6:30-8:00 Jeffrey Palermo (COO, @jeffreypalermo), Kevin Hurwitz (Chief Architect), Pedro Reys (Consultant, @pedroreys) will present on How To Do Business in the Cloud: A Technical Perspective
Abstract: The cloud is very sexy. Business is boring.. This presentation will cover how:
Every company department operates in the cloud
The developers build and test software in the cloud
We manage the consulting practice in the cloud.
We use at least eight different cloud providers, and we will share the uses and strengths of each. Because each of our projects is a custom solution for clients of various industries, we almost always never do the same thing twice. This is designed to be an interactive presentation, so ask questions at any time. We are happy to share our experience with cloud offerings, what has worked, and what turned out to be a resounding “fail”. Hopefully our findings will help you and your company not fail.
Bios:Jeffrey Palermo, Chief Operating Officer, will share the boring business services that streamline the management of the software consulting company. Chief Architect, Kevin Hurwitz will share the technical side, and Consultant, Pedro Reys, will share how this structure enables custom software systems to be easily developed, tested, and deployed.
In September of 2007, I joined my company as the CTO. Now I serve as the Chief Operating Officer (COO). When I joined, there were 4 other employees including the original found serving as CEO. He founded the company in 2001. It has always been professional services, but the strategy has changed a few times over the years. I have been meaning to share some of what I have learned since Sept 2007, and this post is about one thing I am really excited about: operational metrics. I also will share what I’ve learned about financial metrics at some point. I work with our accountant to ensure our monthly financial statements paint a clear picture of what is going on with the company.
Every day, I glance at our operational dashboard. While I won’t share full screen-shots yet, I want to share some of the graphs I use every day to ensure the company is doing well. Consider this graph.
“BD” stands for “big dial”. We have 3 big dials we glance at every day. If we don’t like what we see, we have some “smaller dials” we can look at. We use the analogy of a plane cockpit. There are a few things pilots always glance at, and then there are smaller, more detailed ones that are consulted as the need arises.
This graph shows us our utilization breakdown in the categories that are relevant. Here are the categories:
Personal Time: holidays, vacations, dentist appts, etc.
Assigned Time: Department meetings, 1×1’s, stand-up meetings, etc
Bench Time: Time without available project work (doesn’t show because it’s zero)
Other Time: Unplanned unproductive time, such as having a flat tire on the way to work
Sales Time: Mostly used by the sales department: work to acquire a client
Billed Time: self-explanatory
Unbilled Time: Working for a client, but not charging
CI Time: Continuous Improvement time: We expect 10% of the time, our people are working to improve: comes out to 5.2 business weeks of the 52-week year.
You will notice the big dip during the week of 4/7. We had our Q1 quarterly off-site during that week. We spent 12% of that week to use as a fun off-site where the entire company toured Inner Space Cavern hundreds of feet under Georgetown. It shows up on the dashboard because it affects the performance of the company. As an executive team, we decided it was a good investment in the future productivity of our staff.
You might have also noticed that 4/7 was a Thursday in 2011. How can it be the week of 4/7? We use the concept of “moving weeks” instead of calendar weeks. We used to use calendar weeks, but the last data point of the graph was always skewed because it didn’t represent a full data point until people logged their time for Friday. By taking data from a moving week, when I look at the data on Thursday, it pulls data from the previous Thursday through this Wednesday (yesterday). That way, every point on the graph represents exactly the same size of a data point. We do the same for months, quarters and years.
There is a big problem with pull metrics by calendar month:
January has 21 business days
February has 20 business days
March has 23 business days
April has 21 business days
May has 22 business days
You can see how using calendar months can wreak havoc on the comparability of month metrics. We expect larger months to pose better numbers than the smaller months. On the financial side, we have to accrue the payroll appropriately as well in order to keep net income from becoming skewed.
To deal with this, we use the concept of a moving month. There are 13 moving months in a year. Each moving month is a 28-day time period from yesterday to 28 days before yesterday. In this way, every data point will be exactly the same size as the other. There are also 4, 13-week moving quarters in a year. The following graph is our 2nd big dial shown by moving month.
Before moving to moving months, the calendar month line was consistently misrepresented by the larger months. Where the line moves, we need to know why. We made the switch so that every curve of the line was meaningful. We didn’t want our data communicating falsehoods or April-fools jokes. You think I’m kidding, but April always looks bad coming straight out of March, which boasts 2 more full business days. In professional services, a business day accounts for a significant amount of revenue.
Using Big Dial 1 and Big Dial 2, we can keep the ship on the right course. As long as our staff is billing a consistently high percentage: we shoot for 78-79%, and our hourly margins are high enough to account for our unbillable staff (sales, marketing, corporate) and our fixed costs (facilities, supplies, etc.), our company will remain healthy.
These dials are tactical, not strategic. The next dial is strategic.
This gives us a view into the structure of our company. We have hired at least 9 new employees since Jan 1, 2011. With that, it’s important to keep tabs on how we are changing the structure of our company. When we hired Steve Donie for the operations department, we expanded billable staff. When we hired Katie Barbaro for marketing, we increased non-billable staff. Keeping the right balance is important.
You can see that our % of Operations staff to the rest has dipped a little bit over the last 7 months. We have done that while growing, and we are re-leveling the organization now. To level out the organization, we need to add about three more people to the Operations department. This graph, while very high level, gives critical insight into how the other two graphs affect our income statement.
Using these three charts together, I have a very good sense of what I need to do to improve the financial performance of the company. Right now:
I need to hire 3 more great .Net developers
I need to keep Client Time at the level of Operations % plus Contractor % (since both types bill)
I am really sorry to say that there will not be a Party with Palermo at Tech Ed this year. I have had to make some priority decisions, and I have decided to prioritize my daughter’s tap dance recital over throwing the party. I want to thank my sponsors and the enthusiastic attendees to always looking forward to and supporting the party.
Party with Palermo has always been a personal thing, not connected to any business. The size of the bar tab has always been connected to the amount of sponsorships I’ve been able to get. I look forward to planning the next one at the next major Microsoft conference I attend.
Party with Palermo started in 2005 the night before Tech Ed in Orlando, FL. It was held at the hotel restaurant inside the Peabody hotel. With no budget and no sponsors, 35 people came to have dinner together. The original purpose was to provide a venue where folks could gather the night before the conference when everyone is getting in to town with no place to go. Over time, I have been able to bring on sponsors to provide funds to rent a venue, provide food as well as tasty beverages.
In the spirit of this purpose, feel free to use the comments on this blog post to direct people to other social venues available the night before Tech Ed starts on Sunday, May 15, 2011. The traditional time has been 7PM.
A special shoutout to anyone who wants to plan a “Party without Palermo”.