Things to consider as you enter the New Year

First and foremost, Happy New Year!  We wish everyone a prosperous and healthy 2016 and want to thank The Wholesaler readers who have been so supportive over the years.  We also want to thank the crew at The Wholesaler who do all the hard work of getting the magazine out every month.  We are honored to be a part of the team that puts out the best magazine in our industry.

As we start the New Year, there are a lot of things to be thankful for and a lot of positive things happening in the world.  There are also many changes happening. Technology is constantly evolving and with new things there are always risks. While risks are in every human endeavor, the reality, in our experience, is that with anything “new” you can seldom avoid paying your dues.  

As an example, you may decide to convert to a “new” ERP.  The ERP sales person has shown you a bright, shiny new system with a slick, modern-looking user interface. It “seems” perfect and “surely” has all the features and functions of your old system, plus all the new features and gingerbread that the sales person has demonstrated. We have, thus far, not heard of a conversion that did not involve some level of “paying dues.”  Over the years, we have heard of a few where the dues paid exceeded the net profits for the wholesaler involved in the process. If the expenses had been expected and planned for, the investment would have been absorbed in the course of business.

Unfortunately, there were surprises that jeopardized the businesses.

The point is that planning for the paying of dues often makes the process more successful and less expensive.  So let’s start building a list of new things that you may want to ponder as you move into the New Year.  As always, we hope our list hits some of your issues and also stimulates some ideas for your own list of new things/risks for the coming year.

• The Internet – Of course the Internet is not new, but it continues to evolve in many new ways.  This means you cannot simply assume that where you are or where you are going is risk free.  As expected, the Amazon Supply has not wiped out the traditional wholesaler, but as we have said before, you must take a competitor who is this large seriously.  They are selling stuff to customers in our industry, as are a growing number of stores created by large nationals.  If your team is not up to speed, it’s time for them to pay their dues and get fully engaged in conducting business in the internet age — and in resigning themselves to the reality that “fully engaged” could be much different a year from now.  

• Hosted environments – There are certainly many things to recommend the use of hosted environments for your website, webstore and even your ERP.  They can be very cost effective and may provide better day-to-day service levels for some companies.  They may reduce maintenance costs and are a good candidate for outsourcing since, the skill set to manage a Windows/Linux server or a network for our industry is pretty much the same as other industries.  In other words, there is little, if any, industry-specific knowledge for managing servers or networks in our industry.  

Every week we hear horror stories about viruses and other sorts of attacks being launched by smarter and smarter hackers.  The large, well-known, hosted environments present trophy targets for hackers  while smaller private environments might fly under their radar.

• Technology dependence – Many companies have become so technology dependent that they do not even have a plan for how they would continue to provide service through an extended power or communications outage.  One wholesaler confided, “Our old timers still know how to hand write an order but most of our new people have no idea how to do it.  I would bet many of our branches couldn’t even find the multi-part forms we have stored somewhere in their office.  I should probably make sure they haven’t thrown them out.”  

We recommend that you have a plan for continuing to operate your business through an outage.  If the outage is localized to you or your provider, you certainly don’t want to cede all your business to competitors.  In a local emergency, like an ice storm or a tropical storm, your community will need you as a part of the recovery effort.  Think through the immediate problems of taking orders, pricing the orders and get the material delivered but don’t forget the back office functions of replenishing, paying suppliers, billing customers and processing payments.  After the dust settles, it is surprising how quickly an extended outage in these often-ignored mundane functions becomes life-threatening to a company.

We also recommend that you evaluate the disaster plan espoused by your hosting provider or prospective provider.  Ask some tough questions about power, communications, natural disasters, etc.  Ask how the environment fails over to the disaster environment?  Are the main data center and backup data center likely to experience the same ice storm or other major weather event?  Do they actually test the fail-over procedure?  (Fail-over is a procedure the provider uses to move the normal workload to a backup server or data center.  Some providers have an automated fail-over that, in theory, moves the workload without human intervention.  Some fail-over processes require major manual work to move the workload.)  Do they have 100% of their capacity in their disaster site?  Should you expect degraded service in a fail-over?  In a past life, Rich ran data centers for a Fortune 100 company that included massive disaster recovery plans.  In his experience, very few fail-overs are seamless.  Very few plans are actually tested and when they are, they often disclose gaping, sometimes fatal, holes in the plan.  His rule of thumb is: When a provider tells you he has absolute confidence in their plan, you can have absolute confidence that they are lying or ignorant.  Do these providers have better plans than most wholesalers?  Probably, since most wholesalers have essentially nothing.  Either way paying some dues up front may save you a big balloon payment when it hits the fan.

If you are not using a hosted environment, you should be considering these same questions about your in-house system.

• Web data backup services – again we see a large number of companies in and out of our industry moving to online backup services.  The promise is: “Trouble-free backups of your data without the hassle of tapes and other backup devices.”  It is important to read the fine print of what they provide and to understand both the backup and, maybe more important, the recovery process.  If a server dies, is the restoration process a simple and fast process or are you 3 days away from an operating server.  Much of this may depend upon your network speed.  What happens if the event takes out your network connection too or the city’s network connection.  

Surprisingly, some of the backup approaches will not allow you to easily restore back to the end of last month.  In the past, you simply brought in the tape from the end of month and you were there.  When you ask some online backup services to restore to a date, they respond, “We don’t work that way.  You have to select the files you want from a list.”  That works great if you want a lost photo of grandma’s 90th but if you need to restore 3 million files to rebuild your accounting and inventory for the last year, that will be a huge mess.

Further, web data backup services may not provide the archival and tax records you want.  We are not experts in this area but we have heard of companies stopping their in-house data archives in favor of these services and are concerned that they may not be in compliance with a company’s need for archives and records.

Just for the record, many in-house data backup approaches deserve serious scrutiny.  Some companies have moved from simple, reliable backup tapes taken home by the owner to complicated backup software that “magically” manages the process with a mix of backup servers, network providers and disks or tapes.  As with most technology, when it works as planned everything is wonderful.  When it fails, the complexity may result in a situation that no one on earth can solve.

The recommendation is to take a deep dive into how your data backup works, and consider whether you want to have all your eggs in that one basket.  Does your backup provide the security and redundancy that you will need in a disaster?  Have you ever tested the recovery process to make sure it works and to determine how long you will be hand-writing tickets as the data is restored?  There is an old saying about “assuming” things that definitely applies to data backup.

There are lots of new things on the horizon.  Some will be great, some will not.  The challenge for all of us will be to approach them all with respect and some caution.  Remember that for most of them there will be dues to pay, so take the time, ahead of time, to understand and plan for, those dues.

Are the main data center and backup data center likely to experience the same ice storm or other major weather event?  Do they actually test the fail-over procedure?  (Fail-over is a procedure the provider uses to move the normal workload to a backup server or data center.  Some providers have an automated fail-over that, in theory, moves the workload without human intervention.  Some fail-over processes require major manual work to move the workload.)  Do they have 100% of their capacity in their disaster site?  Should you expect degraded service in a fail-over?  In a past life, Rich ran data centers for a Fortune 100 company that included massive disaster recovery plans.  In his experience, very few fail-overs are seamless.  Very few plans are actually tested and when they are, they often disclose gaping, sometimes fatal, holes in the plan.  His rule of thumb is: When a provider tells you he has absolute confidence in their plan, you can have absolute confidence that they are lying or ignorant.  Do these providers have better plans than most wholesalers?  Probably, since most wholesalers have essentially nothing.  

Either way, paying some dues up front may save you a big balloon payment when it hits the fan.

If you are not using a hosted environment, you should be considering these same questions about your in-house system.

• Web data backup services –  Again we see a large number of companies in and out of our industry moving to online backup services.  The promise is: “Trouble-free backups of your data without the hassle of tapes and other backup devices.”  It is important to read the fine print of what they provide and to understand both the backup and, maybe more important, the recovery process.  If a server dies, is the restoration process a simple and fast process or are you three days away from an operating server?  Much of this may depend upon your network speed.  What happens if the event takes out your network connection too or the city’s network connection.  

Surprisingly, some of the backup approaches will not allow you to easily restore back to the end of last month.  In the past, you simply brought in the tape from the end of month and you were there.  When you ask some online backup services to restore to a date, they respond, “We don’t work that way.  You have to select the files you want from a list.”  That works great if you want a lost photo of grandma’s 90th but if you need to restore three million files to rebuild your accounting and inventory for the last year, that will be a huge mess.

Further, web data backup services may not provide the archival and tax records you want.  We are not experts in this area but we have heard of companies stopping their in-house data archives in favor of these services and are concerned that they may not be in compliance with a company’s need for archives and records.

Just for the record, many in-house data backup approaches deserve serious scrutiny.  Some companies have moved from simple, reliable backup tapes taken home by the owner to complicated backup software that “magically” manages the process with a mix of backup servers, network providers and disks or tapes.  As with most technology, when it works as planned everything is wonderful.  When it fails, the complexity may result in a situation that no one on earth can solve.

The recommendation is to take a deep dive into how your data backup works, and consider whether you want to have all your eggs in that one basket.  Does your backup provide the security and redundancy that you will need in a disaster?  Have you ever tested the recovery process to make sure it works and to determine how long you will be hand-writing tickets as the data is restored?  There is an old saying about “assuming” things that definitely applies to data backup.

There are lots of new things on the horizon.  Some will be great, some will not.  The challenge for all of us will be to approach them all with respect and some caution.  Remember that for most of them there will be dues to pay, so take the time, ahead of time, to understand and plan for, those dues.

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