person, these are all different!
Now there are what I like to call 2 categories of IT Service Companies; "Big Shops" - those who target medium to large organizations; and "Small Shops" - those who target start-up, small, to Medium sized organizations.
Notice I mention nothing about skill or ability. Big Shops have a mass of employees, they have skill in many different areas and more dynamic with what they could potentially do when needing a large variety of skills or simply a large amount of horsepower. This however at the very core comes with a higher operating expense, and with such a higher cost to you.
Small Shops can do all of the same the first can, they might not have as much breadth of experience across as many verticals as the Big Shops, but very often you don't need them all. They are typically a little smaller, leaner, and come with a much lower operating expense. Which means a lower cost to you.
To put it simply, if a fortune 500 companies pays for a website, they typically hire a Big Shop. If a small to medium size companies hires a Small Shop to build literally the exact same website, the cost will be incredibly lower. I have literally seen this example where the difference in cost is 1000% more at the Big Shop.
Let’s get back to simple. Assuming you are a small company (as most often that reflects your budget). You’re priority here is time to market. You are not going to make it if you don’t sell your product to the point where you’re revenue outweighs your expenses. Period. The natural tendency here is to choose the smallest, cheapest, less risky option. Especially if your business requires technology to be successful, an online business for example, this can be devastating.
You essentially have one of two options;
Bite the bullet, get a proper IT Service company or knowledgeable independent consultant, and build a product fast BUT, be strict on your priorities! Find a company that will offer small business solutions with the ability to scale as time goes on.
Hire a person from a classified ad, a friend of a friend, or a child of a colleague that knows something about computers, has limited experience, or has taken a course. Pay them little, and try to get a sell-able product as fast as possible with little upfront investment.
With the first option, you will have a scalable application that can better grow with your business. It will cost a little more upfront, but if you manage your priorities properly, you will have an outstanding product in no time. You also have a relationship with a company that can help you scale into your next phase.
Unfortunately, most start-up or small companies do not utilize this option. The cost appears way too high and, if they don’t have technical experience, they don’t understand the risks of a non-developer building their application. Would you ask the son of your friend to develop your basement because he’s taken a woodworking course?
With option two, you will get an application. But remember this is someone with less experience. So it will most likely not perform to your full expectations, it may not look and feel like you had hoped, and it will most definitely have a short shelf life. It will also run at a higher operational cost to maintain as it will not scale with your business and will have more issues. But hey, the developer you are using is cheap right? Who cares if he has to work at it a little more? Remember though, down time affects customer loyalty and retention.
At some point in time, the application will hit a wall. You will get to a point where you are no longer be able to add, enhance or update it. Your developer will reach the limit of their knowledge and expertise. In order to move forward you will have to pay a senior developer with knowledge and experience to try and patch it and make it work. The senior developer will warn you the risk of working within your current product and will urge you to re-develop it. You have quite literally paid for a house of cards. Every enhancement, update, bug fix or new feature adds to the deck. You don’t simply “update a card” you slightly move it or add another card on top. You who have gone through it know what I’m talking about. At some point, the house always falls.
Even with this, option two can most definitely still be a valid option for you. That’s right, I said it. As long as you know what you’re getting into. Let’s say you make some fantastic jewelry and you want to sell it on your own online store. You have a brilliant idea to make it interactive, you can spin the jewelry around and see all angles. You can post a picture of yourself and see it on you. A true online experience! You get a quote from an IT Service company in town and it will cost somewhere in the $30,000 to $50,000 to have them build it. $50,000?! Are you kidding me? I don’t even know if anyone will buy from my store!
Your ranting to a colleague when he mentions his son has taken a course and web design and might be able to help you out. You give it a shot and he charges you $2,000. You understand the risk of using a less experienced resource and know the product can only get you so far, but the $2,000 investment is much easier to chew on to get your store to market and start proving your business model. You scale your priorities to only those required for your first online launch. Within 6 months, you have a regular following. You’re store is making decent money and you’ve started to hit the capacity of your current web site. Knowing this was coming and knowing that your store is now a proven business with some cash flow in the bank, you can justify the cash to invest into a more stable solution.
This is not a bad thing. Is it worth investing $50,000 into something that may not work? I know your idea is solid, and your plan is bullet proof, but c’mon, there’s still a risk in starting any company. I’ve watched countless companies over-invest into amazing new products to either run out of money before they can sell or once they launch it, all the fun features they thought people would love are not closing the sales they expected. Budget what you want to invest into your product, and then work with someone to plan what can fit into that budget.
Alternatively, you can get the $50,000 site for cheaper, if you’re willing to compromise. Outline what is important to your success. List out all the features you want to have in your website, now start cutting them down. I know you want it all, but think about it. Some of the best features in most applications developed today were not planned. They were discovered over time or thought to be non-essential features that clients grabbed on to.
Limit your priorities to what’s critical to sell your product. Scale back features to be functional over perfection or interactive without compromising on usability. Create a product that you can sell first. Get it out, start selling, then expand it to your end goal.
Remember your critical factors for being successful and keep these in mind when investigating any new business that requires online or IT related help to be successful, these are especially when it comes to technology:
Time to market – Get to market fast and make money to re-invest into more features. The longer you’re not available to your clients, the more money you spend and the more market hold your competitors get.
Return on Investment – Ensure what you’re working on will provide a return over items you feel must be implemented. Look at it in black and white, does it provide additional revenue, does it improve customer retention, does it provide a unique factor that makes clients switch to your product (lowering you cost of acquisitions), or does it drastically lower your operational costs (increasing your profit). If it doesn’t do any of these, is it worth spending the money on it now.
So where does that leave us? Are you more confused than when you started? Well let’s try to shorten the answer:
If you have money or financial backing and a sound idea, go with option one while managing your priorities. Investigate your IT Service companies in your area and don’t be scared of the high costs and complex contracts.
If money is a concern, challenge them to stage your project and get them to provide pricing on each. Challenge yourself to split your project into 4 stages:
Stage 1: SELL - Create an online store where I can post my jewelry and access payments through Paypal. Now start selling!
Stage 2: ENHANCE – Add the ability to accept other major credit cards. Add the ability to create and offer sales and promotions. Create a social following on Facebook and Twitter and showcase your product. Pick important features that will enhance your site but leave out the nice to haves and non-revenue features. Keep selling!
Stage 3: WAIT - That’s right, just wait and watch. Watch your analytics. Determine what features are working. Expand your client base and triage your customer needs. This will change your impression of your “nice-to-haves” and might even bring to light some new revenue possibilities.
Stage 4: ENHANCE – From monitoring your customer feedback, position, and returns, you determine people do have issues viewing themselves in different colours or more extravagant designs. They really don’t care about seeing an interactive 3D image, a couple pictures from different angles is more than enough. With this new knowledge you investigate the ability to either upload a picture for people see the jewelry on themselves or upload different types of pictures of the jewelry on models.
You can continue cycling through Stage 3 and 4 for as long as you have enhancements and features you would like to add.
If you don’t have the money, or not sure of your product, then investigate option 2. Find a third party website building tool or colleague, friend, or acquaintance to build a proof of concept. Align it to what is defined in Stage 1 above. Build something you can sell comfortably but do not invest too much time into difficult features or enhancements that are not necessary to proving your model. Prove your model, and make some money. Remember, this solution is to solely prove your model and business. Upon success, it will need to be replaced with something more reliable and scalable. At that time, you can re-invest into option 1 with the lessons you have learned.