Good Enough ConsideringBy Lawrence Walsh | Posted 2009-02-02 Email Print
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Economic hard times are forcing companies to cut spending and act more conservatively in their technology investments. Solution providers must recalibrate their value propositions and position themselves for when boom times return.
As the recession took root, I started thinking about how economic downturns were really turning points in value propositions. As industries fall, new ones rise to take their place and spur the next epoch in propriety. The tech industry is one of those rare verticals that will never really go away, since it reinvents itself constantly, developing new technologies and delivery systems to replace antiquated and outmoded systems.
In economic downturns, I thought, it’s more important than ever for solution providers to demonstrate their value by harnessing the power of emerging technologies to improve the performance of their customers’ businesses.
Then I met Dave Hitz, the co-founder and executive vice president of NetApp, who uttered the three most terrifying words about surviving the recession: "good enough considering."
IT spending is either down or flat as businesses and consumers retreat to their fiscal bunkers to weather out the economic storm. Small businesses to enterprises are reticent to spend any discretionary budget out of fear that they’ll need the cash at some point in the future or that revenue will not replace existing reserves or credit lines. The result is an economic ecosystem that is risk adverse and unwilling to invest in anything that appears—on the surface—discretionary.
"My hunch is that a lot of people are saying 'good enough considering,’" says Hitz, who recently published the book How to Castrate a Bull, the story and lessons of building NetApp from a startup to a Fortune 500 company. "People are saying that a system may not be as good or reliable as a new system, but it’s good enough considering …"
"Good enough considering," Hitz believes, is a temporary state brought on and fueled by the recession. It means that even in light of end users recognizing the need to replace technology and upgrade to new, more efficient and more cost-effective systems, they will extend the life and use of their existing technologies to avoid an investment—even when they show a near immediate ROI.
Channel Insider is tracking that phenomenon in our forthcoming 2009 Market Pulse Report. Solution providers report that their customers are delaying or deferring projects, taking longer to commit to new sales and scaling back on new IT spending. One-third of solution providers say that their customers are consolidating technologies for greater efficiencies. Only 6 percent of those surveyed say their customers are increasing technology investments.
As vendors such as Toshiba, Lenovo and Hewlett-Packard race new, low-cost notebooks and desktops to market, solution providers say that their customers are stretching the service life of PCs and other critical infrastructure pieces to five years and longer. And dealers in refurbished equipment, such as switches, routers and servers, are reporting a marked uptick in sales since the start of the recession.
Solution Providers: PC Refresh Cycles Stretch to 5-Plus Years
As the recession stretches into 2009, companies are pushing their PC refresh cycles out to five years, according to solution providers contacted by Channel Insider. That's bad news for PC and server makers Dell, HP and Lenovo, but represents a different kind of opportunity for savvy solution providers.
Does an enterprise need new routers if it’s decreasing staff and network loads? Does a small business need the latest accounting software package? Is an investment in the data loss prevention absolutely necessary? Will upgrading sales teams to the latest generation of smartphones accelerate sales? Or will the technology investments made over the previous two or three years carry a business through the next 12 to 18 months? As Hitz says, "If the computer system you have will solve your problems, doing nothing may be the answer."
Obviously, Hitz’s company and solution providers don’t want "good enough considering" to be the answer to every technology question poised to customers and prospects. Some technology and information needs must be addressed regardless of economic conditions. Data generation continues at an unabated pace, which translates into the need for greater storage capacity. Security threats remain omnipresent, which translates into the need for better data and infrastructure protection measures and risk management systems. And energy and staffing costs are crushing IT budgets, which opens the need for consolidating and rearchitecting data centers.
During tough times, it’s incumbent upon solution providers to hone their value proposition and show their customers and prospects how they can be of service and support even in the absence of new product purchases. As solution providers tell Channel Insider in the 2009 Market Pulse Report, revenue from professional and consultative services is increasing even as hardware and software sales are sluggish. By sharing customers’ pain, solution providers will be positioned as a trusted partner that’s ready to share in the eventual prosperity to come.
"'Good enough considering’ is a value proposition in tough times. You don’t buy a BMW during tough times because it’s a luxury. You buy a Yugo because it’s good enough considering economic conditions. It’s not going to be the situation forever," Hitz says. So very true.
Lawrence M. Walsh is vice president and group publisher of Channel Insider.