strategic it analysis of a startup
DESCRIPTION
Analysis of the Strategic IT needs of a startupTRANSCRIPT
Analysis of the Strategic IT Needs of a Startup
by
Michael Munevar
May 2012 Strategic Information Systems
EMBA Semester 2
Michael Smurfit Graduate Business School, University College Dublin, UCD
Lecturer: Mr. Dermot Casey
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TABLE OF CONTENTS
1.0 -‐‑ INTRODUCTION 2
2.0 -‐‑ ANALYSIS 3
2.1 CURRENT ENVIRONMENT 3 2.2 CURRENT SYSTEMS IN PLACE 4 2.3 CHALLENGES 5 2.4 PORTER’S FIVE FORCES 6 2.5 SWOT ANALYSIS 8 2.6 THE CYNEFIN FRAMEWORK 9
3.0 -‐‑ RECOMMENDATIONS 11
3.1 PROCEDURAL 11 3.2 PROJECT MANAGEMENT 13 3.3 SYSTEMS 15
4.0 -‐‑ CONCLUSION 16
APPENDIX 17
REFERENCES 17 BUSINESS DOCUMENTS 18
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1.0 INTRODUCTION
The company that I have chosen to study is a small Dublin-‐‑based startup called exSite Communications. exSite is a relatively new company, only becoming incorporated in 2009. Its primary function is to design and build websites for small and medium-‐‑sized businesses. It also operates in the micro-‐‑business field, creating personal websites for personal use and websites for could-‐‑be and current politicians.
Most recently, it is getting more requests for 3 new types of products. It seems that its new clients are interested in the following types of technologies:
This has lead the company into frenzy, and it has decided to experiment with various kinds of projects. Although it hasn’t landed any mobile-‐‑friendly websites or apps, it has a small amount of experience building eCommerce sites. The first eCommerce project won was the development of an online wine store, complete with details on wines from every corner of the world. The original plan was to build the eCommerce solution in 3 months. The project took more than 18 months, and after the ordeal was complete, the client still was not happy. Ultimately, after the launch of the online store, the client ended up closing their account with exSite and continuing the project with a competitor. The direction that this project took was less than ideal. The client ended up losing faith, and exSite ended up losing a client, and any of his referrals.
More recently, exSite has received some larger web design projects, projects that are estimated to take 3-‐‑4 weeks to complete as opposed to the typical 1-‐‑week turnaround project. These larger projects require quite a bit of client interaction and feedback, and a higher level of organizational skills.
As for the building of apps, the exSite does all its builds in-‐‑house, and to venture into this space would require them to either hire new staff, outsource it, or find a partner that could create it for them. There have been several inquiries for
Mobile-friendly
Websites
Mobile Phone Apps
eCommerce Stores
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mobile apps. Unfortunately, mostly due to pricing concerns, none of the mobile apps have been built.
exSite finds itself in a changing environment. It could very well continue to build new microsites, and continue to survive by word-‐‑of-‐‑mouth marketing. This technique has served them well and gotten them to their current position. To make sure that it survives in this kind of market, it will ultimately have to adapt.
2.0 ANALYSIS
It’s clear from the introduction, that exSite has a dilemma. The market is changing and it is working with microbusinesses. The recurring revenue from its 200+ clients allows it to employ 3 full-‐‑time staff, one designer, one systems administrator and one project manager. The following is an analysis of exSite’s IT systems. I will focus specifically on how exSite uses technology to reach its strategic goals, growth and profitability.
The following information has been obtained by working closely within the company in the operations department, from the at length discussions with its managing director, project manager and system administrator. It is also comprised of my personal experiences within the organization as operations manager.
2.1 CURRENT ENVIRONMENT
exSite is working mostly in the Irish market. They have been able to amass the majority of their clients through word of mouth, and referrals. exSite is closely tied to the Irish market, and the peaks and troughs of the Irish economy. At present, many businesses are closing down, and there continues to be further data to prove that this trend will continue in the near future.
Technologically speaking, the needs of clients are changing. Ten years ago it may have been suffice to have a simple one-‐‑page website with your contact details. In the last 5 years, having a website meant the difference between being trusted to do business and not. The first thing people do when receiving a business card is to check out the website, and not having a website could be a warning sign that could deny you business. Businesses are now moving towards the need to have a mobile-‐‑friendly website, mobile app and/or eCommerce online store.
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2.2 CURRENT SYSTEMS IN PLACE
Currently, exSite has a multitude of systems that are in place to manage its day-‐‑to-‐‑day operations. The figure below is a listing of their systems and how they use them.
System Description Intro Freshbooks Accounting system used to bill and invoice clients 2009 Email system To be able to communicate internally/externally 2009 Server – 500gb Locally accessible server with all softcopy contracts,
design notes, website drafts and website photography 2009
Trello Collaboration software being used to manage projects 2012 Ganttic Time management tool used to manage the time of
resources(ex designer and meeting room) 2012
“The Board” Whiteboard outlining days of week and employee tasks for each day. Currently discontinued.
2009
Basecamp PM software used primarily to manage eCommerce builds. Use was discontinued.
2011
Annual Leave Online software package used to request and approve staff holidays
2012
Blacknight Hosting
Several servers hosted by BK that house client and company websites
2009
Other Hosting Managed hosting in London, Germany and the US 2009 Odesk Outsourcing system for outsourcing build and design
process during peak periods 2012
In total, there are 11 different systems being used. Originally, there was an ad-‐‑hoc system put in place to manage projects. It worked as follows:
Clients sign contracts that are saved in a shared network computer server. This 500gb server holds contracts, design notes, graphics, and prototype designs. All communication was by email, and some by phone. Phone notes would be communicated verbally, usually email communication would be forwarded to the PM and/or designer. As the designer and system administrator would have various projects that they would be working on, there became a point where there was too many tasks to manage in a sequential order. At this point, a simple whiteboard on the wall, known appropriately as “the board” was used to assign tasks to each resource, in a certain priority. This would become more complex as new projects entered the stream and became a competing priority.
The above system worked well, and got the job done. This was until eCommerce projects came into play. eCommerce projects required that several streams of tasks be commenced simultaneously, and that regular client communication take place. It also required an incredible amount of data to be transferred between the
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client and exSite for the descriptions and images of products, as well as details of sales calendars and special products. At this point, Bootcamp was introduced to help to manage these projects. Bootcamp is not free, and once a certain project threshold was met, old projects had to be archived and could not be easily accessible. As the person who worked mainly with Bootcamp had left the company, it was retired as a tool that was not widely adopted by other staff.
I joined the company as operations manager on a limited basis in November of 2011. I quickly noticed a need to be able to manage projects in a more organized fashion. My original intention was to consolidate the myriad of systems already in place with one more complete project management and bug tracking tool. After investigating about two dozen different tools, with a wide variety of features, bells and whistles, I ended up implementing two: Trello and Ganttic. Although there were more complete tools that offered more features, and more powerful reporting functionality, these two tools were chosen because of their relative ease of use and pricetag. Both products are free, a price line that was very appealing to the start-‐‑up’s MD.
2.3 CHALLENGES
In all, the 11 systems created what was the underlying back office of exSite, open-‐‑source where possible and free to use where open-‐‑source was not feasible. I decided to introduce Trello and Ganttic(at first I was reluctant to introduce two systems, but alas as there was no free alternative that was able to replace a the project management, bug-‐‑tracking and workflow prioritization system in place. The staff had to adjust to the systems in place, and although quite intuitive, it did take about four to six weeks of ongoing support to make sure that everyone was using the system as intended and updating the system. Every phone call, every email, every support query that needed escalation, was inserted into the system and thus managed by the appropriate department. The Satir Change Model held mostly true, except that the chaos stage was notably absent(1991).
Clients were for the most part novices in computer technology. Although it was standard procedure(and good form) to create an operating manual with screenshots to explain to the client how to updated their website post launch, should there be any deviation from the procedure, this would lead to the customer opening a support ticket.
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Finally, exSite regularly performed content updates and this was a major service and source of income for the company. In an interview with Tim, it was revealed that he spent his day as follows:
Time Task 1-‐‑4 hrs Managing Content Updates(aka Post) 1 hr Administration issues/email 1-‐‑2 hrs Meetings internal and external 2-‐‑5 hrs Project Management
Figure 1 -‐‑ Typical daily workload of a Project Manager
As significant portion of his day is dedicated to managing content and meetings. Although this has not been officially tracked, it is certainly an interesting statistic and would be interesting to see a more detailed breakdown of how much time he spends on average of each task. It is noted that project manager’s time is not strictly monitored using Ganttic.
2.4 PORTER’S 5 FORCES
We begin with a quote by Michael Porter:
Many of the pioneers of the Internet business, both dot-‐‑coms and established companies, have competed in ways that violate nearly every precept of good strategy… Rather than make trade-‐‑offs, they have rushed to offer every conceivable product, service or type of
information(2001).
The truth stands true for exSite. Just being in the business and competing with rivals for clients will not benefit them unless they build on a strategy that is custom-‐‑tailored for their sector of the market. Let’s examine how Porter’s five forces affect exSite:
POTENTIAL ENTRANTS
exSite operates in a niche market. The client base that they work with is on the small, medium and micro-‐‑business side. The risk of potential entrants is big. Freelancers can complete the same projects that exSite has, albeit with a much lower overhead. Marketing and PR companies regularly create websites for their clients and are using their relationships and capital to enter the web design marketplace.
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THE THREAT OF SUBSTITUTES
The threat of substitutes is very high. The product that exSite creates can easily be made by a competitor with average level design skills. There are several companies readily available in Dublin that offer similar services. The quality is similar and exSite has not yet built the brand name of excellence.
THE POWER OF BUYERS
Buyers at this level are looking to save the most amount of money possible. In several instances, they have demanded discounts to already low prices. Because exSite relies on their customer’s referrals and recurring management fees, it is willing to negotiate and to bring down the cost for certain projects. The strategy employed here has been to keep the client happy. In some occasions, demands from the client are so high, that margins quickly disappear.
THE POWER OF SUPPLIERS
The main supplier of exSite is their account with Blacknight Web Hosting. Web hosting in Ireland is more expensive than the European average, mostly due to the fact that there are less providers in Ireland. It is yet to be seen what will happen to the suppliers that go out of business due to the slump in the economy, and how that will affect the price of hosting in Ireland. It is understood, that changes in the supply may affect prices indirectly.
COMPETITIVE RIVALRY
Finally, competitive rivalry is high in the industry. The company has chosen to take a transparent approach to pricing, clearly marking their prices on their website. This adds a certain level of rivalry, as it is uncertain what the competition is charging, and that the competition is using exSite’s publicly posted prices online to price their own products. This could be an advantage to exSite, as it gains the trust of the client to know that the prices are the same for everyone. It does, however have its negative aspect, as competition uses this information to take away potential customers. It is unclear as to how effective this strategy is, although sales use this fact regularly to gain trust from the potential client. It is noted that the majority of web design companies are of a comparable size, 3-‐‑5 staff in an office, one designer and technician.
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2.5 SWOT ANALYSIS
The following is only meant to give a short sample of the technological SWOT analysis of the company and not meant to be exhaustive.
STRENGTHS
Lean operation – The startup is in the growth phase and adamant about keeping their costs low.
Low operating costs – all equipment is leased, from the computers, to the servers
Growing Client base -‐‑ 200+ clients create a healthy recurring revenue
WEAKNESSES
Relative inexperience of client mix – Clients at that level demand more support and training, and are not always able or willing to pay for it.
Low mix of clients – Fifty percent are political, about 40% are commercial, and 10% are eCommerce/other platforms.
High cost per acquisition per customer – Sales invests a lot of time acquiring new customers.
Relatively low recurring revenue per customer – Many clients go for minimal or support management, between €15 and €30 per month for unlimited website updates.
No fair-‐‑use policy – Many clients do not abuse the management package, while a few do.
Irish market is currently underperforming – SMEs and shops are closing and there are relatively fewer businesses in operation at this level.
OPPORTUNITIES
Recurring revenue -‐‑ Ability to create good amount of recurring revenue. Each client will need hosting and a service agreement. Ninety percent of clients are on a service/hosting contract.
Growing infrastructure -‐‑ Maintains servers and hosting relationships in four countries.
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Marketing potential – exSite has 200+ clients but at the moment, there is no concerted effort to communicate with them and offer them complementary services.
THREATS
Business health – This is highly dependent on sales, the sales volume has been down in the last 6 months.
Seasonality of Sales -‐‑ Sales are seasonal, and highly dependent on the SME and microbusiness market.
Overhead -‐‑ Recurring revenue is not sufficient to cover overhead, thus sales must cover the difference
Staff -‐‑ Business is operating so lean, that a departure or sickness of any staff will stop production.
Servers -‐‑ Servers are not properly backed up, and a failure at the webhost end may result in a potential loss of data. There is no backup on certain servers.
Hackers -‐‑ Being that one server is housing 50+ Political clients, it is understood that this particular server may be subject to a DoS attack.
2.6 THE CYNEFIN FRAMEWORK
At the moment, exSite is operating in a stable environment. This can be characterized as simple, as design and processes are stable. Projects carry a relatively low-‐‑risk as websites are paid for 50% in advance and 50% upon completion. This best practice in essence works well, except for when there are projects with multiple stages, and different launch criteria. The website building procedure, is quite standard, going from the prototype phase to build phase to launch.
Figure 2: Three-‐‑Phase Approach to Building a Website
Prototype Phase
Build Phase
Launch Phase
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Clients sign off at the end of each stage, and payment is completed before the Launch Phase is executed.
There have been some instances that have brought the simple framework into chaos. I will describe one here:
Although email is not explicitly offered as a service, it is treated as a necessary aspect and is often overlooked during the website creation process. In January of 2012, the primary mail server had been blacklisted by several MX recordkeeping companies. This created problems with outgoing emails, as clients began to call up and demand a fix to their email problem. It took about a week to figure it out, and it was discovered that the best solution would be to move the website from one server to a new one and move the email hosting to Google’s email servers. In reality, it was necessary to create a schedule of the 200+ websites to be moved, and move each site, one-‐‑by-‐‑one. When the problem was discovered it created a chaotic environment, which lasted for weeks. There were several solutions proposed, and several ways of managing the situation from a services perspective.
When looking at the underlying systems, the “backend” (a mesh of the 11 aforementioned systems), is complicated. There is a good amount of flexibility in the system and many options available. This also means that there is a lack of structure, and this is can be seen in the project management timeline. It is estimated that about 80% of projects are completed within a reasonable turnaround time of 1-‐‑2 months. There are about 20% of projects that reach stopping blocks, mostly put into place by clients stalling and delaying the project. As of current, there is no proven method of getting these 20% of projects to completion, except for the time-‐‑consuming process of chasing after the non-‐‑responsive client through emails, phone calls, messages and meetings.
Finally, there is a lack of a project management system. Building a website is by no means complicated, what brings in the complexity is the changes in project requirements that clients make mid-‐‑project. Certain design changes are easier to accept early on in the project, while others are impossible. Changing the requirements mid-‐‑project is time-‐‑consuming and leads to unnecessary delays and out-‐‑of-‐‑budget expenses. It is because of this, that the project management procedure needs to be more accurately defined, and discussed with the client before the project begins.
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3.0 RECOMMENDATIONS
The following recommendations were created after working closely with the company for 4 months. They can be divided them up into 3 different broad categories:
3.1 PROCEDURAL
It is noted that the ad-‐‑hoc procedures used in the past can still be used to manage projects in the future. In order to be able to accept more and larger projects, it is important that procedures be set in place as to make the management of the project as smooth as possible. This will doubly benefit the company, projects will be completed in less time and customers will be more satisfied and more willing to recommend exSite’s services.
Once a website has been sold, it is normally passed from sales to project management. In many occasions, clients would have given specific details as to the requirements of their new system before payment. Although handover meetings have gone well in the past, sometimes there have been several occasions in which the right information was not solicited from the client and would have to have been chased up afterwards. It is generally understood that it is difficult to get the attention of the client later on in the project, and this is the prime opportunity to get that information. It is important to have better structure of the handover meeting, with specific questions about the technologically more tricky aspects of the system. Optimizing this meeting so that it is clear to the client what the next actions are needed and what the client
Procedural
Systems Project Management
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has to deliver in time in order to prevent delays. I have witnessed projects begin without handover meetings, just simply some simple design notes. In one example the designer was given the directive, make a simple site for a lawyer similar to lawyerx.com.
Figure 3: Typical eCommerce Project Build
In order to alleviate the guesswork, an exhaustive list of all requirements needed to build a website was created by an intern. Although it was very complete, it was not in an easy-‐‑to-‐‑use format. This was the building block for creating the design requirements document(see appendix), an easy to read and fill-‐‑out form that outlining most aspects of the design and build process, from a detail of the client as to what functionality will be part of the site, to an approved color pallet and definition of who/where the photography will come from. With additional sections like logo design, corporate branding and marketing, it will also be a useful tool in upselling and cross-‐‑selling other services.
Originally, clients with support problems wrote to a generic email address [email protected]. This email was forwarded to three people, who then managed the case. The problem with this procedure is twofold, some emails could get forgotten about or lost, and one agent could assume that someone else was managing that ticket when they really were not. The email system has since been updated to a shared Thunderbird email system, in order to give the system some redundancy and email tracking abilities. Some support tickets are simple and can be managed in a matter of minutes(ex: create a new email address). Others, launched mini-‐‑projects, and bugs could launch investigations(ex: my contact
Design Phase
Build Phase
Product Management
Systems Design
Training
Payment System Implementation
Launch Phase
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form doesn’t work). Whatever the case, a sophisticated ticket management system, should be implemented as to assist in the growing number of support and content management request increases.
In order to replace the whiteboard, Ganttic was brought in to help keep better track of the time of the resources. Although it is a start, it only allows allotting of time in chunks of one hour. As it is difficult to track the time of the project manager, it would give a more adequate picture of the actual amount of work performed for any one project. A more sophisticated and integrated time management tool, will be necessary to continuously track time in the future. There are several to choose from, and it is recommended that a list of requirements be drawn up to assist in choosing the right platform.
Finally, it was noted that due to the high level of political clients, the systems are a prime target for hacking attacks. Although there is very little that can be done once a DoS attack begins, it is imperative that exSite has emergency procedures in place. This can be as simple as just having an offline list of clients that are affected, with phone numbers and email address ready to be contacted. It can be as sophisticated as having an early warning detection system, and notification to clients that exSite is aware that there is a problem and actively working to investigate. Because of the amount of damage that exSite’s reputation can suffer in this situation, it is important that a constant and regular system of communication is in place during such an attack, which is not reliant on the underlying systems that are being attacked.
3.2 PROJECT MANAGEMENT
Being able to manage projects is an important aspect of a service-‐‑based business. It’s impressive to find out that exSite has gone so long without a project management tool, but it can’t feasibly go much longer without having one that supports its business needs. At the moment, exSite is using Trello as a ticketing and project management tool. This is not sufficient, as the level of reporting and time management features that it has are very limited. At a point, Basecamp was used to manage the eCommerce projects. It is such a powerful tool, exSite should consider returning to it, as it is becoming a standard tool in the virtual business space.
At a point, exSite was a high-‐‑tech company with low-‐‑tech employees. In order to fill this gap, an initiative called exSite education was launched. It proved successful, and staff became more proficient at solving internal and external
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problems. It’s returned to the point though that the gap is once again widening. exSite should consider restarting this project and complementing it with professional development training in service-‐‑based industry, marketing, design and project management. Staff at exSite shows good initiative, and it will be very beneficial to the company to bring some more professional business skills to the business. Some training in the services and business industry would also help all employees to better manage client expectations.
Figure 4: Proposed Completion Time-‐‑line
Part of the complexity of building the website, is that exSite promises incredibly short response times to clients, sometimes offering results within one business day of receiving payment. Although this is very impressive to the client, clients don’t currently pay for expedited service, and this is a lost opportunity. To balance the effect, exSite can offer a completion time-‐‑line. There are three phases to building a website. A meeting can be scheduled in advance at the end of each phase in order to monitor progress, and to offer support to the client. That would allow them to schedule the time of the designer more efficiently, and be able to accept(and charge appropriately for) projects with strict deadlines.
There are currently 3 major bottlenecks in the core of the system, mostly related to a lack of resources. One way to alleviate the bottleneck problem is to increase the number of resources. There should be redundancy in the core of the system, if the designer is sick, production at the factory stops. This is something that should not happen. exSite will want to make sure that its systems and design staff are redundant. In the long-‐‑term, this can be achieved by cross training. In
Protoype Phase (7 days)
Client Review Period (3 days)
Design Phase (7 days)
Client Review Period (3 days)
Launch Phase (3 days)
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the short term, having additional staff on-‐‑call or virtual staff overseas that can step in when an illness occurs or projects start to pile up.
Finally, there are two computers in the office that have Adobe Photoshop installed on them, the computer of the designer and that of the system administrator. On occasion, a project manager has to make small updates to a PSD, and has to wait for one of the other staff to go on break or leave for the day to be able to make that change. It would be more efficient to pay for an additional license on another computer.
3.3 SYSTEMS
Being in the high-‐‑tech industry, means that exSite uses technology to work efficiently and lean. Technology is not always being used in the most efficient way though.
The systems are better, but they’re not great. – Tim G, exSite Project Manager
At the moment, there are four systems (500gb server, Trello, Ganttic and email) for managing the workload of projects. It is recommended that exSite create an extensive list of business needs so that they can choose a package system that allows them to consolidate these four systems. There are plenty of packages available, the better ones will require a monthly subscription. There are several things to consider when choosing a package system, particularly the ability to export data and move it from one system to another. According to Ross, the very first step is to the IT architecture on the key business processes(2003). In exSite’s position, this would have to be working with a project management system that fills their business needs.
Finally, it was discovered that there are not adequate backup and restore systems in place. The agreement with Blacknight leaves the responsibility of backing up the server on the client. Blacknight has some pricey backup solutions. The situation has never been discussed, but exSite must face the reality that without a proper backup system, they risk losing client websites literally overnight. Should one of the big servers go, that could lead the company into failure. Backups are not free, although not having one is taking a risk that is far too great. It is also noted, that whatever backup solution is chosen, it should allow the system administrator to quickly and efficiently restore the client’s website. The restore solution is as important as the backup system. exSite will have to decide on a balance between how much to backup, how much to charge, and what they can afford.
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4.0 CONCLUSION
It’s easy to see that exSite is currently working in an environment that is not only quickly changing, but also highly competitive. Clients are demanding new kinds of products, and competition in the sector is becoming fierce. exSite must face these facts. Just as exSite was able to create a web products that matches the business needs of their clients, they will have to apply this knowledge to create new products that meet the new demands of the market. They’ll have to do this by maintaining the working relationship, high-‐‑quality output and economic value that their clients are familiar with.
In many respects, exSite’s problems are very much like those of other small businesses. They have a small and dedicated staff, a growing number of clients, and have worked hard to build confidence and trust in the market. In some respects, they are unique. Their market of clients is currently shrinking as online businesses are shifting their needs towards other products.
Eleven different aspects of the IT strategy have been highlighted above. For them to assist in the future success of exSite, they need to be developed. Deciding how and when they do this will help the company to mature into a more developed and stable enterprise.
As with smaller companies, they are very concerned with their short-‐‑term goals. Equally important though, are the longer-‐‑term projects, the longer-‐‑term projects will help them to make sure that are adequately ready for the next big thing. At the core of the business, are the IT skills. In a smaller company, everyone counts, and every hire will need to have skills that will allow him to stand in for his coworker. exSite will have to gain the skills and resources needed to corner their part of the market, and be ready to adapt them to the continuously evolving space of technology.
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APPENDIX
REFERENCES
Porter, Michael, Mar 2001, “Strategy and the Internet”, Harvard Business
Review, p72
Ross, Jeane, Mar 2003, “Creating a Strategic IT Architecture Competency –
Learning in Stages”, MIS Quarterly Executive, p42”
Satir, Virginia, et. al., 1991, “The Satir Model: Family Therapy and Beyond,
Science and Behavior Books
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BUSINESS DOCUMENTS
The following documents have been included to provide some insight into the internal processes at exSite.
PROJECT MANAGEMENT METHODOLOGY:
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SAMPLE PROJECT MANAGEMENT CHECKLIST
There are 62 items in this checklist. Only a part of it has been provided here.
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SAMPLE OF DESIGN REQUIREMENTS DOCUMENT
The Design Requirements Document is a seven-‐‑page document used by Sales, and in the Handover Meeting.
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A special thank you to Tom Ponsonby, Tim G, and the staff of exSite Communicatoins, for their
assistance in creating and completing this study.