Selling services in a tough market

 

Gartner Research has an article on selling IT services in an economic downturn.

There’s some good advice there which applies to all service businesses, not just the tech sector.

Probably the most important advice is the final point: Make your own opportunities.

Those who run with the pack and just try to compete on price or simply cut costs are going to be in great trouble.

The businesses that have a point of difference are going to be the ones who thrive over the next few years. 

We need to be thinking about our products, our image, our pricing and the way we tell people our story and why they should use us and not the guy down the street.

Keeping Costs Down On The Net

This article originally appeared in the November 2008 Sensis “Small Business, Big Opportunity” newsletter.

There are few areas in business that change as fast as the Internet, particularly when it comes to business connection plans. What was good value two years ago can be pretty ordinary today.

Now we’re in uncertain times it’s a good opportunity to review what your Internet provider is giving you for your money. The right plan can help your business get the most from the Internet.

It’s often said there are three factors in an Internet plan: price, speed and reliability. You can choose any two of them.

I’d like to say price shouldn’t be the deciding factor, but in reality none of us have bottomless budgets. So the first step is to look at what you currently spend and decide what you can afford.

Budgets can vary dramatically between businesses. A $50 a month plan is fine for a home based business while tens of thousands per month isn’t out of the question for a larger business with heavy needs.

Regardless of your business size, forget the super cheap consumer plans. You need a supplier you can rely on. Business grade providers will also offer important add on features like fixed IP addresses and priority support.

Nothing breaks a technology consultant’s heart more than seeing a business struggling with a substandard Internet connection. The lost productivity dwarfs the fifty or hundred dollar a month saved from scrimping on connection charges.

So having set a realistic budget, we have to choose between speed and reliability.

Reliability is non-negotiable. The net, and in particular email, is a key business function and telling customers “sorry, the Internet is down” simply doesn’t wash anymore. As businesses move more towards Voice over IP, software as a service and web 2.0 applications, always-on fast Internet becomes essential.

This leaves us with speed. Internet speeds are split into two parts; download, the data that comes into your system, and upload, the data that goes out.

Internet plans usually state their speeds along the lines of 1500/256 which in this case means the download speed is 1500kbps and the outgoing speed 256. This is called an asynchronous connection which is the “A” in ADSL.

Home plans usually use ADSL connections because web surfing downloads far more data than it sends but office applications like email, remote access and Voice over IP need a higher upload speed.

So if you have lots of people working remotely, or you’re making phone calls over the Internet you’ll have to consider plans that have higher upload speeds.

There’s also data allowances, these can be tricky for all Internet subscribers as the fixed price plans shape the connection, meaning they slow you down once you go over the limit. For businesses that rely mainly on email, these plans are fine.

If your business Internet needs are more demanding though, the alternative is excess use plans where you are charged once you exceed the limit. This can mean horrendous bills if the wrong plan is chosen.

The good news with data allowances though is this is one of the areas that has dramatically changed in the last few years. So this is an area where the canny business can get more value for their Internet spending.

Even if your Internet Service Provider won’t come to the party on reducing your prices, there’s a very good chance you can negotiate a better deal in data allowances and speeds to help your business have the edge in these uncertain times.

Dell’s $70 netbook bundle

Vodafone’s $70 a month bundled laptop deal sees them joining Optus and Telstra in offering these plans. To date, there’s been almost zero uptake with these products as the dealers don’t seem to know or care about them.

Let’s see if Vodafone and Dell can do a better job of marketing these packages.

For consumers, it would pay to shop around on these deals as Vodafone currently offer the 5Gb data plan with a free modem for $39 per month.

Over a 24-month period (which is what we’ll have to assume the plan is without any further information) then the package costs $1,680. If we subtract the data component of $936 (24*39) that “free” netbook will cost $744.

Not bad, based upon Dell’s list price of $699 that’s a 3.2% APR, but you can be sure Dell and other netbook vendors will have better deals on their computers next month.

It always pays to do the sums closely before committing to these contracts.

Respecting your network

This article orginally appeared in Smart Company on November 25, 2008

Australia’s Spam Act is just over five years old, and it’s had some success in keeping locally sourced junk email to reasonable limits along with catching the odd perpetrator.

The Australian Communications and Media Authority has plenty of Spam Act information for business owners on its website and the requirements can be summarised in three principles – get consent, identify yourself, and make it easy to unsubscribe.

Before you can send commercial emails to people, they need to ask for them. In itself, this requirement eliminates your emails being classified as spam given the definition of spam is unsolicited emails.

Identity is important, as the recipient needs to know who the email is from. All legitimate businesses should have no problem with this.

Finally, unsubscribing is simply good manners. For a business owner there is absolutely no point in irritating potential customers and partners who don’t want your messages.

The sticking point in all of this is defining consent. The loophole in the act defines “inferred consent” if you have an “existing business relationship”. The current interpretation of a business relationship is merely having the business card of the recipient.

Sadly this gives any dolt you’ve been foolish enough to give a business card to at a networking function permission to bombard you with invites to get-rich-quick seminars and share boat schemes.

I can’t tell you how irritating I find idiots sending me three pointless emails a week because I put my card in the door prize bowl or gave the courtesy of exchanging cards while talking.

Even worse are the dills who start sending SMS messages to your mobile phone. In fact I’m amazed that anyone thinks ultra intrusive text spam is an effective way to generate goodwill for a business.

A particular difficulty with spamming people in your network is that your paths will almost certainly to cross again, which can put all parties in a difficult position.

So don’t simply add everyone who gives you their business card to your mailing list. By all means send them a follow up email, phone call or postcard, and certainly offer to connect to them on social networking sites like LinkedIn and Facebook, but spare everyone the spam.

Understanding your responsibilities under the Spam Act will help you get more from your mailing lists. Adding some common sense and manners goes a long way too.

Second hand PCs

Gartner reports that less than 50% of second hand PCs are making it into the resale market. I’m surprised it’s that many given the restrictive software licensing, particularly for Windows.

I imagine the supply is going to dry up even more over the next few years as people start to hold onto their computers for longer.

Where we’ve seen business computers last three to five years I expect we’ll see the life of office and basic home PCs blow out to eight to ten years.

There’s three reasons for this; web based applications, little innovation and the recession.

The recession is a no-brainer. As I posted previously, computers purchases are deferrable and as money gets tighter users won’t replace them until they are throughly flogged.

This isn’t such a bad thing for users as there’s little compelling reason for buying a new computer if the current is working fine. For the majority of users who surf the web, type letters and do the odd spreadsheet they could get by with an eight year old computer.

Running eight year hardware becomes even easier if you’re running web based apps. As long as your system can run a reasonably modern browser, all the rest will follow.

This raises big problems for the bigger vendors. They are going to have offer some pretty compelling reasons for buyers to junk their old systems.

In the meantime, buyers of used systems might find the market remains tight.

Social networking and old media

I’m currently attending the Online Social Networking and Business Collaboration World Conference.

There’s some interesting perspectives on where social networking is going and how people are going to make money from it.

Personally, I think too many of the big players like Bebo and MySpace are too fixated on the old broadcast media model of top down content where they control everything.

Particularly fascinating is how dismissive many of the attendees are of YouTube and Facebook. The funny thing is there were five people around me with laptops on and all of them visited their Facebook pages during the morning seminar.

The icing on the cake was on the bus home. The girl in front of me had her MacBook open and she was editing her Facebook page.

It seems to me the big established media companies are struggling with their investments in the social media space. 

More on this later.

Sweet point for iPhone apps

Thanks to Techmeme, I came across an Venture Beat article that illustrates some of the points in my earlier post.

The $9.99 iPhone app is exactly these price points at work. The price isn’t too much to discourage buyers but equally allows the developer to turn a profit from the application.

It’s interesting how the price points settled so quickly in the App Store and how a similar thing happened with the 99c price point in iTunes.

Where does your business sit

One thing that’s been in my mind recently is how businesses will survive the downturn.

The way I see it is there are three broad segments we can put business and products into; essential, deferrable and discretionary. These are going to need different strategies to survive.

Discretionary

Stuff we don’t really need.
Examples: Expensive travel, cafes, TV’s, spa baths, gourmet food, farmer’s markets, designer shoes, branded bottled water, 90% of what’s on sale at the typical suburban shopping mall.

If your business is in this category then you have a problem. You’re going to have to demonstrate some sort of need or value to the customer. 

To survive in this category it’s going to take innovative thinking in marketing and production along with some radical revisions of pricing and cost structures.

We see some of this with fast food chains offering things like 99c and $1.99 meals. I expect we’ll see many cafes offering 99c coffees and restaurants offering $19.99 “recession buster” meals.

To make money on these deals business owners are going to have to keep a canny eye on their costs, the prices customers want to pay and be very innovative in their marketing.

Deferrable

Things that can be put off for the moment
Examples: Computer repairs, mechanics, homewares, mobile phones, motor vehicles

As a former computer tech, this one’s close to my heart and there’s no doubt the tech sector’s already being crunched by this as people put off purchases and maintenance.

The key to surviving here is in motivating customers not to defer purchases. It’s going to be a matter of cutting costs and reviewing product range and price points.

This means more marketing that emphases the benefits of your product (eg cleaning up your computer extends its life and saves you money) or making the service more affordable (eg 30 point inspection service for $29.95).

Essentials

Stuff we can’t do without.
Examples: Basic groceries, energy, telecoms, shelter

Strangely I think this sector will see the most blood on the floor. For the simple reason too many business owners believe their products are essentials.

A good example is the belief if you are in food and groceries you should be fine. That’s only true if you sell food and groceries people need and can afford.

For instance many of those stall holders at your local farmer’s market might sell food, but people don’t need cold pressed, extra virgin olive oil at $20 a litre or ash rolled goat’s cheese at $40 a kilo.

Even if you are selling basics, you’re going to have to watch your costs and your competitors. You need to be able to meet the price point savvy consumers will demand in the next few years.

If you’re selling tomatoes a $7.99 a kilo when the guy around the corner is getting them out the door for $4.99 then you need to look at your suppliers and your costs.

The overriding themes through this post are “price points” and “marketing”.

We are going to have to let them know we can deliver what they want at the price they want.

How the ACMA blacklist works

One of the comments to my Smart Company column took me to task on how the Australian Communications and Media Authority compiles the website blacklist. I’ve put the comment and my reply which explains the process below.

I should also add the blacklist only applies to sites hosted outside Australia. ACMA will direct an Australian hosting serivce to take down any site rated X18+ or refused classification .

Paul, you incorrectly write that it is up the classification board to decide what is blacked out. That is incorrect as they only have jurisdiction on what is published within Australia. The blacklist is currently maintained by ACMA, so which minor public servant gets the job of surfing the web looking for something they can add (as well as responding to any ministerial hints about “unwanted” material).

If it was a transparent process, the material had been vetted against Australian standards then maybe. Or rules by a court. But not a secret list. No way.

Thanks for your comment, Richard. One of the big concerns about filtering is exactly how an appeals process or independent oversight of a blacklist will work.

ACMA refers any complaint about a website to the Classification Board. The board then classifies the site under the same system used for computer games and movies. If the board refuses classification or gives the site an X18+ rating then ACMA adds the site to the blacklist. The details are on the ACMA and Classification Board websites.

Why Internet filtering is bad for business

The proposals for an internet filter risk hurting innocent businesses by blocking websites.

This article orginally appeared in SmartCompany on the 14th November 2008

As reported in SmartCompany last week the Federal Government is proceeding with trials of internet filters that will restrict Australian access to the world wide web.

The aim of internet filtering is to block child abuse sites from Australian web surfers. While the idea is well meaning, the proposal will be an additional burden on business and won’t fix the problem.

There certainly is a problem – a study by the University of California, Berkeley, found around 1% of websites contain pornographic material. With over a billion websites indexed by Google, this translates to around 10 million sites containing things you’d rather not be seen in your workplace or by your kids.

To deal with this problem, most computer operating systems, browsers and search engines have built-in adult filters, and the Federal Government provides free software for home computer users on its NetAlert website.

The new filter will go a number of steps further, with it being compulsory for internet providers to deny access to around 10,000 sites, a number that falls dramatically short of the 10 million estimated pornographic sites and who knows how many terrorist, gambling and euthanasia sites that will probably be added to the list.

The task of deciding which of the billion websites to be blacked out will fall upon the Classification Board. In 2005-6, their 65 staff considered 9425 movies, video games and websites. To say the board will require a massive injection of resources is an understatement.

Under the current proposals, the banned list would be secret, and it’s uncertain if your business inadvertently found itself on the list how an appeal mechanism would work.

One serious risk for business is that many of the people who post illegal and inappropriate material do so on others’ computers to avoid detection. Hacked personal computers and corporate servers are frequently used by criminal gangs for exactly this purpose.

There is also the risk of sites being blocked for political reasons. Canberra has form on this, with the Federal Police using spurious copyright reasons to close down Richard Neville’s spoof John Howard site in 2006.

Recently, a staffer of the present Federal Government indirectly pressured a prominent critic of the filtering proposal through his industry association.

So there are real risks to your website if someone in your company does something illegal, messes up a security setting, or simply upsets the wrong person in a minister’s office.

However it’s not the censorship aspects of filtering that should be the main concern for businesses. The indirect consequences will be deep and far reaching for Australian commerce.

The immediate effect is filtering will increase internet costs. Given 98% of businesses use the internet, the increased ISP charges will be a tax on almost every Australian enterprise.

Business relies upon fast, reliable communications. Trials to date of the filtering systems show a decrease of speed between 2% and 84%. The filters will also add another level of complexity to the system, which in turn reduces reliability.

Those additional costs will become another barrier to entry. At the very time the Federal Government is struggling with competition in the communications industry, this proposal will eliminate many smaller operators and favour the larger incumbent providers.

Overall, this proposal will add costs and reduce the reliability of one of the modern economy’s critical business tools. The real tragedy is the filters simply won’t work.

Global Entrepreneurship Week

I went along to the Sydney launch for Global Entrepreneurship Week tonight.

What an absolutely interesting evening! There really are a lot of great ideas out there and plenty of talented people making them a reality (many of them 20 years younger than me).

More on this when I’ve had some sleep (in three days times).

I also learned about the Kauffman Foundation. More on that later too.

AVG anti virus problems

I’ve long recommended AVG for home users. But since the release of version 7.5 there’s been a slow decline in the quality of both the support and the product itself.

Flagging a critical Windows dll file as a virus is a real worry. If that had happened to me, my first thought would have been that I’d stupidly infected myself with something.

The lesson when a result like this comes from the blue is to treat it with suspicion. If one virus checker flags a problem like this, hit it with a couple of others to confirm the problem.

I think I’ll have to change the free anti virus recommendation on the PC Rescue and IT Queries websites. It looks like Avast! is the best choice and I’ll keep AVG and Anti Vir as the alternatives.