Reddog Technology

on July 11, 2015

Jason Rudolph and I started working on what would become Reddog Technology in late 2002. Our mission (which became our guiding principal) was to to create an IT company our customers loved and therefore technology solutions they loved to use and loved to pay for.

When we spoke to prospective customers, the main complaints they made about their IT was it’s unreliability, slow service, not being fit for purpose or not keeping up with technology advances. We set about solving these issues by structuring Reddog Technology’s business model so that the company and it’s employees were incentivised for delivering those things most important to our customers.

To create an IT company that our customers loved took a lot of research. At the time most IT companies were service companies and we knew from our research that this model was unable to provide the level of quality that our customers wanted. After running the numbers we decided to model Reddog Technology on how a large company provided their IT - a single IT department (Reddog Technology) which services the many other departments (our customers) within the organisation.

We provided an IT department to organisations of any size, our smallest being 2 employees and our largest almost 1,000 employees. We provided any technology our customers required for their IT needs, for a fixed monthly price per solution. Our customers could get new equipment or return unneeded equipment whenever their business needs required. Since we provided unlimited support and unlimited returns for a fixed monthly fee, in the event something was unreliable, broke or was not fit for purpose, the cost of fixing those issues was born by Reddog Technology. This naturally resulted in very reliable products and solutions for our customers and therefore a lower total cost of ownership.

Our business model and structure doesn’t seem too complicated until you realise we needed to be able to charge out customers. To do this, we needed to create an extremely fine grained transfer pricing model, which you can read about below.

Supported by our customers, Reddog Technology expanded nationally (in Australia) around 2008 and international approximately a year later.

Many of the products that Reddog Technology offered were developed internally because:

  1. they needed to be standardised, for all customers, in all offices, all over the world.
  2. while standardised, they needed to fulfill the needs of customers both current and future.
  3. they needed to be extremely high quality, easily replaceable, robust and easy to install or replace
  4. many products or features our customers wanted, didn’t exist

Because of our size and experience, we got very good at doing what we did. Many of our customers would fit out an entire building (which we would help manage) and we would only require a single weekend to install all their electrical needs and have it working for hundreds of employees on Monday morning. It was a great privilege to work with a team of people that made things like that possible for our customers.

Some of the products we offered:

  • Custom firewalls and other security products
  • Complex, multi office and multi site networking
  • Mobile phone tower installation
  • Satellite Internet systems (fixed and mobile)
  • Global connectivity
  • Custom VOIP phone systems
  • Zimbra Mail Server
  • VMware ESX virtual infrastructure including SAN’s and distributed architecture in multiple data centers
  • Apple Desktops, laptops, servers, iPhones and iPads

We were very lucky to work with many successful, innovative people and organisations. My role at Reddog Technology was completely customer focused. Some of my tasks were:

  1. liaising with the executives and board members of our customers in regards to their organisations technology strategy
  2. recommending different products or services that fit our customers needs
  3. leading the development of new products for our customers
  4. advising our customers on change management in regards to IT and its effect on staff and customers
  5. helping customers with due diligence in regards to technology and intellectual property when taking over other organisations
  6. managing building fit outs
  7. developing the software and mathematical models for our service, analytics and pricing systems

Selling Reddog Technology

By 2017 Jason Rudolph and I had been running Reddog Technology for 15 years. We were at the point where we wanted to focus on new challenges in our lives. We considered selling Reddog Technology as a going concern as it was large and successful with long term customer relationships and contracts. After much deliberation we decided that the success of Reddog Technology came from always considering our customers needs first. We spoke with a number of customers and decided that instead of selling Reddog Technology as a going concern, we would sell it to our customers. Each of our customers was offered the opportunity to buy all of their equipment and documentation, which would allow them to run their IT department in a similar manner to the way it had always been run. All of our customers took up the offer.

Pricing model development

Developing our pricing model was a big undertaking. At a basic level, we needed to create a transfer pricing model for an IT department. The complexity came from us needing to price things at an individual level but also make sure that total cost of ownership was at a minimum. This meant we needed to create mathematical models to predict the cost and prices we should charge for several hundred products and services with flexible return policies while keeping our customers invoices static.

Doing this was a big undertaking mostly because we didn’t have enough real data to work with. We needed to teach our models to guess our costs and the prices we should charge based on our small dataset. By the time we had enough data, our models showed that they had been at worst 92% accurate, which we were very happy with. Having a model like this, allowed us to provide the same levels of service to smaller customers as it did to our biggest customers.

A basic overview of how our model worked for a singular product - we offered an iPhone Solution to our customers, which came with an iPhone, sim card, screen protector, charger, charge cable and unlimited service. By listing every component that came with a solution, we were able to offer standardisation in packaging, pricing, support, shipping with the added benefit that it limited mistakes on our side. Our customers could use the iPhone for a day and return it or keep it for as long as they needed it.

Pricing hardware

We had thousands of iPhone’s (similar for all our assets) in our “active inventory”. To charge for the physical iPhone asset (as part of the larger iPhone Solution) we used the average cost of all iPhones in our “active inventory”. Our software decided if an iPhone should be part of our “active inventory” by considering the average viable life of the asset. The average viable life was calculated by analysing the inflection point at which the asset had too much wear and tear, was superseded, required more service or had a higher chance of failure. By doing this we were able to remove assets from our “active inventory” before the cost of customers using them got higher than their current value. Having this model allowed us to continually add new equipment to our inventory below the cost of ownership, significantly reducing our prices. This created a win/win for our customers in that they were always using the best equipment and paying the lowest prices. Having an unlimited switch policy provided a fluid flow of equipment through our warehouse and allowed us to retire equipment that had reached it’s “average viable life”.

Pricing service

As we provided unlimited support we needed a way to price what the support cost. Our support system analysed the cost of providing support to each and every solution we offered and looked for ways to minimise the support costs while providing exceptional service. A simple way to solve this would be to provide IT solutions that were so reliable that they did not require support. Our models showed that a large portion of the cost of IT is the cost of labor, so reducing labor would allow us to charge our customers less. To minimise the costs charged to our customers, our mathematical models needed to analyse the hardware and software combinations and look for the ones that required the least amount of support while providing the customer with the features they required. Reducing support needs was also imperative to Reddog Technology’s profitability since we provided unlimited support. Looking for the combinations that required the least amount of support allowed us to service customers who were extremely remote - one customer was so remote it cost $10,000 to get a single person to site.

To maintain static pricing for our customers we charged them the average cost of supporting each solution.