Vlad Mazek – Vladville Blog

Knowledge is crack, just try it and you’ll be hooked. And you’ll find out how clueless you were beforehand, or how clueless everyone around you is. That’s what’s so wonderful about technology, Internet, etc – it’s possible (given time, effort and actual willingness) to gain expertise at literally anything.

There are so many best practices on how to hire and groom good people that would make your head spin. Unfortunately, they are only good for hiring remedial labor when you’re seeking complacent people that treasure stability, no change or accountability (ie: drones). But most businesses do not grow (or in this climate, survive) with drones. And when you look for more gifted and talented people, the unfortunate circumstance is that smart people know how to manipulate data. Things like DiSC profiles for example, can be easily skewed if you know what the hiring manager is looking for.

To date, I have only found one thing that makes good people stand apart from the army of idiots looking for a paycheck: eagerness to learn.

Literally everyone who ever used to work for Own Web Now is no longer here because they refused or showed no interest in self improvement – from reading long form books that establish expertise down to reading Google. People that wait for direction and expect to be forced/sent to training are usually directed back to the job search.

It sounds harsh, but it’s all about superpowers..

If you’re skilled enough, you get a job.

Just because you got a job doesn’t necessarily mean you get to keep it.

And it certainly doesn’t mean you’ll ever get a raise or move up.

It’s amazing how many people don’t get the above fundamentals of work in the 21st century. Like I recently wrote in the Death of a Services Salesman, the opportunity to hide and slide is only there in the infancy when everyone is trying to figure out how to make it. Once the best practices are established, the only ones that survive are first movers (people who figured it out first and created a very large client base) and the cost leaders (people that can automate and price the solution down to the bare bones)

Where does that leave people in a job?

Well. I sat around with my marketing folks yesterday and we went through the agenda for the next month. Development of superpowers was key. What I mean by that is that things are only apparent and common sense when you study and learn about them.

They are only common sense because you’re aware of them.

The rest of the people have no idea that they are being manipulated, that everything they say and how they say it reveals what they are up to, that they are being coached and guided towards the (mutually) beneficial result.

In 2010 and beyond, I am only looking for people that are looking for more & better. I don’t care what your DiSC, history, education says – because that’s largely irrelevant. A year from now we’ll be doing very different stuff than what we do today and we need people that can get from here to there on their own.

It took over a week to catch up with the comments regarding the “Death of a Services Salesman” blog series. I’m glad so many of you enjoyed it, I got more comments on this and more ad money than ever before. Now I can retire and live in a tent! 🙂

The commentary seemed split between oneliners that I read and long, extended rants that I deleted. Told you I would do that. If you have an opinion or insight that can fill more than a paragraph, honestly, you’re doing yourself and everyone else a disservice by not having a blog of your own.

“Nice Eulogy”

If you saw DoaSS as an eulogy, it probably was. Please turn the lights off on your way out.

On the other hand, we’ve seen this before. Technology (and solution providers) are naturally phased out by technological improvements. But that doesn’t mean that there is a mass extinction event on which everything as you knew it a second ago ceases to exist. Remember that Gmail has been out for 6 years and Microsoft signaled the current state of affairs at least 4 years ago (which leads me to believe that people that thought it was an eulogy didn’t actually read the blog posts but instead just reacted to their own fear of not being able to continue running business as usual)

Quite the contrary, the phase out period is extended – but only the first movers tend to survive. They get to the new market before the rest of the sheep flood it and completely render it impossible to differentiate and compete in.

The faster you accept that things are changing, the faster your company will grow. No, this blog is not meant as an abuse broadcast system (another comment) – it’s meant as a sounding board. I speak to hundreds sometimes thousands of people each week – and I use this blog to voice the insight I get from my interactions to see if I’m only getting a message from a small/vocal biased group or if this is an overall state of industry.

That’s how I know that if you’re sitting around formulating strategies over virtualizing servers in the cloud you’re stuck in 2006. Remember when good ol’ Vlad talked about a $99 SBS box and had thousands of them running? Yeah, good luck selling that today – you’ll find a handful of people with a lot of money and the number of people that consume IT like that is decreasing, not increasing. So by all means, try to run your consulting practice like you did in 2006 – few clients with thousands of dollars to burn on IT. High risk, slow deployments, expensive staff – and the few SMB bloggers that are still around will hopefully speak fondly of you and what a great job you did building the company’s first LAN.

The point of DoaSS is to make you move – quickly. If after reading it you don’t have a sense of urgency, go read it again.

Over the last four posts I looked at the major factors contributing to the death of the IT solution providers in the SMB sector. To quickly review, we’ve seen a lot of people hang up the hat because:

1. They were too focused on technology they were comfortable with 
2. Their value proposition did not match their market (they pitched big expenses to small businesses)
3. They could not cope with the competition from larger providers, global companies and former suppliers that passed them by
4. They underestimated the length and severity of the downturn combined with the changing taste for technology

The truth is undeniable, we all know a lot of people who used to be in this business that are now doing something else. And when faced with the prospect of looking at our peers failure, we have a fair amount of grief to deal with. Elizabeth Kubler-Ross outlines the five stages of grief:

• Denial – There is no IT downturn in IT, so many SMB solution providers are still thriving. Plus, how are Dell, HP and Cisco growing?
• Anger – It’s all Apple, Microsoft, Google, Dell and Obama’s fault (that last one I threw in for my buddy Chris Rue)
• Bargaining – If we redesign our business, and SWOT and change our marketing, surely we have a shot?
• Depression – Whatever, we can’t compete against Google so we’ll just focus on being a small specialty provider.
• Acceptance…

Acceptance

Lot’s of people will surely want to pick a fight over the many, many points I’ve made here. I encourage you to. Please write your own public blog post or write a comment on any of the four pages because I will not be addressing personal emails written on this subject – there are far too many people that read this blog that are dealing with this problem and we owe it to one another (in this industry) to have this discussion in the open while we’re still talking about the present (and future) not the past.

The IT Solution Provider industry (VARs, MSPs, etc) need to accept the fact that the good ol’ times of “investing in technology as a competitive advantage” are gone – everyone has technology now.

We need to accept that there is no such thing as “local presence” anymore and that global is the new local – bringing with it lower wages, more intense and more competent competition.

We need to accept that the days of the right solution being the only solution are gone – thanks to the many alternatives and substitutes the building blocks of a technology solution have permanently changed the taste and the demand.

Determination

If you’re capable of making it past the previous section, it’s time to make a decision. The simplest one is to say Screw you Vlad, you’re wrong. Or…

Opportunity: You could look at the clients that passed on your solution and ask them why? What did you pick? How come?

Sure, you could embrace the cloud but there are only going to be so many players left there. When it comes to competing with the likes of Microsoft and Google (which have huge cash cows sustaining their deep losses in their effort to work directly with the consumer) the odds are against you.

Yeah, you can charge people a markup for the cloud, but how does that make you competitive – everyone can do that. Maybe you can be an expert at moving people to the cloud and charging a service markup – yet again, you’re becoming an expert at something that everyone can do. And already does!  You’re just shifting your existing service to another platform (be it virtualization or cloud) and with it the same stuff that the clients don’t care about and you get no differentiation from.

Trust me: If some genius figured out the above paragraph, they’d be rolling in billions, not sitting in zip code 12345 pretending to be an expert.

What is going to make you sufficiently different from your competition when you’re using the same platform, same suppliers and at relatively similar cost structure?

This is something that I’ve spent the last 8 or so months trying to figure out. I think you’ve seen OWN (if you actually work closely with us, not the blog posts and public stuff) starting to go in that direction.

Supporting vs. Patronizing

I’m sure that many of you will see this as a very unsupportive message. But Vlad, if all of us are screwed, where does that leave the only OWN client – the partner? You go under too, right? Go back up and read about denial.

My job as the CEO of OWN is to help our partners grow. Not to sit idly by and pretend like there are no problems out there and patronize folks to their slow and inevitable death. Yes, I’m pretty sure that most of the service providers will be gone within 24 months – so my job is to figure out a way to push the ones that will be left around in the right direction and provide support systems for them to compete.

And that, dear friends, is what separates successful people from the failures. Ignoring problems doesn’t make them go away – embracing them and trying to find a solution is a trait that has and will sustain companies with the technical evolution, no matter where it takes us. The question is, can you spot it?

In late 2009 through early 2010 we’re seeing an unprecedented death rate of technology businesses involved in SMB (VARs, MSPs, technology experts), traditionally reseller-friendly companies going direct and the rapidly changing set of rates (from netbooks to computer service to “app store” software) for technology. The five part series titled “Death of a Services Salesman” will explore these trends, the causes behind them and hopefully give some clarity to the many that are rightfully asking: Are the good times in technology services gone for good?

When did it start slowing down?

The demand for IT services in SMB actually slowed down before the release of SBS 2008. I remember conversations with my partners rather vividly because nearly everyone back then thought the temporary slowness was due to the coming releases of Windows 7 and Small Business Server 2008. If you go back even on Vladville or Karl’s blog you’ll see a number of posts talking about how SBS 2008 might be the last server you ever sell.

Yes, the hindsight is 20/20 but it clearly marked the end of big deals in SMB. Which brings me to the 4th reason why the SMB solution providers are dying: thinking that it’s the economy.

It’s not the economy…

It’s not the economy. Or more specifically:

Problem: It’s the economy you remember.

That economy is long gone. It ain’t coming back. Much like dialup Internet service providers aren’t posed for a comeback, or the days of AOL keywords, technology that gets obsoleted over time is not closely tied to the general economic swings.

Critical components of every economic system are supply and demand. And supply is affected by substitutes: items that buyers are willing to purchase as an alternative to your product/service that produces a similar benefit. Strap on your seat belt, we’re about to travel through time:

Kicking the Delorean up to 88mph..

Welcome back 1997. Your desktop cost $2,000. Your laptop cost $3,000 and weighted as much as a briefcase will in 2010. Sony introduces Vaio F505, a slim light weight laptop that costs $4,000 and with a 10” screen represents the future in which most computers will be sold with slim 10” screens.

You need to connect your business to the Internet. You’ve got a choice of a dialup connection with Exchange 5.5 doing ETRN, a dedicated ISDN (one channel or two) or a T1 or better starting in four figures a month.

It’s time to get rid of that Novell server and try this new Microsoft NT thing. Problem is, you need to hire a network engineer and those start at $40,000. Business is business, time to invest in the company and use the technology to get to the next step. So you hire that engineer, do some situps, do a 100 pushups a day in your office and one day you’re strong enough to lift a copy of Computer Shopper.

You need a server, a switch or a hub, a CSU/DSU, a tape backup system… Wait, what’s that? A company that can figure out all this mess for me and possibly save me thousands of dollars?

Back to the Delorean and to 2010:

Problem: The “value” that VARs used to deliver (that of technical expertise) is no longer deemed to be of premium value. Our rate sheets are from the days of $4,000 laptops, $2,000 desktops, $10,000 server deployments. Those times are over.

We no longer need a company to contract a purchase of Internet access complete with a CSU/DSU, router, switch, firewall. We can now go down to a Verizon or Sprint store and they’ll hand us Internet that can fit into our pocket and be shared with 5 other people.

You no longer need an MCSE to offer technology advice.

Newspapers are dying.

It’s a different age all together.

A single engineer can manage thousands of workstations from a remote office (or a remote country at a far lower rate) and the opportunities for a network engineer went from every company needs one to only Fortune 500 needs a few.

And much like the Skynet system in Terminator, the more perfect the automation system of controlling all these devices and networks gets, the less need there is for a human being to watch after every one of them. The machines are controlling the machines.

Best Practices Change Over Time

If you’re in break’n’fix, “trying to go to managed services” is an opportunity that has passed you by. As discussed in the previous post, the competition is fierce and it’s coming down to competition on price.

The services we used to rely on servers for have gone to the clouds. The workstation has been replaced by the laptop and the laptop has been watered down by the netbook. The future is on the touchscreen. The last person still serving an engineering firm that needs to have a local file server for really large CAD drawings will turn off the light.   

The best practice of where files sit, how they are backed up, who can access them and who controls who can access them has changed.

Problem: The mere fact that we’ve left the days of technological entropy and further adoption of technology no longer causes further spending and chaos is amazing. The age of highly compensated engineers has been replaced by the age of Geniuses working in retail stores advising you which of the 5 computer models is right for you. Unfortunately, for most people the difference between a professional service and a $10/hr Genius is indistinguishable.

…

While the temporary recovery in the economy and the technology refresh cycle may give some hope that the things are finally turning around, the reality is that the new economy with all its new technology, automation and alternatives has permanently changed the cost structure and the expectations small businesses have of their technology.

When you no longer need a technology department because you can get one in an Apple or Verizon store then you no longer need a CIO and you no longer need a VAR or an MSP. Most of the VARs and MSPs were established on building and managing networks for companies with under 100 employees. With that demand disappearing, so does the need for many technology companies and it’s the #4 reasons why IT solution providers in small business are disappearing.

…

Now, the beauty of business is that it doesn’t have a life limited by age. It has a life limited by imagination and opportunity. So the days of building and managing networks is not enough to sustain a growth or revenue levels – so what?

We’re not selling dialback ISDN plans in 2010, are we? Are we crying to have those days back? Heck no, the opportunity for developing solutions on top of high speed Internet is far greater than the markup we used to get on a single service solution.

The connectivity and automation have brought us a global opportunity, not just one limited by the amount of time we’re willing to spend in a car to reach a client. As have tastes – you no longer need a flight and a round of golf to make a deal.

While the world will always need a bicycle shop and a VCR repair man, the world moves forward for a reason – things get better! And with it, we have to as well – because there is a lot more money to be made and much more interesting problems to be solved.

Join me tomorrow for the final post in this series, exploring the further Death of a Services Salesman and what is coming out of it’s ashes.

In late 2009 through early 2010 we’re seeing an unprecedented death rate of technology businesses involved in SMB (VARs, MSPs, technology experts), traditionally reseller-friendly companies going direct and the rapidly changing set of rates (from netbooks to computer service to “app store” software) for technology. The five part series titled “Death of a Services Salesman” will explore these trends, the causes behind them and hopefully give some clarity to the many that are rightfully asking: Are the good times in technology services gone for good?

What’s “local” anymore?

Before I even state the extremely obvious challenge SMB IT solution providers face from all fronts, I’m going to share the answer nearly all the providers in this space have given me in 12 years in this industry when asked how they build their business: referrals. The word of mouth, do a good job and hope the client is happy enough to recommend you to someone else. Or even ask/incentivize them to do so. Or join a business referral network.

Problem: There is no such thing as “local” anymore. The competition for IT services is now global.

Talk about the blue ocean strategy backfiring: Where people hoped they would find unlimited opportunity of untapped markets, they found more competition from more aggressive predators. Every day I am greeted to a spam bucket full of Indian programmers by the pound and by the minute, call center outsourcing, temp labor and skilled workers waiting to work for the fraction of what anyone would expect in United States. But do you want to know what the #1 predator in the blue ocean is?

Problem: Our suppliers are now our direct competition.

Competing against suppliers

This is nothing new, we’ve always known that large box makers have been direct. Some (Dell) have had direct as a motto and principal value. They always wanted a direct relationship with the client.

What is new in this equation is that these companies now deliver services. It was easy to ignore them when all they did was ship equipment – but now the equipment is shipped with the maintenance service already purchased, from warranty to monitoring to offsite backups to antivirus. The whole purpose the VAR industry served – that of taking something raw and turning it into a functional business tool that can deal with the real world networks (appropriate software, antivirus, licensing, configuration) is now done by the manufacturers.

The whole “MSP Revolution” was short lived, with Dell’s acquisition of Silverback the same core value MSPs were offering now became a checkbox on Dell’s site. And they aren’t afraid to make a phone call or even hold an order back until they talk to you about managing the purchase you’re about to make.

Competing against larger providers

In the previous blog post I discussed the strength in numbers.

With the recent economic problems caused in part by implosion of the banking system, the word “trust” has almost been wiped out of the dictionary. With all the (possibly criminal) activity the banks have committed, there aren’t fewer people doing business with Bank of America – the “too large to fail” is somehow less of a concern than the thousands of small banks that are small enough and failing in large numbers. It’s not fair but it’s business and the purchasing criteria has changed.

At Own Web Now we do business with a lot of managed services providers that service multiple states – not just two or three but a dozen – and they are the ones that are growing fastest. It could be that they are just aggressive by nature – but it’s more likely that the marketing message of “we are larger and more resourceful than your local mom & pop IT shop” resonates with the business owners that are spending their money on technology because their ambitions are larger than just the walls of their office.

Competing against the cloud

I’ve written hundreds of blog posts about this point and it’s something I don’t have anything new to say. Every software powerhouse has or is working on a cloud strategy that goes direct. It is so powerful that many service providers are forced to hand over their clients for 6% commission of $5.

…

Some people live to compete. The rest die because they refuse to.

That’s at least my opinion. People that sat on the sidelines waiting for the “cloud” to materialize are now dying. Not because the cloud is taking their clients, but because their existing clients have downsized or closed doors and it takes time and effort to build a marketing and delivery system built around the cloud.

With nearly unlimited competition from suppliers and other providers, it’s harder to commit to larger marketing & sales efforts which inevitably allows the loss of client base to outpace new business.

The most amazing (to me) part of ignorance comes from the providers that have been around for a while, improved their marketing, their sales, their procurement and their reputation in the industry – but haven’t grown as a result of it. If you’ve improved everything but your bottom line that’s not success – that’s churning.

Thinking that local is a closed environment is the #3 reason IT solution providers are dying. I find many people face this problem with an immense sense of denial – even when confronted about their local competition most will say that they have less competition now than ever before (because they only view the people they can see – that are now bankrupt – as competition). The economy and the demand for services has changed. Sitting back and waiting for it to change back is an option, sure, but doesn’t it make more sense to just compete at a different level?