Surprising Security Shortcomings After nearly a decade of threat warnings, evolving threats and billions of dollars in technology investments, you’d think that businesses have at least a baseline of IT security protections. Recent reports reveal some surprising security shortcomings in the business community.
General Motors, Ford and Chrysler executives return to Washington today in search of a multibillion-dollar bailout. Technology solution providers, struggling with their own recession pressures, have some sage business advice for the Motor City trio.
As the top three auto makers head back to Washington, D.C. today to ask for $25 billion in additional loans to assist them as they look to survive the growing economic slump, technology solution providers have some advice for them.
Know Your Strengths Many solution providers know that you cannot be all things to all people. Successful companies pick one product and invest in product lines that are profitable.
Alex Zaltzman, CEO of TourSpot, offers “GM has eight different product brands. That's like selling eight different firewall brands, each requiring employee training, labs and managing vendor relationships. How many "brands" do Nissan, Toyota and Honda have? Bottom line, eliminating extraneous and overlapping products reduces huge overhead.”
GM also is likely to discuss efforts to shed brands while in Washington, although it would prefer to sell them rather than shutting down Pontiac, Saturn or Saab, according to early reports. Shutting down some brands would require cash that GM doesn't have. On Monday, Ford announced that it may sell its Volvo brand to raise cash.
Cash Flow Operations Chris Adragna, director of operations at iVenture Solutions, recommends the auto industry “operate more out of cash flow like we do. There is a good small business lesson that would help many larger enterprises stay out of big trouble.”
This would be a suggestion worth following as cash reserves at GM and Chrysler are precariously close to the minimum level. They could have trouble paying all their bills by the end of the year. Ford is burning cash at an alarming rate; it borrowed more than $20 billion last year and has stated it can last at least through 2010.
In the most recently quarterly report filed with the Securities and Exchange Commission, GM reported owing creditors a whopping $45 billion, plus it’s obligated to pay more than $7.5 billion early in 2010 to a United Auto Workers trust fund that will take over retiree health care payments. GM is not the only company to owe the UAW. Ford owes more than $26 billion, with $6.3 billion due to its trust fund at the end of 2009.
Review Your Contracts No small business can allow contracts to continue without review for profitability. Kevin McDonald, executive vice president at Alvaka Networks, advises the auto industry to “aggressively renegotiate all of their agreements with employees and subcontractors. They have agreements with dealers that are costly and there are too many of them.”
Realistic Compensation As Alvaka’s McDonald suggests, “any agreement for government support must come with minimum expectations that [automakers] remove their top executive immediately and that they should receive no more than 25 percent of any compensation package. Any new executive must only be paid a base salary with performance bonuses and that those bonuses should be tied to a multiple of the highest paid non-executive. If the president of the United States can run the most powerful county in the world for less than half a million per year, we should be able to find talented people who are willing to work for far more reasonable amounts.”
TourSpot’s Zaltzman agrees. “Treat and pay employees fairly, there would be no need for unions.” And iVenture’s Adragna offers, “All of the stakeholders need to make adjustments. As much as I support the worker, and have mostly been pro-union, I do think that the unions are going to have to share the pain here, too.”
Some congressional lawmakers have urged the auto executives to take major pay cuts as part of the deal. Chrysler CEO Robert Nardelli said he would work for $1 a year, and a similar commitment is expected from GM’s CEO Rick Wagoner. It was unclear if Ford CEO Alan Mulally will take a similar cut.
Invest in New Technologies & Services According to the Channel Insider 2008 Midyear Outlook survey, solution providers see investing in new, more profitable and sustainable IT products and vendors as a means of attracting new customers and growing revenues. So it comes as no surprise that solution providers would recommend that automakers invest in new technologies and services to improve their bottom lines.
Alvaka’s McDonald would be looking for “investments in new technology and advancing fuel efficiency and make much smaller and cooler vehicles with better and longer warranties.”
Analysts and financial investors agree, but caution that with such huge debt payments looming the automakers will have less money for research than their competitors. GM would restructure its debt, preserving funds for research on next-generation fuel-efficient products such as the Chevrolet Volt rechargeable electric car or the Chevrolet Cruze compact, said GM spokeswoman Renee Rashid-Merem.
Chris summed it up for all of the solution providers we spoke with “In the end, if they do all the same things the same way it's going to turn out the same.”
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