August 16, 2017

What is the Cloud?

Cloud computing on blackboard Discussions about the cloud have been going on for several years. However, even though it is a term many use, there also seems to be a lot of confusion about what it actually means, both in terms of trying to define it too narrowly or too nebulously.

In the simplest sense, the cloud is a collection of networking and server infrastructure that is “out there” as opposed to the “in here” like an organization’s local area network. One of the key characteristics of the cloud is that you can’t physically put your hands on it. However, just like clouds, the fact that you can’t touch them does not mean they are not real or have great purpose and value.

Anything you can do on an “in here” network you can do on the “out there” network of the cloud. You can store files and folders and databases. You can run servers and desktop computers. You can launch and run programs/applications and interact with them. You can secure and encrypt and backup and protect things the exact same way you would on an “in here” network.

The two biggest drivers of the cloud are:

  1. You only pay for exactly what you need and use. With a physical network, you make decisions and buy hardware and software based on 5-7 year projections. With cloud networks, you can size the resources (space, servers, processing, memory, etc) up or down in less than 2 hours.
  2. Operation and maintenance are included. I’m yet to meet the business owner who will say they got into business because they really wanted to own a server closet. It has been a necessary component, but, for most owners, not an enjoyable expense or worry.

We’ll have more TechTalkTuesdays over the coming weeks discussing some of the terminology and providers of cloud services. We’ll also be discussing how small businesses are using cloud to improve their operations, expand business and save money.

We welcome your thoughts and questions.

Little Savings Add Up

Save Money button keyOne of our partners recently sent me an article discussing a 14 year old student’s research project that found businesses and other organizations could save as much 24%-30% in ink expenses by switching to the Garamond typeface, a thinner and ink-saving font.  Given that ink costs more per ounce than French perfume, that small change equated to an annual savings of $21,000 for his school district and could equal $136 Million per year by the US Federal Government.

I think Garamond is a fine font, but I think the bigger message is that small savings add up.  For most small businesses, the single largest expense is labor and one of the main time wasters for employees is technology that is not running at peek efficiency.  The amount of time employees spend messing with and working around inefficient systems is significant and it is also frustrating for the employees.

We have found that Onsite Logic clients who have a regularly scheduled onsite service call, e.g., the afternoon of the third Wednesday of each month, have far fewer computer issues and much happier and productive employees.  With a set time, employees can screen shot or post-it note the little issues that come up between scheduled service calls and put them in a centralized place for the technician (example: one client tapes them to the inside of the server closet door).  At the appointed time, the technician will convert those items into tickets, prioritize them with you or your manager, and very efficiently work through the issues.  Many times these are small issues that would not justify a specific service call, but when combined with others and regular maintenance they can all quickly be resolved.

Instead of focusing on how much it would cost to have a regularly scheduled technician visit, the bigger question is how much would it save in lost productivity, emergency issues and employee morale.  There are no long-term contracts required and discounts for prepaid block-time are available.  Why not try it for two or three months and see if you can see the difference?

Year End Technology Planning

iStock_000013935368XSmallOnsite Logic recently had the opportunity to sit down with Brian Nail with Nail CPA Firm, LC to discuss year end technology planning.

Onsite Logic: Brian, most of our clients are small business owners.  What should they be considering in terms of technology spending as year end approaches?

Nail: Technology investments are often major expenses for a small business.  Basically, most business owners are faced with two questions. First, are these expenses that I will need to incur in the near future?  Second, am I better off paying for those expenses in this year or next?

Assuming that they need to incur the expense, the only way to answer the second question is to look at a couple of different factors, including profitability and tax law changes.

Usually, businesses have about the same level of profit each year.  There may be some growth or some slight business slow down, but usually the difference between years is not really that significant.

In 2012, businesses, generally, can immediately expense the full cost of IT equipment that they purchase under the special bonus depreciation rules.  This is better than the Section 179 expense rules because there is no limitation based on income and means that they can get the full benefit of the expense in this year instead of needing to spread it out over three to five years.

Unfortunately, we may be looking at the last chance to take advantage of bonus depreciation.  It is set to expire at the end of this year unless Congress decides to extend it into 2013.  Beginning January 1, 2013, businesses might be required to depreciate those very purchases they were able to expense if they were simply made the day before.  We just don’t know what Congress is going to do at this point.

Onsite Logic: Are there any other special provisions for 2012 or 2013 that business owners should keep in mind?

Nail: There are recently some big changes in the State laws.

For those in Kansas, if they are an LLC, Partnership, S Corporation or Sole Proprietor, Income Taxes change drastically in 2013.  Business  income, other than wages, that flows through to  business owners is not taxed by Kansas beginning in 2013. While this is good news, it also means that business owners should consider maximizing their deductions in 2012 if at all possible.  Accelerating technology improvement or upgrades into 2012 are a great way to do this.

Here is how it works.  Let’s say a business has net earnings of $100,000 in 2012 and they are a Kansas LLC treated as an S Corporation.  Let’s also say they need to buy 20 computers with software, installation, etc., each costing $1,500 prior to year end.    That could be treated as $30,000 in immediately deductible expense.  If they make the expenditure in 2012 they would pay  taxes on only $70,000.  If they earn the same amount in 2013 and make the purchase then, they lose the benefit of the State income tax deduction because none of the business income will be taxed anyway.   Assuming that the 6.45% Kansas tax bracket applies, waiting until 2013 just cost them $1950 by not making the purchase in 2012.

Onsite Logic: Do they have to have the cash to claim the expense?

Nail: No, credit card payments count, as do most financing instruments.

Onsite Logic: What about prepaying expenses?

Nail: If you file on a cash basis, paying any invoices, whether for goods or services in 2012 would count as a 2012 expense as long as the services were used within a reasonable timeframe.

Onsite Logic: What are some examples?

Nail: Well, obviously purchasing prepaid block-time is one option, from Onsite Logic or any other service providers.  With the growth of cloud services, it is also an option to move payments for web hosting, email hosting, security, domain renewals, etc. into the current year.

Onsite Logic: Brian, thanks for this helpful information.

 

Brian Nail is the owner of Nail CPA Firm, LC, and can be reached at 913 663-2500.  Nail CPA Firm specializing in providing advise and service to business clients.

Onsite Logic provides in-house computer support to small business owners to keep their systems running smoothly and their employees happy and supported.

 

Technology Innovation

America is the land of innovation.  Sometimes innovation involves creating something completely new, but more often it is taking something that already exists and using it in an entirely new way.

For example, take the Microsoft Kinect.  The Kinect is a motion control sensor for the X-Box that allows you to wave your hands around to play an X-Box game like tennis or dance without the use of a controller.  Since the Kinect was introduced, some innovators have been using it in applications other than X-Box games.

Microsoft recently helped promote 11 startup companies who are innovating with the Kinect device to potential investors for startup funding.

As I read about these startups I was energized and excited by these small businesses and how they saw an opportunity to use existing, inexpensive technology to provide easier, safer, cheaper and better solutions.

Here’s a brief description of the 11 companies:

  • Jintronix: Uses Kinect to track a patient’s movements to make physical therapy cheaper and more accessible.
  • Manctl: Uses 3-D technology to make it cheaper to make orthopedic molds for creating shoe insoles, or to fit bras more accurately.
  • Ikkos: Founded by an Olympic coach, the company is creating a way to train athletes by using the Kinect to track a user’s movements.
  • Kimetric: Uses Kinect sensors to track consumer behavior inside of retail stores.
  • NConnex: Enables consumers to create 3-D models for interior decorating or remodels.
  • Styku: Created by executives of Tukatech, which creates software for the fashion industry, is now making it possible to virtually try on clothing to find the perfect pair of jeans.
  • Ubi Interactive: Is using 3-D multitouch technology that turns any surface, including a coffee table or window, into a digital sign or game of Angry Birds.
  • Voxon: Giving artists and game designers the tools to create “holographic” entertainment and education.
  • Zebcare: Monitors senior citizens in the home to assure that your loved ones are safe.
  • Freak’n Genius: Makes it fun and easy for anyone to create animations using your whole body.
  • GestSure Technologies: Allows surgeons to navigate MRI and CT scans in the operating room while maintaining sterility.

What technology can we take from another industry or use and re-apply it to make things faster, cheaper, better, or safer in your business?