How to build the next great IT business

I was recently asked by my friends on Facebook (www.facebook.com/vladmmd) and Twitter (@vladmazek) about how to build a great technology business. As I was told, I spend a lot of time explaining how the doors to opportunity are being closed and not enough talking about what to actually do. Honestly, I spend a lot of time talking about our own businesses (Shockey Monkey, ExchangeDefender, CloudBlock, Looks Cloudy) and how those are being managed/promoted/built but those posts tend to get very skeptical commentary because even after years and years of documenting my every move on this blog people still somehow can’t trust me (why you’d value my opinion on this post then is beyond me but I aim to please).

So first a couple of disclaimers: I am not now nor have I ever been an MSP. The following is an opinion, not an advice. This opinion is only appropriate for a 30something looking for a business that has a medium range lifecycle (5-10 years).

Objective: To build a fast, scalable and inexpensive business that profits from the growing commoditization of network services and consumerization of IT.

Assumptions: Low startup costs, low barrier to entry, low level of skill or work ethic (otherwise you’d make more faster working for someone) and preferably a business activity that the attorney general would choose not to prosecute.

Business model: Look at the most successful technology businesses and find a way to wiggle in between them and the decision maker. Commoditize the most expensive component in the service delivery.

The Broken Model

The “technology business” model as exists right now is extremely expensive. It requires huge up front investments and huge operational expenses. All for extremely low returns met with extremely high risk.

For example, you’d be insane to start building Exchange clusters right now. I never built a voice product at ExchangeDefender and looking at the marketplace demand right now I wouldn’t even humor it. Everything “expensive” is on it’s way out – there are way too many substitutes for something big to work and work well enough.

Likewise, talent is extremely expensive, forget building a business that requires big salaries. Look at solutions like www.thirdtier.com and tell me why you’d ever create a single point of failure in your business given the price tag?

Finally, there are two huge challenges to the existing business model: consumerization and commoditization. Everything that is huge and expensive is being beaten by smaller and simpler solutions that don’t require an army of people to build and maintain.

The Opportunity of Viable Threats

The opportunity of connecting the technical dots out there is huge.

The only issue is that nobody has a huge interest in promoting them because if you’re already selling stuff you naturally want to sell the most expensive (highest margin) stuff you can get away with. Smaller and cheaper stuff, while it works just as well, is something as threatening to you as it is threatening your suppliers. But with your suppliers starting to compete with you… well, it’s time to make difficult decisions.

Make yourself the product and associate everything around you as a service or a tool that can be sold as a subscription.

Don’t do any actual work – resell services, service contracts, support, tools – set yourself up as an uncomissioned salesman that is collecting a margin but do so without liability or responsibility for what is being sold.

Outsource everything except management. You cannot run a modern business as an SPF, there is a long blood trail out in the industry as a proof. But forget about working 9-5.

Embrace working with people. The ones that make around $10/hour.

Redefine what you offer. Expertise, not grunt monkey work. The two need to be separate entities because if you try to balance both you’ll eventually be an expert grunt monkey making $10/hour for a job that others would charge $110/hour.

Be loud and annoying. Forget about a marketing budget.

What is it you do around here

Look at what’s expensive and commoditize it – training.

Look at what’s being consumerized and connect it – mobility.

Businesses are spending boatloads of money on consumer gadgets that they are barely managing or having any idea how much of their staff time is wasted on them instead of going towards “productivity” benefits they bought them for in the first place.

Do you go into business of managing mobile devices? Hell no. That costs a ton of money. You need skilled engineers, ridiculously expensive software and you can only be assured of one thing – it’s always gonna be a step slower than the stuff that’s coming out.

So what do you sell? If I had nothing better to do, I’d sell a low flat-rate training technology service. That is layered with a sales component on top of it. You could even sell managed services – just be sure you’re not the one stuck delivering them at 5 AM on Saturday.

This is something you don’t need a lot of resources for – you don’t even need an office. A virtual office with an impressive meeting space (leased by the hour) along with some admin assistant time for marketing, followups and scheduling.

The way to lead and ride the wave of consumerization of IT is to be a user, an expert – and leverage that to others that want to make it work. All that’s in it for you is 10-25% commission along the way.

Conclusion

There is no doubt cloud is huge. There is no doubt that big network infrastructure stuff is in pain. There is no doubt all of the techical stuff – from equipment to skill – is being commoditized. It’s also a fact that consumerization is taking the IT departments and technology companies out of the loop.

It’s also a fact that these companies have a ton of money and massive infrastructure in place to do what they do. Some of which they will spend on you if you can connect them to the base they are losing so rapidly.