In the IT market the term "change is the only constant" has been around for years (well, certainly since I left ICL where change was not constant, but that was due to the contract that dictated that everything did not change, so fell behind).

Note, this post is purely the ramblings from my mind, not a statement from Microsoft in an Official or Unofficial capacity

We've seen big iron, then smaller systems, the rise of SMP, the reduction in IT hardware and software costs for solutions, the rise of Microsoft servers, client server, 3-tier, clustered computing, multi-core and now internet enabled computing.  There is much more, of course, to come, but how we deliver IT to customers has changed too.  Of course, this is all generalised and some people have always been at one end or the other, but general acceptance is always shifting - remember the ASP business model of the late 90's - dead, yet here it is again with Software as / plus service.  The pricing of some services even appears to be £0, yet you pay by clicking on adverts or by others buying adverts for you to see.

 

Business Models

Google and salesforce.com have once again shown that non-distributed computing means that a central failure grinds everything to a halt, just as Terminal based computing did before SAS was being considered.  While you can architect to reduce these impacts, when they happen, hundreds to millions of people are impacted and if that is your business, it can be fatal.

Once upon a time it was building PCs, then custom PCs, then servers, then core infrastructure, now ICT.  However this is all the technical "stuff".  We now deliver solutions more than just boxes (I know some always did) and the need to move beyond core infrastructure is a business necessity if you have not already moved this way.  Excitement about a new "gizmo" (OS, application, gadget etc) is now tempered with "So what can it do to improve my business and is it worth it."

One of the conversations I have had repeatedly with partners over the last few months is about the "change."  How do they stop it, how do they avoid it or for those braver, how do they take advantage of it.  The answer is not simple and the faith required to make the step can be huge.  However, if you don't offer your customers what they want to buy, then you will surely be reduced to a niche market at best.  I have been there, done that, found my "amazing high end solutions" not worth the ROI when compared to a cheaper "medium quality" solution offered by someone else.  It was this change that brought me to Microsoft where I can run at the front of the change and benefit myself and share this knowledge with other.

Advertising, subscription and web based business models are cropping up all over the place - that does not mean they will survive - look at Vonage or Sunrocket - Subscription based VoIP - all the right boxes checked, except one has gone and the other will probably fail soon unless they are able to reduce churn and raise income.

 

Lets get the scary bits out - old business models and moving to new ones

I'm not a business specialist.  I have run my own business successfully before - IT training, Legal applications, custom database applications.  I've also worked with hundreds of partners to improve life for them.  Below are my "collected wisdoms" in this area.

Selling IT rather than solutions will continue to decline unless you are selling to the people who sell the solutions to other businesses.  You have a choice - become an outsource partner to someone else or niche yourself to those who don't want or trust the solution people.  Look at some of the SBSC member and their successful business model is to sell to other IT shops, not (just) to customers.

Moving up the solution stack is hard as it often means moving away from the technology.  Many SBSC partners freely admit that this scares them and they don't know how to do it.  This was highlighted by a recent conversation where I was asked "Why do I have to ask my customer about their mission statement?"  Well, to understand them, to check that their thoughts on IT matches their business requirements.  The worst possible situation is that you think you have done everything right and they think it is a lousy solution and you can't agree on who is right.  You'll never get repeat business this way and you won't learn how to grow in the future.

Charging more can be a good thing.  The price you sell your services at is a reflection on how much you value them.  If you get a plumber for £50 a day you probably will be told by someone that your boiler might blow up.  Get someone for £1,000 a day and you will have checked their credentials and the ability to stand by their work without you having to pay more.  Which camp do you want to be in?

Being a jack of all trades for technical people is a great feeling - hero to many (I know), but when someone wants something "difficult" doing you might be outsold by a more focused provider.  This means you need to know what you are good at and hone that skill.  Market the fact that you are an expert, the best of the best and charge for it.  If necessary, have a second brand that handles the lower end business and have different SLAs or offers for each end, even if you do both yourself.

Marketing and brand are swear words for many partners I work with.  They should not be.  If a customer does not know you exist, or know what you can do for them, then business will be harder to come buy.  Ask them if they know all you can do and ensure you can simply explain to them what it is.  Help them market you if you don't want to go down the "marketing" avenue in any other way.  As an aside I recently was asked to comment of 3 proposals for some work to be done for a cash strapped organisation.  I looked at the 3 proposals.  One was overly detailed - providing loads of technical info on Windows Server, Office 2007, Windows Vista.  The second was thin, basically a Quote invoice and an overview page. The third had prices at the end, but described how they would enhance the environment for the users in terms of what the users did, not what the technology was capable of.  They also included things like 3 levels of service (with a recommendation of the right one) and then a quote like price breakdown at the end.  I am sure you can guess which one one out.  It was above the budget set by this organisation, but they felt most comfortable with the one focused on them.  They knew they had to buy some "things" that they had not thought off, but when questioned why it was on the winning quote and not the others they were able to say what would be missing from the solution without it.  Simple!

Adopting new business models will require a change in the shape of your business - in terms of where you make money, the skills (both technical and sales) that you need and where you invest in training and customers to build a reputation that you can stand by.  If you want to sell "Live" services, you won't make your money on the sign-up kicker unless you sell hundreds a month, so you need to make it on design, consultancy, support services (and I don't mean just break fix), adding extra functionality that the business will want over the lifetime they are with you and more.  Do the sums, work out the run-rate you need and switch partially or fully as needed.

So what has this got to do with Microsoft and me?

Well, my tone is often not too kind, so if you've read this far you might now be thinking that I am too big for my boots or simply want to put a stick in my eye.  You might also be thinking that this is all very well and good, but why does this matter the to the people who read my blog.  Well, people have asked me about this and the fact is that change is coming that will shake up the way SBSC members and others do business.  For those who have not seen the signs along the way, here are some of them.

1) Microsoft is beginning to offer services in the cloud - With Its Head in the 'Cloud,' Microsoft Talks Web Services, Microsoft Details Web-Services Strategy, Ozzie Opens Up on 'Cloud' Services

2) Microsoft is trying to enable a model where partners can build a new business model around these new offerings, but the place where you make your profit (who cares about revenue - you need to have some take home money to pay the mortgage right?) - Turner: Microsoft Still 'Figuring Out' Core Strategies

3) The traditional software model will continue, but the growth will come in the newer areas - its not all doom and gloom, but the market will shrink for traditional services - Microsoft Executives Explain Services Transformation

4) We are not at the end of the line, there is still a huge amount more to come - Behind Microsoft's Bid to Gain Cutting Edge, Ballmer: Patient Investors Rewarded

For those who want to understand more, have a look at On-Demand Webcast: Presentations at Financial Analyst Meeting;

 

Me and others

As always, I'd love to get feedback - know where I am wrong - I most surely am in places and I have been told before that when I write it comes out far more arrogantly than when I talk face to face - that is the lack of feedback.  I'd love to have feedback, as I said, where you want more help from Microsoft, where I am wrong or mis-guided, what you are doing or have done to ensure the "gloom" does not impact your business.  It does not take long to write a comment or send me an e-mail - I can take the blunt ones as well as I can be blunt :-)

One last point - I am in a new role, working with software vendors around the UK and world.  Microsoft is not the only organisation grappling with this change, so expect to see similar offerings form others too!!

Other people who discuss areas like this, but don't necessarily agree with me include Steve Clayton (Microsoft), Susanne Dansey and Vlad Mazek and Rachel Elnaugh

ttfn

David

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Posted Thu, Aug 9 2007 12:00 PM by David Overton