From the mailbag (firstname.lastname@example.org):
(excerpt from longer email):
Did you say SMB IT is slowing down? Is this nationwide or just your area?
What I actually blogged about previously was not the slowdown in the SMB IT, but that more and more SMB IT shops are closing doors. There are many reasons for this (incompetence, piracy crackdown, more stable infrastructure, more complex infrastructure) but the single biggest cause behind the exits is the fact that the consumers are getting more savvy about the technology that they use and demand less and less consulting. Notice that I said “they demand less” not that “they require less” – there is a difference, look up the definition of “ignorance”.
There are several trends that are causing the bottom of the market to fall out and even some of the middle sectors of the IT field. First, the bottom feeders. Several years ago, if your inkjet had enough ink in it and you could buy perforated business card templates, you were an IT consultant. That segment has been eliminated, the complexity of even the simplest network infrastructure has gone beyond the weekend distractions of the elderly hasbeens and 20-something-ITT-dropouts. The semi-legitimate operation of these shops has made it more difficult for these shops to exist, with Microsoft’s crackdown on piracy, promotion of the Small Business Specialist and push away from the FPP. The guys I used to see around a few years ago are gone, the calls from the same type of “consultant” no longer need to be turned away, they are done. To a certain extent managed services have driven a few of these shops down and out as well – for the past two years being a geek has simply not been enough. The bottom tier of “I know technology, therefore I am a consultant” have had a harder time competing for business against the full solution providers that can talk more than just spyware and reinstalling Windows. What tends to get lost in the conversation among the many “Turn MSP Today!” pitches is that you actually have to have some business sense to advise a business on their technology spending, and with most geeks never having gone through the business school and most running shops smaller than 10- or 5- employees likely all in the same department, the pitch to the CIO and CEO of a large company tends to be a test of humility.
Strangely enough, this has opened the exit door for a lot of the really experienced IT people in the market because they realized their worth is far higher with a lot less stress in the employee role than an employment/manager role. Years 2003-2007 have been phenomenal, but with the uncertain future I talk to more and more IT guys that are selling their shares and moving into executive and IT management segments of their largest clients. One of my best friends in this space just took an offer for a 9-5 VP MIS role paying $180,000 which according to him is nearly twice what his 6 employee firm netted him in take-home income in 2007. He sold his interest and moved on. Many are taking the same road, knowledge in a larger businesses is more lucrative with less stress than small business ownership and stress of dealing with the small business owners that are getting more knowledgeable and more cost sensitive.
Finally, and perhaps most tragically, the business models have not evolved with the industry and IT Solution Provider product offerings have not become strategic but rather organic. I’ve seen many businesses either outright flop or walk away with the tail between their legs from the large multiyear investments / contracts they signed for tools to support the infrastructure they have not yet sold. When you put it that way it does seem ridiculous but the number of people that have told me they regretted going with XYZ and ABC has been spectacular. At the same time that the SMB IT Providers are being locked down by the vendors and restricted, the customers are looking for the more open and unlocked relationship – result: more and more partners are walking away from those customers because they do not have an answer for services advertised in Time / Business Week / Newsweek and those services don’t pay for the tools they want to deploy! I’m not going to shamelessly plug my own products here but I will tell you that most people tend to be surprised with what we are offering and supporting under one umbrella – but they only seem to look at us after their trip through the foreign helpdesks and incurred a massive reputation hit on their competence in the eyes of their clients.
So people are.. slowly.. dropping out because they lack the vision or capability to execute their strategy in the way they envisioned it. Whatever the cause may be, this huge black hole of IT consulting is turning into a goldmine for those of us in this segment that have profitable lines of business, multiple revenue streams (ie: not just contract labor or blocks of hours but actual services, tiers, multiple technologies and product lines reaching both the desktop, server, cloud and data center), multiple points of presence or connections to help companies with multiple locations streamline their IT support through the same provider that is more in line with where they are heading. The alternatives to legitimate business are also slipping away, with less access to reliable pirated software, less need to pirate software (if a free alternative is available you can offer it instead of walking away from the client), better argument to go with a stable service company instead of a large takeover / M&A speculative or venture capital firm backing (Web 2.0 competition anyone?), portfolio of clients, long term ties to the local business, evidence of market participation..
.. that last one is something I want you to consider as well. This blog, www.vladville.com, outmarkets and outsells anything else OWN does on its own as a corporation. My presence is felt every single day, and it has been followed by press, competitors, partners and customers for years. The same is true for any local business that actually leads, and as my friend Dave Sobel would say it: In order to lead you can’t just say it while doing the same thing as everyone else, you actually have to do something. The opportunity is growing as the riffraff is falling by the wayside, what will you do to seize it in 2008?