Two Takes on Surviving Recession via Cost Cutting

This year’s annual CompTIA Breakaway conference had a distinct air of problem-solving, fraternity and optimism. With its members-driven set of working groups, CompTIA events tend to be constructive and goal-driven. Yet as a leader of a couple of workshops at this year’s event, I was reminded of the practical survival instinct in play with many of today’s more successful solution providers.  

One workshop session, entitled “Surviving the Recession by Cost Cutting Without Affecting Customer Service Levels,” included some 15 U.S.-based participants with varying business models. Most partners kicked things off positively, indicating that their calendar Q3 revenues were looking much stronger than those of Q2.  Most also said they had a much clearer line-of-sight to a solid sales pipeline today, compared  to the first six months of this year. The conversation later shifted to the challenging decisions partners have been making to contain costs and recession-proof their businesses. The emphasis here was not so much on pure cost-cutting but rather reallocation of resources and costs to better differentiate and grow their businesses.

Through our discussion, we grouped the solution providers’ economic activities into several buckets:  cuts already made, cuts they’re not willing to make (“sacred cows”) and resources reallocated or shifted. I found it remarkable in this hour-plus conversation that there was very little connection between these economic business decisions and the partners’ relationships with their key suppliers. In fact, several times, the only pessimism in the room came during conversation about channel program support or funding available from key vendors. 

Here’s the top list of cost initiatives offered by this group:

Cuts:
•    Staffing cuts or caps on bonuses
•    Salary freezes
•    Changing healthcare plans or providers
•    Significant cuts on travel
•    “Firing” unprofitable customers
•    Dropping low-margin product lines
•    Closing regional sales offices or sub-leasing unused office space
•    Letting employees work from home more often

No Cuts/Sacred Cows:
•    Incentive pay
•    Overtime pay
•    Healthcare programs for employees and families
•    401K program
•    Selected employee “fun” events to maintain or grow team morale

Cost Reallocation:
•    Strategic hiring of subject-matter experts
•    Shifting headcount to hire more sales resources
•    Outsourcing cold-calling to cultivate new leads
•    Adding training and certification requirements for employees to fill “downtime”
•    Doing most pre-sales work via telepresence or on-line vehicles
•    Cutting mileage compensation and buying company cars

We asked the group several times about their expectations for increased support from vendors or dependence on their key vendor’s channel programs to help weather the economic storm. Most comments here centered on the cutting of resources by vendors, including MDF programs, overall marketing support and poor quality of leads supplied. What came through loud and clear was that although many solution providers had experienced a bleak past six months, this group was comprised of  tough, practical business people preparing for the worst, hoping for a stronger next two- to three quarters and taking business matters into their own hands.