With Skinman blogging about outsourcing (here, here, and here) along with Michael Miller blogging about the ease of leasing vs. buying, I had to jump in to say that the numbers show that their thinking is right on track.

Using database driving financial modeling software, I modeled a small internet-based business doing their IT infrastructure in-house versus using SoftLayer to handle the infrastructure for them. The benefits of using SoftLayer are eye-popping.

Here are the basic assumptions of the mythical company. There are 8 employees, 2 of which are founders who took out second mortgages on their houses to launch the business. First year sales are about $1.5 million. Business needs require 12 servers in two different geographic locations, housed in climate controlled rooms. Pricing out the servers and networking gear on Dell and eBay worked out to $71,509. This gear was financed with part of the proceeds from the second mortgages, booked to the balance sheet and depreciated. After three years, it was disposed of and upgraded with new gear costing $125,000.

Using SoftLayer changes several of these assumptions. By letting SoftLayer handle infrastructure, one less employee was required. There was no capital outlay for the needed 12 servers and networking gear. SoftLayer got the servers running in a couple of hours with no setup fees for a manageable monthly charge. This allowed less debt to start the business, and there were no long term contracts with SoftLayer if the business idea didn’t work out. There was no need to book the assets to the balance sheet, depreciate them, and upgrading them after three years involved a simple phone call so SoftLayer. No disposing of old gear or balance sheet write offs were necessary.

Consequently, this improved all the most important financial statement measures besides revenue, which remained the same in each scenario. Gross profit, EBITDA, EBIT, and Net Income all improved dramatically from using SoftLayer. Balance sheet credit worthiness, measured by things like equity and the Current Ratio among other things, dramatically improve. Finally, cash balances and cash flow almost double by using SoftLayer. Just compare the highlighted fields in this spreadsheet.

As they say, “your mileage may vary.” But odds are that you can significantly improve your financial performance by using SoftLayer to eliminate operating costs, depreciation, debt financing, and upgrade logistics related to your IT infrastructure needs.

Wal-Mart! Champion of Retail! Who else can build a large brick box, paint it blue, stuff it with stuff, and make money hand over fist? What is the source of this power? Many will say it’s their sheer size. However, this isn’t true! Because what many people forget is that Wal-Mart had to start with one single store, just like every other retailer in America. So what is their secret?

INFRASTRUCTURE!

It’s been said that Wal-Mart can track a single apple from the tree to the front of the store. Every piece of inventory is logged and tracked from pickup to delivery. Every single bottle of aspirin, every sock, every donut is duly logged and mashed up in massive data warehouses where giant computers munch the data and produce useful reports. You know what the most popular item is at Wal-Mart? According to an employee friend of mine, in the Cedar Creek Lake Area of North Texas, it’s Bananas. They know how many bananas are sold, when they were sold, what the best day of the week is for banana sales, and which cashier is responsible for the most banana sales during a month. They can track banana sales over time, by store, region, trucking company, banana producer, you name it. They know which employee was on duty in the fresh fruit aisle when banana sales were high, and which employee used to be on duty in the fresh fruit aisle when banana sales were low. It’s all in there, if you want it.

However, Wal-Mart had to build this technology from scratch. They had to install special data systems in their distribution centers. They had to build their own server farms, lease their own data lines… did you know Wal-Mart has it’s own SATELLITE NETWORK?!? The Wal-Mart Satellite Network is one of the largest private satellite systems in the world, carrying real time data from every single Wal-Mart store and distribution center to Wal-Mart’s headquarters in Bentonville, Arkansas, where it is poured into their massive data warehouse. They can plan, instantly, to take care of overstocks and shortfalls at every store, as soon as it happens.

You don’t need to build your own satellite network to get competition crushing infrastructure today. Using the technology solutions provided by SoftLayer, and simple connections to the Internet, you too can have the type of infrastructure necessary to succeed in today’s business world. We provide world class servers for your number crunching, huge amounts of networked storage for your data warehouse, geographically diverse datacenters for disaster security, and a private network that allows you to tie it all together as blazing high speeds. Using our awesome API 3.0, you can automate just about every part of maintaining your infrastructure. Leveraging the Internet, you can build data portals that allow your partners to keep you up to date on production, to plan finances, track bananas, whatever you want to do!

We’ve already taken care of the hard work required to build the infrastructure. Now all you have to do is leverage it.

Wikipedia defines stress as the condition that results when person-environment transactions lead the individual to perceive a discrepancy, whether real or not, between the demands of a situation and the resources of the persons biological, psychological or social systems. In a nutshell that says Stress is your mind telling you that you are in over your head for a multitude of reasons. I have worked many jobs in the past where those transactions were out of control and they became high stress jobs. Let’s hit the “wayback” machine and relive the stressful ones. I am assuming some of you will relate to this and some will just think it’s funny.

The Burger years - It all started at Burger King. I know if you haven’t done the fast food thing you are thinking, “Right, that isn’t a stressful job!” I’ll tell you though, during a lunch rush when the order screen is full and backlogged and you are the only one making burgers and you are about 30 behind, it can be a little stressful. Then there are the times when non-paying customers are eating food from the salad bar and you have to tell them to leave, but that is a separate (and funny) blog entry. Anyway, I decided that the burger future just wasn’t for me and it was adding to my ham hocks so I left for…

The Factory Months - Repetition became the word of the day for the next 8 months. I lifted 100lb bags of powder repeatedly, then cut the bags and dumped the chemicals into a vat. After hours of mixing it magically and chemically became glaze for toilets. I even made pretty colors with Black being the most time consuming, specific, and expensive (if you have ever priced a black toilet now you know why it is so high). Really the only stress there was just trying to get it all done in 8 hours correctly and not hold up the day guys and make them wait on me. Driving the forklift through the wall and losing 50 pounds of Burger King induced ham hocks was just a bonus. After that it was off to…

The Mall years - Any of you ever hear of Babbage’s? I took a store manager position and you would be amazed at how stressful working from 9am to 10pm during Christmas hours was. Normally it was just the kids kicking and screaming but during Christmas it was THE PARENTS! “I was first in line! No! I was” All that for games for the Linx hand held (it was SO cool and so before it’s time), Nintendo, or Sega. Even during the slow months the monotony of standing there just waiting for a customer was almost as stressful. I thought it was time to get a real job so I went to work for…

The Clone wars - Computer clone manufacturer as a sales person. A sales position is very stressful. I bet all you folks out there that have to meet a quota know exactly what I mean. The last day of the month you are popping the champagne corks and getting big bonuses and commissions and then the very next day your sales are at $0.00 and you are at square one again. It’s numbing and nerve-wracking. I am no longer a sales guy after 5 years of that hell and my hat is off to those of you who are good at that gig. I learned a few technical things while being in sales so it was time to try them out.

The “Internot” years – Phone support at its finest! Phone support in the early days was different than today. Today we have remote control tools and things of that nature where in the past it was all trial and error with some folks who just bought that new computer (and very first computer) with a Winmodem in it. Oh, the good old winmodems (I just shivered). I can’t even begin to explain how stressful a 12-hour shift of phone support talking about winmodems can be. If any of you remember that I bet you just shivered too. Two years of phone support was enough so…

The Geek years – Systems admin/engineer. I stressed out like crazy taking my MCSE all to get this phone call while working at a fortune 500 company. “Email is down! For everyone! Fix it! We can’t do anything without it! We are dead in the water!” MORE STRESS! I have found that CEOs can’t live without email anymore when in the past they actually played golf on the golf course, now they claim to still work! I worked with Terminal services, Citrix, and Exchange, the things that companies just CAN’T live without. Sleep was optional during this time so I decided…

Management! – Get the title. Manager, Director, I want to be a VP, etc. Life will be stress free closer to the top. What was I thinking? I think this one is better broken into two categories, managing up and the WIT method (I just made that up!). We will start with managing up. Managing up? It’s the fine art of making your boss think you are interested, patting yourself on the back, seeking new “out of your comfort zone” responsibilities, getting noticed at all costs, act like and work like one level above your title, and knowing what matters to your boss and his boss even if they don’t matter to your group or the people you manage. So for the short definition Managing up = Stress! I took pride in being the laid back easy going manager that gains respect from his employees by trusting the people he puts in a place to do their job and letting them succeed and helping when necessary. If you mix that style with a micromanager you are looking for trouble. I think stress starts at the top and is instilled in everyone all the way down to the very bottom. A workaholic CEO = a stressed out workaholic staff. I’m not saying that you shouldn’t manage up as it is a very good form of getting promoted etc. I am simply saying it adds stress to your life. On we go to…

WIT – Whatever it takes. There is something to be said about a company that has one simple motto from the top to the bottom; whatever it takes and at the same time actually living to that standard. I have found that place. When my alarm goes off now in the morning, I hit the ground running. I can’t wait to get to work and be part of the fun and productive team and do whatever it takes. I can honestly say that everyone at Softlayer has one goal - to be the best! THAT makes for an extremely stress-free and fun workplace. We don’t need to work in the Bank of America tower in beautiful downtown Dallas to be happy, we are happy already! Just keep up the free coffee and Monster and I am good to go!

If you own a small business then you most likely deal with stressful situations daily. Why not let us ease some of your IT stress and outsource your infrastructure to the best stress-free IT Company out there - SoftLayer!

Disclaimer:The events depicted in this blog are true. Any similarity to a company living or dead is most likely coincidental.