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In Hi-Tech, Second Place is really First Loser

May 3, 2010

Most people would be hard pressed to know a good tech company from bad, except for some obvious names such as Salesforce.com, Oracle, Apple or Google.  I have worked for and lived with hi-tech for so long, I can literally drive by and smell success brewing or the smell of an impending acquisition target.

Tech companies who survived the last 24-36 months of doom-and-gloom, those who have lean-and-mean, on-the-ground operationally focused management with energized employees and well defined value propositions are about to pounce in this Brave New World.  They are the bold and the focused.  They are those who will seize the moment, those who will escape paralysis-by-analysis and who will ref-focus themselves as the NEXT New Generation of Money Makers.  The very best will even define the markets they are in, becoming not just the category leader, but the default vendor, the company whose product starts being used as a verb.

Those hi-tech companies who will thrive have already reduced operating expenses to the bone but are still focusing on the end to end customer experience and baking that into every internal process.  Risk has been thought through, a threshold established and managed.  And if you haven’t prepared for success and reduced risk does it make sense to wait until conditions improve to do a ground up in-depth review of all your forecasts, assumptions, rules of thumb, operations, strategies and tactics?   High risk does not necessarily result in high returns, does it?   Just watch cable TV as the Texas Hold-‘Em Tournaments unfold, one bad bet = bye, bye.

Don’t ask your in house lieutenants…they are a little “twitchy” right now.  Don’t ask your bankers, they are NOT interested in investing in anything to anyone right now.  One question which you will find either heartening or scary is asking if your company, now owned at least in part by a PE or VC firm, has been placed in their Underperforming Portfolio.  Once these people bring in their own fix-it consultants your span of control is reduced to microns.  It would have been much better to fix your world while you had the time and before they labeled you.

Now is the time to take a deep breath and prepare for the upcoming expansion.  Major League teams review their strengths and weaknesses after each season, knowing what they need from the upcoming Free Agency pool.  Same with Hi-tech – it’s a team only as good as its players, but while the players may be individually great (and expensive), if the overall game winning strategy is wrong, your company will be doomed to Second Place, or worse, out-of-business.

My guess is that for the greater economy, 2010 will have a non-robust, GDP mini-growth of between + 1.8% – 2.6% (after the inevitable “re-set” of the “official measurements” by the government, three to six months after “first release”).  Inflation is highly unlikely and consumer spending will be at self-funding levels without much use of credit which will affect inventory replenishment cycles.

Hi-Tech will be luckier as companies open their wallets having postponed necessary IT Infrastructure upgrades for over 2 years, and Windows 7 is a sure-fire, runaway hit unlike Vista.  There’s a strong likelihood companies will finally begin upgrading their XP-Professional machines to newer Windows 7 laptops (and some desktops), further driving manufacturing demand.   One major question will be how deeply entrenched, after 2 years of robust acceptance, is freeware?  OpenOffice, various CRM programs, MySQL and Linux are all viable, putting price and even feature pressure on the both the per-instance and Cloud business models. I’ve seen many companies mandate that all new servers run Linux.

It’s times like this when new market leaders emerge.  HP purchased Palm, signaling a move to Smartphones, but the new Palm OS has, reportedly, huge security flaws and so rewriting it will be necessary (presumably HP purchased Palm for its people, not its declining user base). Dell and other lower cost high quality providers are licking their chops at the potential for their corporate accounts waking up, but Acer and others are making a play as well.  The winner will be the company providing the best 360 degree user experience, from product mix, to order, to delivery and then to support and finally, initial and 6 month out build quality.

This could be a Hyundai moment, when a former ‘also ran’, semi-joke, makes a successful play for the big leagues and becomes a first tier provider. The proviso is that by studying Hyundai, you soon realize they accepted reality, made realistic and profound changes while they still had credibility (well, some at any rate, but that’s better than Yugo levels) and decided to become market leaders in a crowded, mature market.  Sounds like most of Hi-Tech could use a similar approach.

Bruce Thom is the Western Region Business Development Director for Return on Efficiency, focusing on Hi-Tech.  He has over 30 years of selling to, and for, major software and hardware providers and sees companies from the unique perspective of an ‘inside-outsider’.  He can be reached at bruce.thom@growroe.com.

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