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Linux Consulting Secrets

By Tom
Adelstein
,
CIO of Bynari, Inc

Earlier this year, Bengt Vienke, the Vice President of Data
Services for Ericsson
Americas asked me to assist him in developing a plan for setting up
a consultancy in the US. My assignment included analyzing the
market for niche areas where an Ericsson professional service
organization could enter the market. Ericsson operates a global
business and with its massive infrastructure they have had success
offering services to the industries they serve.

Working with the Ericsson team in the past and having a track
record for consulting startups prepared me for the assignment, I
thought. We learned a valuable lesson about the consulting business
that can help Linux consultants thrive and further market
acceptance for Linux.

Which Startups Succeed?

Startup organizations fail for many reasons. Usually, the firm’s
business plan, written or not, does not contain a well conceived
model. A common misconception exists in the minds of the operators
and the people who finance them. People believe a startup must have
a “great new idea” or a GNI.

Startups succeed when they focus on overlooked business
opportunities. One doesn’t need a GNI to succeed. One of our
founders uses an interesting phrase to characterize this: He says,
“God is in the details but how do you ship it?”

Consider the aforementioned company. Over a span of one hundred
years, a few telephony switches bearing the logo made their way
into the global infrastructure. With an installed base of business,
a startup business can “add value” by adding support. While some
people look for GNI others have created instant revenue by doing
the skunkwerk jobs.

(You might ask for a definition of skunkwerk. I have no idea
where the term originates, but it seems to come from the same
people who say, “that’s how the coins fall to the floor.” I suspect
a Penguin lover might know. As explained to me, it’s the dirty
little jobs no one wants and for which people forget to
budget.)

Skunkwerk characterizes a niche for Linux consultants. For
example, many companies already have Linux systems integrated into
their networks. Free downloads and early distributions of Linux and
the GNU libraries provided many organizations access to the
Internet. GNU’s history precedes the Linux operating kernel and
many people opted for inexpensive solutions to email, firewalls,
print and file services and other solutions available from such
stale places as MIT and UNC. The people who deployed or patched
those utilities together have probably left their organizations
since turnover in the IT world is high. The new employees inherit
those boxes and don’t know how to maintain them. Thus, the Linux
consultant becomes handy.

The analysts of the world might find the proliferation of Linux
in the business community greater than they want to believe. After
all, what sensationalism exists in adding a newer kernel to 75 Red
Hat 4.1 486 computers running the mail for an international firm?
From my experience, the number of Linux servers in business far
exceeds the estimates. Simple statistical sampling tells me that
the number of Linux servers already in use exceeds the estimates of
the community by 300%. I conclude this from samplings of service
requests from our current operations and ones with which I worked
in the past.

Take a look at the business case
archives
at lcsrc.
You’ll see that Linux is the glue that many companies use to hold
their networks together. You’ll also find that it’s the server of
choice for organizations operating on a budget and for those who
need a stable server environment.

Show Me the Business

Microsoft’s Steve Balmer might worry about Apache. A Linux consultant should
learn to track like an Apache so he or she can find a Linux box
running someone’s Web site and sendmail. How many million Web sites
went up on Linux boxes before Microsoft’s brilliant cult figure hit
his head with the heal of his hand and uttered those infamous
words, “We missed the Internet”?

Let’s see, I got my first release of Windows NT 3.1 in 1994 and
it didn’t have a web server. As I recall, we patched it to handle
the PCI bus sometime that year. Then, Windows NT 3.5 arrived as did
NT 3.51 before version 4.0 in late 1996. So, Microsoft didn’t offer
a Web server until the Internet had exploded. Of course, Novell
didn’t “get it” until 1998. That left UNIX, which most people
resisted because of price and platform. So, that left the free Unix
like systems that college kids knew about when the Internet wasn’t
just the World Wide Web. Stop!

Can somebody please explain to me how the Internet grew so fast
when the “major players” didn’t have a hand in it? I mean, the “dot
com” company was fending off a customer rebellion and resistance to
its change of operating systems. I guess the Internet didn’t really
grow at all since the people who claim they made it were not
involved. Now, I see, the entire Internet phenomenon is vaporware!
Of course, if you read the press, you’d know that. Everybody could
afford an 85 megahertz proprietary UNIX system that didn’t
interoperate with anything else and cost a zillion dollars.
Right?

That’s enough background for the moment. If you want to make
money as a Linux consultant forget GNI. Fix and update those
wonderful boxes out there that make up the Internet. The people who
think they’re IS professionals because they learned the GUI of NT
in a six week boot camp can’t do it. You can and people need you.
Now hear this: You can get a higher hourly rate because of the
scarcity of Linux professionals in the market. Yes!

Focus on Revenue

While the world awaits another sensational story about a
technology that will run the planet on a pencil point, get forty
hours of billing time a week out of the support business. Set up
your consulting practice to put your hours on a time sheet. Fill
that time sheet up with time adding and deleting users from the
password file. You know, the one in the /etc. directory. Apply the
security fixes. You might have to reboot the box since it hasn’t
had a good reboot in five years. Put your time on your time sheet
for that too.

Once you have your time on the time sheet, multiply it by an
hourly rate of say $50 to $100. Total those amounts and bill the
client. Then make sure you collect your invoice. Do that again and
again and again. As you add people to your staff, find a “business
consultant” like a CPA and handle your payroll taxes. Then, pay
your quarterly estimates. Get a good employee benefits consultant
to help with human resources. Also, answer the phone when it rings
or beeps or whatever it does.

While other people look for silicon angels, provide a quality
service. Focus on making a profit. When someone says provide a
quality of service take that to heart. The only thing you sell is
service. So make sure you do it right. Good work begets more work.
(Someone should make a song out of that!)

What Happens Next

Due diligence officers from investment bankers traditionally
look at the quality of revenue when deciding whether or not to
recommend a company for a public offering. Quality of revenue means
the money you bring into the business that they can call
“consistent”. Build your revenue base on repetitive service dollars
because an investment banker can use that amount to “capitalize”
the revenue stream. You capitalize a revenue stream by taking the
amount of revenue and converting it into an investment.

This is important. If you generate $100,000 how much would you
have to invest in today’s investment environment to get that as a
return? If you could get a 5 per cent return you would need $2
million. That’s what your business can be worth if the quality of
your base revenue can be sold to someone. $1 million in base
revenue equates to $20,000,000 in capital. The capitalization rate
decreases as your income becomes less stable and more risky. When
you add 15% to the return to account for risk you can only sell
$100,000 of revenue for $500,000.

Once you build a consistent and enduring revenue stream, you can
start to add additional services to your business. For example, in
consulting many people want to add hot software to their product
mix. That’s fine and can provide needed infusions of capital. Just
remember that “hot software” gets cold when left out on the counter
too long. Today, too long can equal two weeks.

A Tip

Good observation will show you that successful consultancies
base their business on basic services. The Arthur Andersen’s and
Cap Gemini’s of the world start with core business that media
analysts might call boring. Don’t think because you’re a Linux
consultant that core business reflects badly on you. People who
have little to contribute focus on the sensational. Be a good
business person and concentrate on that which the due diligence
officers analyze. Who would you rather please, a reporter who last
year was a rock star or the due diligence director from
Goldman?

Conclusion and parting notes

This article is the fifth in a series on Consultative Sales and
Marketing. The first article, How to Successfully Sell Linux,
introduced the idea of starting a consulting practice. The second
article, Consultative Selling, explained the seven phases of a
consultative selling effort. The third article, Using a Pursuit
Team to Win, discussed how to create a presentation or “demo” by
taking a project approach. The last article addressed
“prospecting”.

In describing base revenue generation, we stressed the
importance of finding and having solid income from skunkwerks.
Linux provides excellent solutions for a number of consulting
engagements. Locating the best money making opportunities can help
ensure your success and everyone’s around you.

Tom
Adelstein
, CPA, is the CIO/CFO of Bynari, Inc. He’s the author
of several books and articles on business and technology and has
management, consulting and hands-on experience in the Information
Technology field.