The Wrong Decision Can Be Risky at Best – Expensive and Dangerous at Worst.
There are hidden costs and hidden benefits in everything we do in business. Likewise, there are hidden risks. In this article, we’ll tell you a cautionary tale of cutting technology costs – and how that simple decision can cripple a business. A client of ours just received the most expensive bill for something they didn’t want or order. Well, not actually. They missed out on a very lucrative opportunity. Let me explain…
A Real-Life Cautionary Tale: Cutting Technology Oversight, Services, and Costs.
Our client’s leadership was looking to cut costs and decisions were made without understanding the risk or impact. We have been working with this client for over 10 years, but over the last few years, our services and oversight were decreased to cut costs, at the direction of the CFO. They also brought more of their IT work in-house, relying more and more on their in-house IT manager.
It all started fairly innocently…
- They stopped the onsite visits
- They started handling patching and updates internally
- They asked us to remove the monitoring tools, which meant:
- Remove access to workstations was eliminated
- Communication was virtually non-existent
As of a few months ago, we were only providing help desk support when the IT guy was on vacation and to monitor and verify that backups were being done. As a result of these changes, things really hit the proverbial fan and “stuff” splattered everywhere. Over time, decisions by the internal IT manager were made that did not include the CEO, including the decision to reduce our services and oversight to the levels we found ourselves providing.
A Very Lucrative Opportunity Missed…
What was not known to anyone was that the company was pursuing a lucrative merger opportunity. During this critical time, our client’s IT infrastructure was significantly modified by the internal IT manager. However, industry best practices and standards were not followed.
The CEO, unaware of the changes and these looming risks, was positioning the company for the expected merger. All the ducks were lined up when the floor fell through.
What happened? Well, they were unaware of significant security risks due to a lack of appropriate internal controls and oversight. Basically, thousands of files, templates, and industry secrets developed over 30+ years – all of their intellectual property – was stolen by a few soon to be former employees.
These former employees were intentional and malicious in extracting the information they needed to steal client information, and eventually, go after those clients once they opened up a competing entity. Making matters worse, the internal IT manager was part of this malicious scheme, working in concert with these employees to facilitate their theft of proprietary company assets.
That Loss of Intellectual Property Cost Them MILLIONS in Lost Revenue!
As the merger moved closer to becoming a reality, the financials of the business were pointing towards meaningful losses. Remember those former employees siphoning off the company’s intellectual property? They began stealing clients, and with them, the revenue associated with those accounts. This damage amounted to millions of dollars in revenue and over $10 million in corporate value. As a result, the merger collapsed and the CEOs exit plan was lost.
What seemed like reasonable cost-cutting measures cost our client tens of millions of dollars. Could you be unaware of similar risks to your business, especially if you are considering an eventual merger, sale, and possible exit? The biggest issue we find is clients who simply “don’t know what they don’t know.” All too often, we see IT budgets being cut because it’s just perceived as “overhead.”
What You Spend on Technology SHOULD Be a Competitive Advantage…
I would argue that your IT expenditures should be a competitive advantage and differentiator for your business. It’s anything but overhead. You undoubtedly have financial and other controls established within your business. Do you have them for your IT team? As this story painfully shows, you should. Palindrome Consulting is uniquely qualified to help you establish reasonable controls that will become integral to reaching your corporate goals.
If you’re ready to understand your risk factors and make educated decisions based on your risk profile, let’s work together. We require ALL of our managed services clients to go through a best-practice review of their entire technology stack so they can make sure they’re using technology to operate more effectively and prepare for all possible scenarios.
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