Cost cutting needs to be properly considered.
It often intrigues me when a public company makes a major announcement in relation to a redundancy offering – and their share price jumps a few percent. As a simple example, QR National traded around $2.80 for most of January 2011 and into early February. On 8 February, 3,500 workers were offered redundancy packages and the share price jumped to $3.02 by 9 February and up to $3.23 by the beginning of March. A 15 per cent increase in less than a month based on an announcement that the workforce was going to be cut by a third! The cynic in me says that they should have made two more announcements shedding another 3,500 staff over the next two months and their share price would have gone up by another 30 per cent. Not sure how well a business with zero staff would fare in the long-term though. Offering redundancies says to me that a business is not generating the business it once did so to solve the problem of expenses being too high and sales being too low – an organisation reduces their staff level and pays out a chunk of money!
It doesn’t seem entirely logical but I understand how the market perceives the announcement. Management is keeping a lid on expenses and, even though there is some short-term pain, the long-term gain is going to be worth it.My simplistic attitude to falling sales is to try and use all of my staff to increase sales and therefore remove the problem altogether.
As a reseller it is important to understand the way business managers think to create an offering that appeals to their mindset.
One example is the ongoing debate between capex and opex. I remember an ‘old-school’ client from a few years ago. He had left his son in charge of his business while he spent a few months travelling the world. His son had studied business management and was well-versed on the theoretical side of running a business. They needed to replace the computer system while the son was in charge, so we sold them a new system worth $100K and organised a finance company to tailor a finance package to lease the equipment. We received our $100K and the son had turned capex into opex. Everyone was happy until his Dad came back to see how his son had handled the business. I received a phone call from the very irate father. He wanted to know why his son was paying off these computers for three years and how he could get out of this contract. I don’t think there are many business managers left with this attitude. Why tie up capital in equipment when you can use that to keep stock on the floor or invest it in other areas of your business. It always seems easier to me to sell new equipment for a low monthly fee than sell it for a high ticket price.
Of course, once you have clients in the habit of paying a monthly fee for their hardware, it opens up a range of other possibilities for ongoing services (and subsequent ongoing charges). Nick Moran from EvolveIT says: “Our clients are always looking to budget for IT based on their operational expenses which allows them to be much more predictable and caters for fluctuations in demand. It makes selling other services such as hardware-as-a-service quite easy as it’s simply a bolt-on service offering at an additional monthly price.” The last sentence from Mr Moran says it all to me. The secret to creating a model that allows opex instead of capex is that you can keep adding on incremental services with associated fees. This ongoing revenue stream creates a reseller model that is both more profitable and more secure.
Ryan Spillane from Correct Solutions has been working on the opex premise for years. He says that “it removes the sticker shock and allows the correct solution to be installed in the first place.” Spillane went on further to say that “we have used HaaS and practically Anything as a Service (AaaS) for years to try and reduce the barrier of entry.”
Ultimately I don’t think you can safely say that there is a single item that will totally future-proof a reseller. The most important aspect is to keep evolving along a continuous improvement spectrum because what is successful today can be the path to ruin tomorrow.
Progressive resellers are seeing huge opportunities with this changing business model. Karen Murfett from Anittel says, “The state of the economy has led to a change in how businesses need to approach their IT spending. Clients are receive a better outcome with cloud services and financed solutions giving them what they need from their IT and, as a reseller, having a selection of services to offer is now essential as we need to deliver choice.”
If you are still trying to sell a bunch of hardware for a high ticket price, it might be time to wake up and smell the roses. New business managers want their business to be lean and flexible and to pick and choose services that suit them. The resellers that can give them the choices they need, along with the flexibility of monthly prices for all of those services, will win the day.
The final proof for me was when a client recently complained about his annual anti-virus software renewal. He knew he needed to keep his anti-virus software up to date. He knew he had to pay for that. His complaint was that he was receiving an invoice once a year for the renewal. Why wasn’t the fee just built-in as part of his monthly managed services fee? From that day on, it was!
Tell me if you prefer the capex or opex model at firstname.lastname@example.org.