Software & Services - 2009 dictates value delivery a must

Sunday morning - 7 am – suburban Chicago

Driving down a major retail stretch of road

Whizzing past one closed retailer after another – many of these now closed for good

Pass a worker removing signage from a failed retailer

Goodbye 2008

Goodbye to an economy based not on what we needed or what we could afford

Goodbye to a business economy that wasn’t connected to the basics of a solid business model for a number of years. This was a business economy where cheap credit permitted firms to expand beyond the actual, sensible demand for their products and services. This was a business economy where IT and service firms didn’t exactly do the right things either.

Logic will rule the new economy now. It has to as businesses will fail if they can’t get access to capital and credit. It has to as lenders will (and already are) insisting on stellar credit history, due diligence for loans, etc. 2009 will mark a return to risk-adjusted business decisions. For some IT providers, 2009 will be tough. Tough because they will not or cannot change the essence of what they offer to the market.

Application software vendors mystified me much of this decade. Take accounting software vendors. They are selling a solution that will, in almost all cases, re-automate functions that a user has already automated several times before. Do you really think there are any real benefits left for your 6th general ledger to find? No. If you sell re-automation solutions, you can bet prospects will defer on your sales pitches. If all your solution offers is a newer user interface for the same old functionality, your firm is in for some hurt.

If you want to win in 2009, your software has to provide: real incremental value, truly unique capabilities, and, a means to change the competitive landscape for the customers who license it. This isn’t a new idea – it’s an old-fashioned business maxim that is coming back home to roost. If all your offering contains is a slightly cheaper, competitively similar product that operates in a manner quite like the way the prospect already operates, then it is road kill.

Service providers are in for a rough slog, too. If you’ve built a business on implementing the above, tiresome products, few firms will be buying. Sure, you’ll get the occasional firm that outgrew its old software or the prospect whose parent company wants to spin them off. But, customers who are willing to spend a $1 billion on an ERP implementation will be few and very, very, very far between.

Service providers who focus on doing things to clients (instead of for them) are in trouble. If you can’t foresee how your client’s share price is improved based on your efforts, the new economy will kill you.

In the new economy, clients/customers want value. That’s an overused word that too many say without really thinking about it well. A friend of mine used to use the phrase “I love you” to a half a dozen women daily. He didn’t care what that phrase really meant, he was only interested in the swoons it caused. Consultants overuse ‘value’ so much that they can’t really remember what it means either. Neither do many tech firms.

At the end of the day, value for business customers must manifest itself on the customer’s financial statements. Hopefully, it triggers an increase in sales, a reduction in costs, an increase in shareholder equity, etc.

As you return to work this week, remember you’re starting a new year. You owe it to yourself to look inwardly and ask:

- “What will I do today that makes my client and their shareholders wealthier?” - “Who am I really serving – myself, my employer and/or the client?” - “How are my activities improving GDP and the economic productivity of our nation?”

If you build software, ask yourself:

- “Are we solving any new problems or just re-paving the same old cow path that we’ve paved a half-dozen times already?” - “Have we really gone back to the drawing board to re-think what businesses really need in this global, networked, internet-enabled, etc. world we operate in today?” - “Are we lowering the cost of our solutions or are we expecting customers to pay even more for a non-value adding commodity product?”

Will 2009 be the year companies compare your tech-related firm to General Motors, Circuit City, etc.? Will your tech firm be looking for a bail out, too?

Start the year right – start it with some fresh, healthy introspection.