Archives For data center

numbersHow Many Meetings Are You Getting Per Month?

How Many New Clients Have You Picked Up Over the Past 12 Months?

I hear this all the time, “It’s a number’s game.” If you make 60 calls, or some say 100, then you should get 4 – 6 meetings each month, and 1 will close. That’s the silliest thing I’ve hear in a long time. It’s like saying, if I put enough quarters in the slot machine, I’ll eventually win. Odds are odds. It doesn’t matter how many times you flip a coin, the odds of landing on heads are always 50%.

Not Numbers, Think Strategy and Value

Here’s the hard truth. If you have something people really need, know who to communicate to and how to communicate, you’ll connect. If they really need it, they’ll buy it. If you sell them something they really don’t need, they’ll figure it out. If your offering isn’t great, they’ll leave you shortly after signing.$1 HC Book Ad

In my newest book – Digital Money, due out in a couple of weeks, I explain to business leaders exactly why they need to rethink security. I show them what’s going on inside their organization that is destined to lead to disaster. And then I tell them why they can’t fix this internally, and what to look for in an IT service provider.

If you want to know what that service provider looks like, I explain the whole thing in my book, The House & The Cloud.

Don’t Be Fooled

The number’s game leads to business failure. Gartner, The WSJ, and many others are telling us, “The cloud is here, adapt or lose.” Margins on MSP business are shrinking. And don’t expect the data center business to come back next year. I heard that from someone yesterday. It’s not going to happen any time soon.

© 2016, David Stelzl

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moneyExpect Your IT Infrastructure Business To Shrink in the Second Half

Steve Norton, columnist for The Wall Street Journal, reported new shrinking IT spending numbers in this morning’s CIO Journal Report.

This is the third adjustment this year according to my notes. Earlier in the year Gartner was calling for a 1.3% decline, then in April 3.1%. Now they are saying we should expect 5.5% shrinkage!  These are some big changes.  What’s going on?

Date Center Is Over

Several years ago, when Cisco started really focusing on data center, I made a prediction. You might remember it – It’s in my latest version of The House & The Cloud, and From Vendor to Advisor, a book I published back in 2012.  I made a similar prediction in 2007, in the first House & The Cloud – however it was about VoIP.  These technologies commoditize quickly.  But data center is different.  It was already a commodity!  Cisco was developing what Geoffrey Moore called, in his book Inside the Tornado, a +1 technology.  Plus-One is like putting a popcorn button on the microwave oven.  It takes something that everyone already has and makes it better.  But there’s a problem….Blog Subscribe Ad

The Problem with Plus One Technology 

90% of the technology revenue is being sold today through the channel. If you look at Moore’s model, he shows how products enter the market as early adopter offerings, purchased by about 12.5% of the market. As the product matures, assuming that product enters the early and late majority markets, it enters the majority markets.  If the manufacture does things right, they might become the defacto standard as Moore’s Tornado (Inside the Tornado) heats up.  If that happens they will have 60% of the overall market just from their major market share, plus the earlier 12%; in other words, they’ll be dominating the market like we see Cisco doing right now in Route/Switch.

The problem is, that while the manufacturer is still holding the larger part of the available market share, their resellers don’t really make money on commodity sales. The margins get so thin in the late majority market, they face going out of business. Over the past 20 years we’ve seen technologies come and go. The new waves of technology fuel new resellers, or the reengineering of old resellers. Novell resellers became Microsoft LAN Integrators. The UNIX wave of the mid-nineties helped revitalize many companies that used to sell PCs or CAD-CAM software. And big server deals, including those UNIX systems drove endless storage sales and high-availability computing.  By 2000 there were countless resellers jumping on the  VoIP bandwagon.

In 2003 we saw a shift away from product.  The smaller integrators were all building managed services. Their customers were not candidates for big storage or server sales, so MSP became the goal of just about every reseller.  The consulting business was eroding, given the commoditization of products, so servers were moved to contractual recurring revenue. This was an excellent move for many – it gave stability to the reseller model that had historically struggled with fluctuating services utilization rates (Bench Time).

The larger companies, especially big Cisco integrators, turned to data center and big storage no available in a rack mounted Router chassis. But the plus-one technologies don’t revitalize the reseller for long because they are not what Moore called, discontinuous innovations. Rather, they are an attempt to eat away at existing market share. It’s just an upgrade from an existing commodity product – so competition is steep and margins are thin. The reseller is them left to make up their margin loss in volume. In the long run, this won’t work. The sales people I am working with, who are in this space are telling me their margins are too thin, and they can’t sell enough to make a decent living. They need something new.

The Problem With Managed Services

MSP doesn’t necessarily commoditize – its a different animal altogether. In a way, it’s already a commodity.  It’s really an offering to take on the management of commodity infrastructure.

Since the products involved in MSP offerings are a commodity, the only thing that had kept resellers from flooding the market with offerings was the cost of building the NOC (Network Operations Center). Without a NOC, it’s hard to have an offering. Enter appliances and the Cloud.

In 2003, companies like Nable lowered the barrier to entry by coming out with an appliance that would handle the SMB NOC needs. Of course it had it’s limitations. It didn’t really handle the security side of the equation. Since 2003, numerous offerings have emerged, basic security features have been added, and the SMB integrators all have one.

To make things worse, cloud now gives just about anyone the ability to offer a host of managed services.  I see resellers with just 2 or 3 employees offering services to hundreds of SMB companies, leveraging outsourced call centers and cloud based NOCs to handle just about everything but the initial sale.

MSP offerings are now just dollars/workstation sales. It’s a price sale, just like servers and storage.  There’s no margin left in it.

Back to The Four Things

In my book, From Vendor to Advisor, I make the case for focusing on one of four things. One of them is nearly impossible, so that leaves three. Two are in high demand. And Security has always been the most important of the four.  They are; ROI, Competitive Advantage (including Customer Experience), Operational Efficiency, and Risk Mitigation.  Competitive Advantage and Risk Mitigation are by far the best places to focus.  Some VAR owners will continue to offer all of the above, but like the medical field, the specialist always makes more money, and is always in greater demand.

© 2015, David Stelzl

ROI vs. TCO

March 24, 2011 — Leave a comment

A question came in today asking, “What is the difference between ROI and TCO?  Our company uses the terms interchangeably.”

This is common…but they really are different.  Here is some explanation:

I use the term TCO specifically to mean that it will cost you less to produce the same or better results.  By focusing more on business results and less on cost, the seller has a chance to avoid a true ROI study; which may be analogous to asking the CFO to audit your proposal.  The last person I want to sell this to is a CFO (or anyone in the purchasing department).  Once the focus on business moves to finances, value is compared only to the cost of other options, and not on the value you bring to the business.

You might think of ROI as purely mathematical.  One way to describe it is:

ROI = (Financial Gain – Cost of the Investment)/ Cost of the Investment.

True ROI calculations involve a deal’s net present value ( taking into consideration  a proposal’s future estimated cash flow the cost of capital), payback period or hurdle rate, and an internal rate of return.  In other words, ROI at its core is a math problem dealing with investments, returns, and the cost of capital.  The average sales person’s ability to compute these numbers, or even review them with a financial officer is limited in most cases.

TCO might be defined as the cost of acquisition, installation, and operation.  In this case, we can take into consideration only the current solution and whatever solutions might be under consideration or in use at the present time.  Gartner Group often reports TCO numbers for various technologies,  taking into consideration the above as well as long term operations and future replacement or decommissioning of a technology solution.  When TCO is fairly evident, meaning one solution might involve many smaller servers or appliances that require data center real estate, cooling, and possibly additional staff, it makes sense to use this as justification to buy your solution.

I put this under operational efficiency because the cost savings generally are tied to an efficiency gained by the solution, and that is where the seller’s focus needs to stay.  To focus on the math is to kill the deal, unless the customer is already determined to buy, and is just price shopping at this point.

© 2011, David Stelzl

Every technology company should be building and selling managed service offerings – this is the foundation of financial stability (whether traditional management, SaaS, Cloud, etc. ).  It’s the equivalent of software license renewal.

If you are in sales, and your company is smart, you are being asked to sell these services.  If you are hitting the wall on this, remember, all managed services are sold like security solutions.  They are in fact, security – some form of confidentiality, integrity, or availability.  As an example, server monitoring is done to ensure uptime and response time which are availability, backups are done to ensure recovery/availability and integrity,… and the list goes on.

So stop talking about ROI, operational efficiency, or price, and start focusing on critical assets and looking for asset owners who are liable for functions that depend on the confidentiality of that data asset.  Then determine what risks exist, what level of risk is acceptable, and what managed services could be used to maintain an acceptable level of risk.  This is the key to selling managed services, and brings with it the foundation of financial stability.

“It turned out that the botnet runners had infected computers by instant-messaging malicious links to contacts on infected computers. They also got viruses onto removable thumb drives and through peer-to-peer networks. The program used to create the botnet was known as Mariposa, from the Spanish word for “butterfly.” – From Today’s USA Today….

A few notes on this

  • These were business guys, not geeks, running a for-profit business.  Mistakes made by senior management allowed authorities to track down the people in charge.  According to the article, this is rarely the case – generally the people at the top don’t get caught.
  • The goal is profit, the tool is the botnet – this botnet has been around for years, stealing millions of credit card numbers along with other sensitive data.  Over 13Million computers are involved, and I assume the owners of these systems have no idea who they are.  Likely, some of them are our clients.
  • Instant messaging, P2P networking, and thumb drives – this is typical.  Instant messaging means people were receiving links and clicking on them to infect their computers, P2P is on more computers  than you might imagine – used by many to exchange free music among other things.  Look for people using home computers for work purposes, or taking work computers home and allowing their kids to use them.  This is a sure sign that data is at risk.
  • Thumb drives – this is the oldest trick in the book…yet hackers still win with it.

Assessments are still the number one way to create immediate justification for project work and managed services.  The question is, are you finding urgent issues?  Make sure your team is trained the find the things that lead to justification – this is not always the focus for high end security consultants.  I find companies continue to lead with policy projects, architectural issues, and highly technical rhetoric which generally lands the sales person back with (unqualified) IT people that want to fix it themselves.

One final note – this is not just about finding security project work…whatever you sell can start with risk issues.  Whether you sell storage, servers, UC, applications…it doesn’t really matter. The issue sales people are facing right now is budget constraints, and this type of risk opens the door to assess risk, upgrade core systems, modify architecture, and implement managed services over every aspect of the IT architecture – if data is present, data is at risk.  THIS is the topic of my March Teleseminar…

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