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The Last Server You Will Buy

I drive a 1999 Toyota Land Cruiser. It’s a beast, gets horrible gas mileage, won’t die, and I love it. I bought it for $10,200 8 years ago and could sell it today for approximately $8K. The best depreciating asset investment I have ever made!

The speed at which innovation, market demands and regulation are going (i.e. autonomous vehicles) combined with urban concentration, mind bending traffic, etc. lead me to believe that my beloved Land Cruiser is likely the last car I purchase that a) has a steering wheel that I can control and/or b) is gas powered.

This is all conjecture of course, but what isn’t? In what year will your firm purchase its last server ever? By server I mean a box with circuitry that runs in your office and is referred to as a server that likely houses many virtual machines. For many (as in thousands of CPA firms), they have already bought their last server. For some, I am thinking the last server they are going to buy will be 2020, and those will be the absolute laggards and/or uber-specialized (99% of CPA firms don’t fit that category).

Here is my case for why you will stop buying servers by 2020 (if not sooner):

  1. The world has changed. As a CPA, if your client asked “should I sell something once every 3-5 years or sell something on a recurring revenue basis” what would you say? Of course, monthly. Steady cash flows, predictable cycles…the move to subscription always makes sense for shareholders and clients. They will not allow the current server behemoths to stay stagnant. Google “exit server business” and read the various hypotheses that exist out there; it’s very interesting. The buyers of servers ultimately will be cloud companies, and many are starting to make their own ‘server’ that fits their need, creating and managing manufacturing relationships directly in-house.

  • If you buy a server, it will buy name only – i.e. it will be a virtual server and the name will represent a footprint of sorts. If I ask you how much money you have, you will likely tell me something other than what’s in your wallet. Why? Because money doesn’t mean cash, but cash does mean money.

  • What you buy today will be obsolete tomorrow. Technology moves faster than you can keep up with if you have servers in-house.

  1. You can’t find a (good) person to manage it (nor do you want a single point of failure or one person in your firm to have the keys to your entire client base/business model). Why? Because they can’t get enough reps to be effective, and you know better than to have all of your eggs in one basket. Auditors do not become effective auditors because they do a single audit a year. Effective Auditors specialize. Similarly, IT people need reps to be good at things (and around other IT people to be challenged and collaborate with). IT people will get reps at helping people connect clouds, manage projects/migrations, etc. Skill sets will shift to meet high paying jobs. High paying jobs won’t be fixing servers that don’t exist.

  2. IT People Will Choose Something Else. Most professionals want to add value. It is becoming crystal clear that keeping lights that blink is no longer valuable in the sense that is has been. It is assumed.

  3. Security. This could be an exhaustive bullet point list – instead I will just rapid fire:

  • If companies are exiting the server business, what do you think companies who secure servers are going to do with their products? Find a new angle, not the server angle.

  • Would you trust your general practitioner with a knee surgery? How about open heart? Nope…you want a specialist. This is security in this day and age.

  • It’s expensive and you can’t afford it.

  • You need a team, not a person.

  • You need someone to blame. If it’s your fault, you are going to go out of business. If you can blame a vendor/IT partner, it will work out better for you!

  • Your servers are not as secure under your management as they would be with an outsourced IT partner.

  1. It adds ZERO VALUE to your business to do it in-house (and waste valuable Partner time determining purchase decisions, hiring/firing IT people etc). People/companies who had electricity in their building had a competitive advantage…it was expensive, took specialized knowledge and you could beat a competitor because you had it and they didn’t. That was 100+ years ago, but it will be liken to technology in-house soon enough.

***There will always be IT people. Soon, I hope the term IT will go away completely. It should just (and should have always been) be referred to as technology and technology people. Remembering the broadest definition of the term is ‘the use of non-life to enhance life.’ That is technology. At one point, iron was considered cutting edge technology.

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