It’s still a bad bill!

Senate Healthcare Bill (Senate version)

June 22, 2017

Executive Summary:

It’s still a bad bill!

Background:

I may have misread it, I’m far from perfect - feel free to correct the facts. Here’s the way I read it, in summary: This is yet another bad bill. Hey, later you may be surprised to know I usually vote conservative, it’s just that what’s come out of the GOP on this issue is simply not smart, not complete, too easy and dodges the truly hard work. Why spend the time on a blog? Because I’d never get into Pete Session’s office or Ted Cruz’s office alone - but we could - and the power of social networking goes to our advantage - time to use it.

The situation before Obamacare:

• ERs clogged up with flu cases.
• Low income folks couldn’t afford health insurance and got subrate healthcare.
• Middle class entrepreneurs, small businesses and other 1099ers could afford health insurance but complained about it.
• Middle class W2 (salaried) workers ask “what’s the issue?”
• Rich folks: ? Would love to hear from you.

The situation created by Obamacare and in place now:

• Lower income folks are VERY happy, now have good insurance and for many it’s free or near free (and they are understandably fighting any change).
• Middle class entrepreneurs and other 1099ers have left the exchanges in droves when the bill doubled in four years. This is the main reason the whole system has imploded.
• Small businesses have either closed, reduced benefits, laid off workers or played tricks with hours to offset employer mandates.
• Middle class W2 (salaried) have finally seen huge increases and are now fully aware of the problem. Welcome to the party.
• Rich folks: ? Would love to hear from you.

The situation if we pass the senate version:

• ERs will start to fill up again with flu cases, and in a big way starting 2022.
• The root cause of premium increases are not addressed and they won’t budge - therefore…
• Middle class entrepreneurs and other 1099ers will continue to bail out and subscribe to other options such as Christian Cost-Sharing plans (not insurance - but a better financial and medical option).
• Small businesses will see a boost in profits but will at least begin hiring again.
• Middle class W2 (salaried) will eventually lose almost all or much of their employer contribution and then you’ll see a total melt down in the system, or what’s left of it (again, because premiums will continue to rise as the root cause is not addressed).
• Rich folks: ? Would love to hear from you.

The real solution:

• Recognize the need to fund quality healthcare to low income Americans, and simply fund it with a general tax that everyone shares in. Note - not insurance, but healthcare, and second - completely separate the delivery of that healthcare from the health insurance system - they don’t belong together.
• Pass legislation that “enables through incentive” the creation and growth of viable alternatives to traditional healthcare insurance (could be more cost sharing - could be more group options, there are PLENTY of good ideas around).
• Term limits for congress and senate (this is really # 1 - because right now our representatives legislate based on being re-elected and not as statesmen). Therefore insurance companies are buying influence and the right thing is not getting done. (There’s a way to do this without Congressional approval, and it’s provided for in the Constitution).
• House members should serve 5 years, the first year after being elected as an understudy to the incumbent representative.
• Senate members serve 8 years, however, we need laws for easier recall of misbehaving members
• Neither body can be re-elected, except in the case where less than 2 or 3 years remain on a replacement appointment or election.

Detail: (This stuff is a tangled mess, and complex, I’m sure I’ve left out relevant facts or context - so you are invited to set me straight where I’m wrong)

The sad truth is, health care is being used by politicians to polarize citizens against each other in order to keep their vote. The Republicans blame ObamaCare (and the Dems), and the Democrats point out that the change will devastate the poor (and not acknowledge that the middle class was devastated already). This polarization causes lower earners to think the middle class doesn’t care about them, and that’s just not the case. They do, but the system needs to be fixed and so it must change drastically. The lower wage earners have not experienced their family insurance increasing from $585.00 a month four years ago to almost $1200 a month now. Yet, the lower wage earner has financially benefited  due to the assistance in Obamacare. So it’s easy to see why the views would be so drastically different. Shame on Democrats for taking advantage of the disparity and manipulating people for political gain at the expense of the country. Shame on Republicans for not offering a bold and comprehensive root cause solution.

When the bill was published today, Chuck Schumer was on CNN denouncing it less than three minutes later! Wow, he’s a fast reader. Anyway… Here’s the bill if you’d like to read it for yourself: https://www.budget.senate.gov/imo/media/doc/SENATEHEALTHCARE.pdf  (this is the “Discussion Draft of H.R. 1628”.)

For interesting backdrop, today I had a discussion with a friend who is a 40-ish year old Cardiologist from Texas A&M (whoop!). He mentioned to me that their own health care insurance (they are W2) for his wife and family costs just under $50,000.00 per year! He looked at me and humbly dropped out of his Doctoring character and said “my family can’t afford this, it is unsustainable”! He and I were in perfect lockstep for cause, effect and solution. So why isn’t Congress?

As for the bill - to the best of my knowledge here are some general accurate conclusions I’ve made after reading it, top to bottom.

Tax Credit impact on folks near or below the poverty line.

In general - this section eliminates the funding by 2022 what the fed pays the states to support low income needs. It also tightens up (reduces) the definition of “alien” that have access to the tax credit.

Individual Mandate

Section 104 eliminates the individual mandate by assigning the non coverage penalty of $0. Also shored up in section 114 “Repeal of Health Insurance Tax”.

Employer Mandate

Section 105 effectively eliminates any penalties to employers not providing coverage by assigning the penalty also to $0. This of course is built on the conservative belief that mandatory coverage kills small business jobs - that’s more than a belief, it’s a fact - however it does leave a gap in coverage to a category of Americans. (also shored up in a declaratory statement in section 108).

My analysis on this: If mandatory employer health coverage on small business eliminates jobs it’s not the fault of the small business owner. The problem is the assumption that it’s the employer's responsibility to provide healthcare coverage - this notion was created many decades ago. Which would you rather have, some of your health care coverage covered, but lose your job because of it, or keep your job and go get your own insurance? Not so difficult a question. So while I’m not happy about it, this is the correct strategic way to go. Also, one of the big problems associated with forcing employers to pay for healthcare is that this shields the majority of (silent/content) salaried and voting Americans from understanding the cost of health care and the underlying problems that need to be solved.

Abortions

Next - the bill removes the requirement that the minimum plan includes abortion coverage. To me, regardless of how you feel about abortions can reasonable people agree not to expect others to actually PAY taxes to fund them?

Abortions #2

This bill removes funding for planned parenthood. This is a separate call-out, so if you feel strongly about one, but not the other then you can address them as two issues.

A fund to pay for lapses in coverage under the new bill

The next section provides for support to states starting 2018 and ending at the end of 2021 (less than 5 years). This should quiet the opposition somewhat - but they’ll focus on it out  of politics.

My analysis: Clogging up the ER for the flu is not the answer - it’s time to set minimum coverage and funded at the federal level. (I repeat, I really am conservative)

The advantage of this is that the program will be paid from taxes by ALL Americans, and the second advantage is that it (in theory) would LOWER premiums for everyone else. But the devil is in the details on that - I say let the free market make that correction, and it would. So, I don’t support this, because the fix should be a real program that offers a minimum standard of coverage for all Americans in perpetuity. We should be lobbying for this. If we get it, your taxes at the state and local level would reduce, while the federal level would increase (but not as much as the state/local decrease). So there you have it, it’s the politics of it that prevents the right solution.

High risk individuals in the long term

The bill proposed funding healthcare for people in high risk, and on the long term. The problem is, these do not provide premium relief for any tax payer above the poverty level (lower-middle, middle and upper class)! Hello voters!!!

Paying for health expenses with your HSA

You would no longer have to have a prescription to pay for qualified health care expenses with your HSA. Also, the penalty for using your HSA for non-qualified expenses reduces to 10%, from the current 20%. Finally, cafeteria plan benefits would no longer reduce your HSA contribution and subsequent benefit.

HSA Limits

If I’m reading this correctly the HSA contributions are up, basically equal to the high out of pocket deductible amount on your premium. That’s great news.

Medicaid benefit payments may be subjected to work requirements

The bill makes this optional, a state decision - and it applies to non-disabled, non-

elderly, non-pregnant individuals.

Provider (Doctors) taxes are being reduced. Section 132.

Other areas to look into that are important: (would love help in summing these areas up)
Section 115 - Repeal or Elimination of Deduction for Expenses Applicable to Medicare Part D subsidy.
Section 116 - Repeal of Chronic Care Tax.
Section 117 - Repeal of Medicare Tax Increase.

Others - Repeal of Tanning Tax, Net Investment Tax, many, many others. If there is something I didn't call out that is seriously germane to you, let me know and also any analysis you may have - I'll update the post.

In conclusion, while there's tactical relief for many, it's a sad solution for a long term strategy - make them go back to the table and address root causes!

This Conservative says NO to the new Healthcare Bill (ACHA)

Family coverage in a typical plan today is around $1200 per month. Your employer picks a lot of that up and so the bad things going on in the industry may not be visible to you, yet. But things are about to get a lot worse.

First, I am conservative, and while I'm just as anxious to dump Obamacare as anyone, this plan is no plan at all - and I'll tell you why.

First, there is no provision to drive insurance premiums downward. Given that they have doubled in the last three years since Obamacare then any legislation should have been crafted to reset those rates to prior rates, plus enough to cover a relatively small amount of health care cost increases.

Second, since the mandate penalties are removed and preexisting coverage requirements are not removed then rates will continue to go up (this will finally wake up all Americans, including those with generous employer paid insurance).

Third, the tax subsidies offered for poorer Americans are not enough. Consider after tax subsidies of $4000.00 for a low income couple. That may seem like a lot, but if the premium is $12000 a year then they still have to come up with $8000.00. That's not going to happen for families on the low end - so effectively, there is no coverage for people who can't afford insurance.Plus, they need the money during the year when sickness or injury comes, not at the tax deadline a year later.

I honestly believe that Congress doesn't understand this issue, by and large. They have group federal group coverage so why would they?

So what's my solution?

Work through this with an 80/20 rule mentality. Congress should slow down. They should create a study group composed of people within each major category of Americans: Employed with employer contribution, Individual (1099ers) entrepreneurs, poor people, etc. This study group should have several of each category - and let's make sure they're pretty smart.

Any plan that is crafted should show and have the result approved by the study group, particularly as to the effect on themselves. Each member would agree that to serve that they must treat their other member as their brother or sister and ensure the plan works for them too.

Once that group is established, here are a few ideas of my own:

First, decide that it may be ok not to have an insurance solution for the poorest of Americans. We simply need to decide that we want to provide quality health care to those without enough income. This support needs to come from a general tax base paid by all Americans. Yes, as a Christian-conservative I really do believe this is the best answer. There should be no tie-in between Healthcare insurance that most American's purchase and the system of providing quality healthcare to people who can't afford the insurance (and prove it).

Now we have a pool of Americans that will pay for insurance, so here are some possible solutions:

1 - Preexisting conditions should be covered - unless you have a large gap (more than 3 months, maybe 6 months). However, being "covered" MUST include viable programs like Christian cost sharing plans that are by law not technically "insurance". After all, they pay like everyone else - just much more efficiently. Covering preexisting conditions is better for ALL of us since it will keep people out of public assistance and creating more cost for the general tax base.

2 - HSAs should finally be available to EVERYONE, no matter what. Let Americans save and offset expenses.

3 - Reset insurance premium rates to $500 per month for a family. Now, many "realistic" people will say that's not possible. Actually, it is, and here's why. The cost of health care reimbursements have gone up by a very small fraction since Obamacare, so the premium increases are due to many factors unrelated to health. The insurance system is riddled with inefficiencies all designed around creative ways to "not pay" medical bills. The industry is full of millions of special "fee schedules" - so as a result the payers (insurance companies) have tens of thousands of workers involved in making these processes work.

But in reality, how would you get them to agree to lower premiums with all these workers and invested processes? Simple, you don't.

The solution has to provide a way to allow a new insurance industry to develop. I could write down my own details of it, but that's not the point - there would be a solution. If you don't believe it, then how are the Christian cost-sharing solutions successful at less than $500 per month? One or more of those organizations also manage the flow of the money as well between doctors and patients. If they can do it, then obviously it's possible. So, let's have the study group examine how it's done right.

In summary, the proposed bill is an obvious failure before it starts, so why are we letting Congress pass it? Because there are too many special interest groups trying to protect themselves. That's why your Congress needs to hear from you. Say NO to this and go about reform in a much smarter/methodical way.

Absolute proof why liberals are wrong about a nanny state (and single payer systems)

(Don't think you're lucky because you have "good employer health insurance", you don't - read on.)

What would you think if you paid $1400 for four new tires and then found out you could buy the same tires from the same store for $182 if you'd have just downloaded a free mobile app, pay nothing for it, and just use the app at the point of purchase? Might you be just a little upset? Would you think there had to be a scam in the mix, somewhere?

The following is real life, it provides proof that government should stay out of our business, and it totally indicts the prescription medication industry into official "scam-dom".

Four months ago we were on a Blue Cross plan, via Obamacare (marketplace). This is a policy that we were paying over $800 a month, and for 2017 was going to jump to almost $1200 a month. When we were notified of the change we decided to seriously look at alternatives. The option we took meant we decided to pick up the drugs on our own cost.

Just four months ago I refilled a prescription for a common medication. Looking back on the records it cost $81.31 through our Blue Cross online pharmacy service. Keep in mind, the drug would have cost over $400.00, without the insurance - or so we thought.

So today I went in to refill the prior prescription, no longer on the Blue Cross plan. I forgot to hand them our card and initially went into shock when a $430 tab rang up. Then I remembered the discount card that we paid nothing for, and it brought the price down to about $200.00.  Wow, a $230 discount for nothing?

Then after returning home my wife reminded me of a mobile app we could download and get competitive pricing. Lo and behold, I could get the same drug for $55 at a grocery store pharmacy 2 miles away. That's the same drug, same count, no difference. I went back to the store and was able to get a refund for almost all the difference using the mobile app.

Let's do the math. $430 - $55 = $375 savings. As a matter of fact, had I used that mobile app while insured with Blue Cross I still would have saved $26.31. Huh? What did I do to deserve that? Absolutely nothing, there was no money changing hands for that discount, and as a matter of fact I could have been ANYBODY that downloaded the mobile app.

No, I'm not selling any app, I have no affiliation. If you want to know what it is just ping me. But the point to the blog is this: Apparently, my insurance company paid zero for my meds all these years, and actually cost me money for drugs as compared to someone without insurance at all.

Now to the subject line. You can be sure that the reason for the disparity is because healthcare is in chaos, and rules are changing all the time. Further, you can bet that when ALL the shackles are taken off the system soon that the prices will level out for everyone, because the word is getting out (you're reading this). So, that is my proof that competition works, because it was competition at the retail level that provided the best price. Had Obamacare been allowed to prevail and expand, or worse morph to single payer, there would be no opportunity for price consolidation, only inflation. Medicare is proof of that.

There's nothing like "history" to make us smarter. Can we please learn from this history lesson and be ready accept it for ALL things competition? Anything that doesn't require government intervention should not be run by government, with rare exception (our air, our food, our water, our safety, etc.).

Pass the word and let the market prevail!

Patrick

Would a single payer system decrease the quality of healthcare in America?

Very few will read this article, and most not to the end. It's ironic too, because it's not that I have all the answers, but if congress were to do this level of depth with each other the health care debacle would not have happened. They're elected to take the deep dive on important issues, unfortunately it's gamesmanship first and little or no deep dive at all.

"Long Story Short" - I'll give you my opinion on the bottom line in one paragraph, and if you have severe indigestion, or would like to know more of my basis then read starting at "Short Story Long".

Basically, a single payer system will eliminate competition in health care insurance and as a result doctors, hospitals and medical companies will make less. Bad things result from this: Fewer high quality  doctors, lower quality services in hospitals, fewer breakthroughs in drugs and equipment and ultimately higher cost. This is a basic belief of capitalism. If you don't believe that, or if you'd like some details on this then read on!
_____________

"Short Story Long"

So to the question of single payer. I find it helpful to use an analogy that everyone can relate to. So let’s say you live in a town with only two grocery stores. You have to pick one of them to shop, or you’ll be forced to travel maybe 30 minutes longer – which really equates to an hour round trip. The average American is going to be willing to pay slightly more money for groceries locally to avoid the loss of the hour, but if quality or selection is low they will drive the extra hour. Some people lower on the socio economic ladder may trade their time in for the lower grocery prices if it's cheaper out of town, or they might take less quality if they can't afford to travel. The point is that competition will drive each individual to make a choice, and that choice has consequences to each merchant.

Let’s start throwing in more variables. Let’s say both local grocery stores are either unsafe, dirty and/or have really unfriendly staff. That would cause a few more people to make the trip to the out of town stores, right? Maybe not all, but some.  Now let’s say the owner of one grocery store bought the other one and since he knows he’s the only game in town he raises prices. All of sudden there’s a substantial number of people who are fed up. The stores are dirty, not safe, and unfriendly and now the prices are highway robbery – so a lot more people start shopping out of town. Meanwhile, over time either those two stores will continue to degrade but operate, or the owners (or new owners) will wise-up and make the changes they need to make, OR some other new grocery store will open to fill the gap in quality, safety and friendliness. That, my friends, is capitalism at its finest!

But what if capitalism were not allowed to correct the problem because congress is lobbied and intervenes? What if congress decided the only way to force the stores to be cleaner, sell quality food and force workers to be friendly were to pass a law setting all the prices for all the grocery stores in the country? Congress surmises that if everyone pays the same for the groceries the quality will even out and all Americans will receive relatively the same level of service.

Well of course setting prices wouldn't force the store to be cleaner, safer and friendlier, right? Quality would surely average down because there is less differentiation between product, price and service. By and large, the ability of a store to charge a higher price enables them to spend money on service and quality, and that will draw more people in the store - at least the people who value service over price.

At this point people are angry! They were willing to travel because they don’t want to shop in a dirty, unsafe store with unfriendly workers. The problem is, the out of town grocery stores are now making less money, so they spend less on quality, cleanliness and safety. In the past, competition drove the average overall quality up, yet there were people on the lower end that received less - and that was the basis for demanding government intervention. The problem with that is that the intervention caused lower quality for all, on average - is that a good trade?

Now to tie health care back in. The Doctors are the stores in this case – and the customers are the same. If some people don’t like the quality of their local docs they’ll drive the extra mile, right? The two local docs are charging higher prices because there are no other docs in town and many people won’t drive the extra miles. The docs are setting their prices on choice, and supply and demand, just like the grocery stores.

Once again the government passes a law to make it fairer and creates an insurance system that forces the docs to accept lower compensation of services. The docs decide they’ll accept the government rate but they’ll need to raise the prices of their other patients. Pretty soon everyone buys insurance, but the private/non-government insurers pay the docs more, because if they didn’t then everyone would use the government insurance, right? At this stage if a person can afford the private insurance they choose that, because they’ve noticed there are fewer docs every day taking the government insurance – or docs put a hard-limit on the number of patients who use government insurance. That way all their other patients who are privately insured will make up for the loss. This is the system we have now.

One day though, the government passes a law requiring everyone to have insurance – and all the private insurers offer government subsidized policies. After three years they find that this is very expensive, on average, compared to before the law (this is an undisputed fact), and as a result they raise premiums on everyone. At this critical juncture one of three things happen –

1. Either the government eliminates all insurers in health care except for themselves, causing the following:
• Pay rates to docs to drastically reduce (think of only Docs receiving only Medicare) – resulting in many, possible most quality students to choose careers other than medicine.
• R&D budgets of medical equipment companies vanish because of no profit to fund it – thereby slashing medical breakthroughs in all pursuits.
• Massive wait time for limited specialist (this is Canada).
• R&D budgets of drug companies vanish, causing advances to all but disappear, just like medical equipment.
2. Or eventually the private insurer prices are so high people are forced to not buy it (take the penalty and buy only what they need) – this results in a much lower pool of people to make up the difference effectively killing both the government and private insurance benefits for all. This would either cause the government to mandate higher taxes to fund their underfunded healthcare obligation or they would literally not be able to pay the docs and hospitals. Of course the government could borrow from social security again, but that would take congressional action and that’s not likely in this contemptuous issue, is it?
3. Or, the government decides to repeal the mandates and let competition return.
• They might tax the 300 million Americans to pay for health care for the 30 million that can’t afford it (solving the original problem in the first place). Notice I said health care, not insurance. They get a card, they go to a Doc and they receive quality service. They can only get the card by proving they are in need (just like the system today). Of course we already know the cost of providing health care to 30 million people is far less than the cost of all the skyrocketing premiums. So this is the obvious compromise.
• Competition in health insurance without minimum mandates return, quality goes up and prices lower. Remember that people left the system at some critical price point, so the premiums would have to lower to entice them back – or they just stay out.

In summary, competition is almost always the better answer. Government should only run things when competition can’t safely serve and protect the consumer.

I’m interested in your comments – I realize this is just my opinion and others may feel different. If your opinion differs I’d like to know specifically how it differs, especially in cause and effect. Please though, don’t provide an example of a small number of people would do this, or that, because remember we’re talking about 300 million plus people here – keep your scenarios realistic and we can figure it all out.

As a citizen, I blame the Democrats for forcing such a bad bill. As a conservative I actually applaud them for trying to improve healthcare for all – but they get a big F in execution. You actually hear some people say they blame the republicans for not fixing (the bill). That’s not realistic – you don’t play trickery with a bill and force your position and then expect the other side to gleefully help you fix your bad bill. No, in this case that bill should never have passed. Did the Democratic Party see the result happening in the future? I seriously doubt it – I don’t think it was a single payer system conspiracy. Remember, they didn’t even read the bill before they passed it. No, it was all team politics. PS – I also blame the Republicans for not reaching across the aisle for healthcare reform before that bad bill showed up. They all need to go, ALL of them. Term limits will fix this and many other problems. With term limits they’re more likely to do the right thing, more likely to be statesmen and not re-elected by special interest dollars. That’s another subject though…

Be inside, kicking out...

Looking back through the years,

I remember quite distinctly spotting some developing trends that caused me to “re-tool” and shift where the market was pointing. Some, just in time. For instance, telecommunications was not the most secure place to be after the late 80's, so I retooled into Data Communications. I also distinctly remember when those PC and Novell outlanders came out of nuisance status and started replacing big iron mainframes. 

Then we spotted the “internet” at the Super Collider and created my ISP as a full service ISDN offering (it “was” high speed). I'm not suggesting I'm brilliant, as a matter of fact probably most of us in these fields could see these things coming, you just had to be really stubborn to ignore them. If you did ignore them, well...

Now we have another train that’s long left the station, “cloud”. Actually my ISP company started selling thin-client (early days SaaS) service via internet in the late 90’s. We may have been a bit early in the market, but the train is now freight train status, largely due to big bandwidths enabling web clients access to native applications without the trouble of thin client..

I wouldn't look at cloud as a career though, not in and of itself. I'd look at is as an enabler of whatever you feel your secret sauce is. In my case I love business process improvement. Helping organizations streamline time to market and slash processes that don't fit. The modern interpretation to this is "reducing technical debt". Well, business process improvement is not new, but the optimal solution set is much easier than it used to be with XaaS (my new word, X being just about any service as a lease).

Still, apparently the word is not completely out with cloud. Recently I saw an article with a title that included “cloud is here to stay”.  I had to double-check the date to be sure it wasn’t 5 years earlier, but nope. Some are still viewing cloud as one viable option. On the contrary, it’s difficult to see any company not using SaaS or PaaS for most applications within 5 years. The ROI is too strong. Not only in cash flow but also the impact on CapEx and limberness (elasticity is the current word).

So being in the industry we have to continue to re-tool, learn all we can, test the boundaries, take risks, and… something different… actually learn how to think like the CFO, or even the CEO. Technology decisions should principally revolve around opportunity, elasticity, and cash-flow. No, I didn’t mention governance and security because we’ve probably already passed the point where it’s now easier to secure using XaaS. All this to say, make the future your best friend and conquer your own horizon.

To close on a fun note, and speaking of prophesying, I bet you’ve already thought the following question will oft be asked in 10 years’ time: “Can you believe they actually let people steer these cars back then?”   Or even… “Daddy/Mommy why are there so many empty lanes on the highway”?   “Well dear, people used to drive to work…” Let's take it further then. If that does comes to pass, what do you think we'll do with all those extra roads and highways? Could be fun.

 (Patrick Bouldin is the President & CEO of Run This Project, specializing in cloud computing strategy and Business Process Improvement.)

The inevitable CEO – CIO Conversation?

The past conversations have been tense enough: 

CEO  : Jack, what are we doing about the cloud? 

CIO  : Al, it’s ok, the cloud is insecure, no governance and we’d be at the mercy of someone else... but don’t worry, we moved our email and our on-boarding app to it and sort of checking it all out…

Tomorrow's conversation: 

CEO : Jack, I know our company has been a profit mecca for 25 years, but the guys at the CEO lunch told me we have to have a “cloud migration strategy" or we’ll get undercut by competitors that don’t even exist right now. Plus, I'm told our valued I.T. staff can get certified in these services. I hear there's even an art to juggling different cloud providers and optimizing the service costs.

Ok, both conversations are accurate based on the time they occur. Times have changed, and the train has long left the station. Cloud providers actually offer the governance specs you’re looking for, for the most part. And yes, guys and gals are spinning up companies like spinning up cotton candy because it’s so cheap to do now. Your company’s “secret sauce” is what made it successful for the last two decades, but nowadays it’s no longer secret. Your market share can be assured by providing top quality, but all things being equal you’ll have to produce your product at a cost on par with new competitors. Besides, you’ve been frustrated at time to market, and I.T. technical debt has been limiting company growth for years.

The answer is to migrate the expenses that you can to the cloud, where it makes sense. But what “makes sense”? Those factors should drive your cloud migration strategy. If your company has custom code that runs on an old OS that’s not offered in the cloud then your plan has to also include migrating the OS. Worried? You shouldn’t be, you knew you’d have to do it anyway.

Check out this table, I know it’s busy, just cast your eyes on the three arrows.

The graphic is showing you the ideal situation – conventional data center expenses rolling off over time and cloud expenses going up. Yet, the THIRD red arrow is the most important, the total is less than ever, and the Sparkline trend shows dramatic downward trending! Is it overstated? Not if you plan it out well.

Guess THE most important factor? Is it the execution and migration? Nope. Is it the limberness and scalability improvement? Nope. THE most important factor of success in cloud migration is proving to the CEO (via the CFO) that your net expense trend is going down! But, your plan must have a well-organized process to retire services – and while tempting, it simply can’t be somebody’s part time side job.

That’s a risky proposition – but success can be assured if, and only if, your migration plan has someone ensuring that you’re killing off leases, reducing power and cooling consumption, consolidating data storage and redeploying assets to other areas.

The migration plan itself is yet another subject and involves a deep dive on each application. Not all apps are created equal, have the same risk or have the same importance or the same priority. So, the plan will be multi-faceted. Apps that can’t move today, apps that must move soon and apps that might make more sense staying in-house. Approach this with the old 80/20 rule and you’re the hero in the next annual report.

(Patrick Bouldin is the President & CEO of Run This Project, specializing in cloud computing strategy and Business Process Improvement.)

Businesses Must Care About Cloud

Businesses Must Care About Cloud

Elasticity is THE key advantage in using cloud services. Traditionally with Information Technology spending, actual demand is either less, or greater than capacity. If I.T. has built out capacity too far ahead of demand, it may result in good service, but the cost is not so pleasing to those concerned with earnings.  Conversely, if I.T. is short on capacity nobody in the company is happy. To understand the true gravity of the opportunity or threat that cloud has on legacy business, let’s start with this:

“Constraints, in general, are likely the single biggest factor why a profitable legacy company can fail in this millennium.”

Of course one could make the argument that this has always been the case. The difference is that because of the tools available to entrepreneurs now, you have very little time to respond to competitive attacks. The legacy companies usually were birthed because of some secret sauce. After they became huge and established the sauce wasn’t secret anymore. However, competition was easily held at bay due to the bigger company’s ability to survive a price war or some other predatory tactic.

There have been books and books written on this subject. My favorite is Judo Strategy: Turning Your Competitors' Strength to Your Advantage, by David B. Yoffie. This book was written well before the term “cloud” was coined. While the practice of Judo is ancient, the fundamental point will never change – and the point is in the title itself. Suffice it to say that if an entrepreneur can figure out a way to deliver some small component of a product to a customer cheaper, better and faster, then he may be able to drive a splinter in that market and thrive. Why? Because the big company’s processes are too fat, too slow and too invested to react quickly enough to head off Mr. Small Potatoes. See the Judo reference?

Cloud is a tool that entrepreneurs will use to strike it rich from here on out, and this will continue to erode legacy market share. However if you’re a legacy company take heart, everyone can play and win at this game.

Watch out though, because cloud is just a tool and you could easily buy the wrong brand, spend too much, fail to measure, implement it incorrectly or fail to establish a timeline. With so much to lose or so much to gain, I can’t think of a single legacy business in this country that shouldn’t be evaluating cloud services in some way and at this very moment.

(Patrick Bouldin is the President & CEO of RunThis Project, specializing in Cloud computing and Business Process Improvement.)