Game Over Part Deux (Serious Post)

It’s the second quarter of the year, time to write one serious post without the Vladville act. I’ve decided to make this once-a-quarter event as to not distract the audience withe unfortunate reality (but tremendous opportunity) we find ourselves in.

I don’t have to tell you, you already know it – servers aren’t selling. Projects took over but that is slowing down. Even the almighty Microsoft and Google are slashing jobs, not to be outdone by every other industry other than my friends in Van Nuys and mail-us-your-gold shops. It’s a good time to be a repo man. It’s a bad time to be in anything expensive.

Now, knock on wood, things are still growing in the IT space. Unfortunately, the growth is coming on the back of things that are not scalable (projects) and on top of the minimalist solutions that do not have a high profit margin or high service footprint. The longer this goes on, the less likely we are to ever sell premium solutions because as the story goes… “it’s good enough and it’s 1/10th the price, so you go ahead and sell me on it.”

But this is not about the doom and gloom.

Let’s face it, if you’ve made it this far, you’re doing something right.

Whether you’ll be in that group six months out remains to be seen though.

That goes for everyone, OWN as well.

Yesterday I had a relatively painful conversation with a guy that got laid off at Microsoft. Here is the comment:

“ouch.  the only way to survive in this economy is to sell cheap sh*t that will break, but people can still afford.  I love hearing sales called on the floor – “product x is down y%!”.  maybe they didn’t get the memo.  in the meantime, people get the boot”

The premiums and luxuries in the technology are rapidly being slaughtered in the back yard. Gmail is replacing Exchange. Linux is replacing everything on the cheap side and that turns out to be the only thing that will sell.

Like it or not, the whole world of “outsourced CIO” is rapidly sunsetting. We first saw this as your lowest of the low, unemployed IT consultants, SPF and riffraff disappeared almost as quickly as they appeared. Now legitimate companies are having their credit lines slashed, losing good people and being forced to downsize and cut services.

What is replacing them? Why DIY of course.

You don’t need a CIO to setup Gmail.

You don’t need a CIO to order a laptop from Dell. (you apparently only need to wait 6-8 weeks)

You don’t need a CIO to purchase or install Quickbooks – I know firsthand, Intuit will do everything they can to get you going.

So….

Here comes a big question….

That will determine whether you survive or not….

Where is your version of the Gmail, Netbook or Do-anything-to-deploy-a-service that can’t be replaced by a guy down the street?

Trick question, there is no such thing.

Most people will even ignore the temptation to participate in the commodity market. I can’t blame them, if you only have short term focus and don’t care about trends or building careers for people, it doesn’t matter. Hit it while you can, stash the cash and move on.

However, the danger we face right now is rapid growth of our little company in a rapidly shrinking market. And once we lose those customers to Gmail, they are not going to come back. At least not in the volumes needed to grow a serious business.

And forgive me, but I’m an entrepreneur, not a priest. I don’t need to help people see the light, accept Exchange as their voice and so on and so forth. I want a huge market, a niche product and have people line up to give me money. It’s worked for 12+ years 😉

Now, show me the money..

One thing that most of OWN (well, all of OWN except me and the people I can reach out to smack) has been doing for the past 6-8 months has been the development and launch of a low cost all inclusive service.

Why? Well, it turns out when you remove all support, all enterprise, all redundancy and all the effort that is put into running a global enterprise network, you can create a crappy local one for a fraction of the cost. I’m a little angry that it can operate at a higher profit margin than OWN, but that’s just personal 😉

So we’re branching out and providing an answer… because, honestly… I don’t know who wins here. Cheap/free and massive or expensive and exclusive. There will be a market for both, but I am not willing to pick sides. I’m just in it for the money and service.

One warning I have for everyone is that if you pick one, and pick poorly – you are finished. I personally have little faith in the expensive and personal because it’s not like the cheap solutions are out to screw their clients – and as they improve it gets harder and harder to justify the more expensive alternative. And when it gets to the point that the next viable alternative is just a few dollars a month, switching from one to another is no longer very compelling.

Just economics and business realities.