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Let’s start by stating the obvious: the economy is bad. This is
shaping up to be the worst recession in living memory. Unemployment is
at nearly 30-year highs, GDP shrank more than 6 percent in the last
quarter and the government is spending more than $1.5 trillion (that’s
a 13-digit number) of money it doesn’t have to shore up the financial
and housing sectors.

The evidence that these are tough times is ubiquitous, so this is
the time to retreat to safe ground and ride out the storm, right?
Nothing could be further from the truth.

Conventional wisdom says that businesses should cut their spending
and focus on sustaining their business through a recession. That often
translates into focusing on retaining and expanding relationships with
existing customers because, in theory, those are the people who know
you best and are more likely to continue buying from you. Conversely,
acquiring new customers takes an investment of time and money, which is
in short supply.

Conventional wisdom be damned. The Channel Insider 2009 Market Pulse Report found
a clear division between solution providers who believe their revenue
and profitability will improve over 2008 and those who believe their
business will remain flat or decline as a result of the recession. What
are the distinguishing characteristics between the two groups? The
optimists are investing in their businesses, looking to grow their
customer bases and market share, while the pessimists are retrenching
and cutting their investments.

“Historically, demand has been created by the customer, and you were
responding to the demand. Now, you have to go to the end point and
create the demand,” says Adrian Liddiard, the chief operating officer
of Bluewater Communications Group.


As budgets tighten, customer expectations for the return on their
technology spend increases. Solution providers report that end users
are taking more time to scrutinize proposals, cutting back on projects
in the works and demanding demonstrative proof that their investment of
a dollar today will result in a multiple return within a prescribed

“Before, I don’t know if any customer really evaluated what they
were buying on the front end,” says Jay Kirby, vice president of sales
at Troubadour, a Houston-based security and VoIP solution provider.
“Now, if you can’t get a project done within nine months, you can’t
demonstrate the ROI to them.”

More worrisome to some solution providers is how the recession may
dramatically shift the way end users plan and execute technology
budgets. This is more than just the shift to Web-based services.
Reduced recessionary spend is teaching enterprises and midsized
businesses that they can reap acceptable technology benefits by
swallowing projects in smaller portions. The net result may be that
flush technology spending may not return to pre-recession levels—or may
change the entire technology sales-purchase dynamic.

Now, more than ever, solution providers must focus on their business
model, their value proposition and their fulfillment delivery. The
channel has been fed a steady diatribe that “pushing boxes” isn’t going
to bring their prosperity. Many see services as the means to return a
robust, high margin business, but the day will come when service
provider will be derided like the box pushes of yesteryear (we’ll call
them “packet pushers” for now). A true, robust solution provider
business is never about the technology or the vendors in its portfolio,
but rather what makes the service and solution unique to the customer.
That’s value. That’s marketing distinction. That’s the path to success.

What will make a difference? Marketing, for one. Solution providers
who are investing in focused marketing campaigns are generating leads,
closing deals and increasing revenue. Force 3, a government integrator
in Maryland, has invested in marketing initiatives ranging from spots
on drive-time radio in Washington, D.C., to viral video campaigns that
result in real business growth. Many people think this is not the time
for marketing experimentation or hokey messages, but Krissy Edell
Kelley, Force 3’s director of marketing and communications, says her
business cannot afford not to market. “It’s OK if not everyone gets it,
you just have to be out there,” she says.

Another strategy that works well: market and technology focus.
Troubadour is focused on security. Force 3 is an expert in the federal
channel. And Silient Networks, a solution provider in Carlsbad, Calif.,
is targeting recession-proof verticals such as health care and
nonprofits. “We saw this coming for some time and started to look for
verticals that hadn’t quite gone mainstream,” says CEO Mac Clarke.

The difference between the optimists and the pessimists is a
business plan and a focus on key activities that are intended to drive
the business. Investment in new initiative and activities is always
risky, especially when money is tight. But investment that has a
measurable and predictable return—short and long term—is often more
beneficial than doing nothing at all. Now is not the time to sit back
and wait for the economy to recover. Now is the time to plot a course,
invest in opportunities that will pay dividends and build market share
at the expense of those hovelled, pessimistic solution providers.

“If you don’t have anything left to cut and you’re still having
problems, you have serious issues,” says Gary Fish, CEO of FishNet
Security, one of the largest security integrators in North America.
Truer words have never been spoken.

Lawrence M. Walsh is vice president and group publisher of Channel Insider.


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