When it comes to financial planning, Cesar Lopez knows his stuff. He can write up an annuity, help with investment and tax strategies and give advice on insurance needs. Just don’t ask him to fix his own computer.
“I can look at your 401(k) and fix it, but I’m clueless when it comes to technology,” says Lopez, president and chief executive officer at Next Level Advisors Inc. in Roseville.
Fortunately, Lopez doesn’t have to be a computer expert. He just needs to hire one.
With the help of a local information technology consultant, Lopez digitally stores files, accesses files remotely, networks with financial advisors in 16 Northern California offices and simply makes a phone call if something breaks down.
Lopez estimates he saves about $75,000 a year by outsourcing his six-man firm’s IT needs instead of hiring an in-house staffer. He contracts with Aperio Information Technology of Sacramento to manage Next Level’s robust online offering of financial services.
“It’s not even close, cost-wise,” Lopez says. “An IT tech hired on staff would cost $90,000 with salary and benefits, and instead, I’m spending $15,000. And with an in-house staff person, your IT department is only as good as that one man. With an IT company, you have a staff of people with specialties or experts in different arenas.”
Small businesses rely more than ever on technology that seems to change faster than it can be mastered, yet for small businesses of limited means, hiring a technology manager is out of the question. Thus, the use of external IT support experts — who provide everything from new computer set-up to software upgrades, protection against malware and troubleshooting — has increased among small businesses in recent years.
American companies with fewer than 500 employees spent roughly $23.5 billion on IT services last year according to research firm IDC show.
Now, large corporate retailers are breaking into the brisk small-business market, bringing competition to a sector typically dominated by local independent consultants. Apple and Best Buy recently formed IT service packages for U.S. startups and small companies.
Best Buy highlighted its faith in the small-business market when in December it bought Mindshift Technologies Inc., an IT service provider to more than 5,400 small and midsize businesses nationwide. And last June, Apple partnered with OnForce Inc., a company that delivers on-site IT support to small companies.
Apple also introduced JointVenture, a program providing small businesses with limited tech support in stores and over the phone. That program starts at $499 a year for customers who buy a new Mac, and helps businesses use Mac, iPhone and iPad, including set-up, employee training and systems maintenance.
Larry Barrows, vice president of ConnectedLiving in Sacramento, is one of about 100,000 Apple consultants nationwide catering to the small-business market. He says Apple consultants offer consultations for about $125 an hour, with discounts for home-based users, military personnel and retirees. Barrows also offers clients a flat-rate monthly fee for managed services.
Spending on IT services by U.S. companies of all sizes has been growing at about 3.2 percent annually over the past five years and reached $304 billion last year. That is about 55 percent more than their spending on computer hardware and software sales combined, research firm Gartner Inc. reports.
About 71 percent of small and midsize U.S. companies said they planned to increase their IT budgets by about 5 percent over the next 12 months, according to a July survey of 602 companies with fewer than 500 employees by the Computing Technology Industry Association, a trade group.
The small-business IT market is alluring to many in part because no single player dominates, even though some large corporations have been in the space for longer than Apple and Best Buy, including IBM Corp., Staples Inc. and AT&T Inc.
Cary Warner, vice president of sales and marketing for Aperio, says that as small companies started unloading in-house technicians, IT consulting businesses gained market share, which slowed to a halt during the beginning of the recession and recently have picked up steam.
“We went completely dormant in terms of getting new clients,” Warner recalls. “We had our core client base, but we just battened down the hatches.”
Today, IT consultants have moved to a two-tiered business model, he says.
“We have to offer more and be smarter,” Warner says. “We’re marrying the two ideas of having a back-end, managed server for doing updates at night, clean-ups and utilitarian tasks, leaving our best guys to go to businesses, do more consulting and long-term tech solutions.”
Miles Feinberg, president of Miles Consulting Corp. in Folsom, says that in the past two years, his IT consulting work from small-business clients has risen by 60 percent.
“People had in-house IT staff, and people were scared,” he says. “There was real business loss, and everyone felt the need to get lean and tighten up. So they hired companies that could do it for less. They want to make sure they’re only spending what they need to spend, especially in the harder-hit industries.”
Feinberg says he’s seeing growing demand for cloud technology, which allows multiple users to store and access files on the Internet, as clients seek to streamline and cut costs. When Feinberg started offering cloud consulting in 2010, it was about a tenth of his business. Today, cloud computing makes up a third of his business volume, he says.
Cloud computing includes analytics, software customization, disaster recovery and video conferencing, for instance. Such options and others only recently became feasible to dispense on a widespread scale and at prices the average small business can afford.
Both Feinberg and Warner say competition from the corporate giants hasn’t had much impact yet because most businesses have used local independent support teams for years. Feinberg points out that Best Buy is struggling financially, and most small businesses appreciate a local independent presence for their IT support services.
Still, with all the third-party IT options out there, plenty of business owners still find success by going it alone.
Panda Morgan, director of the Greater Sacramento Small Business Development Center, says her organization has expanded its offering of computer-related classes, and demand is increasing. Last year the center helped 100 people through its social media classes and would soon increase the number of workshops from two a year to four a month.
Hanouvi Agbassekou started a business about a year ago from her Rancho Cordova home and is the sole employee. Through her company, Afrique Design, she imports African fabrics and designs and sews pillows, table linens and dresses.
“Technology is very challenging for startups,” says Agbassekou, a native of Togo in West Africa. “I would love to hire someone when I can afford it, but as a startup business, I don’t have that money right now. Sales are increasing, though, so hopefully it will get to that point. ”
She estimates developing a website with e-commerce and email marketing capabilities would cost about $5,000. Instead of paying someone else to do it, she got assistance from the Small Business Development Center and created a no-frills website and a Facebook page herself.
But she recognizes the importance of having a richer web presence and integrated marketing strategy to spark interest and drive sales.
“It’s important to have these nowadays,” Agbassekou says. “You need a powerful website, with all the features up to date.”
Who you gonna call?
The corporate tech giants have gotten hip to the IT needs of small businesses nationwide. So, if you don’t have a tech guru on staff, you’ve still got options.
Bust Buy: Geek Squad
The Geek Squad is a national, 24-hour task force comprised of computer experts, home entertainment installers, appliance repair technicians and automotive technology technicians. The company is a joint operation with Best Buy and serves individuals and businesses via the Internet, in stores and on location at your home or business. There are not fixed prices for all services, some of which are billed by the hour, but many others do have flat rates. Virus and spyware removal, for example, runs $300 if a Geek comes to your office, but is just $150 if you work through the issue via online chat. The Geek Squad’s agents are listed online with customer service ratings and information about their professional experience, so if you have a preferred service provider, he or she should be easy to find for future needs. In addition, the Geek Squad offers a 30-day, money-back guarantee for computer services.
AT&T: Tech Support 360
Tech Support 360 is a live, 24/7 solution for clients comfortable receiving tech support over the Internet. Services include PC and Mac support, software installation and training, network and security setup, plus managed services such as online data backup and server support. The AT&T Tech Support 360 website provides a menu of one-time, web-based services, including a $140 PC tune-up that includes a virus scan, spyware removal, system defrag and file clean up; a $90 set up for two computers to a secured wireless server; and a $60 Mac installation, set up or training. Alternatively, subscription-based services are also available from $19 monthly per PC or $24 monthly per Mac, or clients can buy subscriptions by the minute, starting at 200 minutes for 18 computers to 750 minutes for more than 30 computers.
Staples entered the small-business tech arena about 5 years ago and has a menu of services listed on its website. Services are conducted in store, at home, in the office or online for a flat rate. Basic services include on-site software installation from $90, loading and testing new drivers on-site from $90, online Windows 7 tutorials from $50, and custom configurations in your office from $130. All of these services and a number of others, including printer setup, are offered in the store or via remote access to your PC for a fraction of the on-site price.
OnForce’s “on-demand workforce” business model allows clients to pay for services only when they’re needed. A network of independent contractors provides assistance on site for customers who need tech support or want to plan and implement a migration from PC to Mac. OnForce supports more than 20 IT categories, including printers, networking, telecommunications, software and hardware installation and troubleshooting, however they do not offer flat-rate services. In addition, OnForce provides support exclusively for Apple retail products and is now offered in Apple stores nationwide. Apple Solutions provides on-site services for Apple customers, assisting with integrating Apple products into businesses, installing equipment, expanding IT infrastructure, wireless networking and remote access. To get the best idea of the IT services needed, Apple recommends starting with an on-site survey in which an Apple expert visits your office and assists in developing a service strategy.
— Christine Calvin
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