Tag Archives: IT Channels

Bad Processes Kill Business

While I argued last week that oversight of business is necessary to move us to a longer-term approach to growth, too much oversight is even worse for a business.

I’ve come across countless examples in my own, IT, industry where companies seem to try very hard to prevent sales, rather than make them – all as a result of too much oversight. Let me illustrate this with an excellent example.

The company in question, let’s call it ABSC (A Big Software Company) is a very significant multinational software vendor, with offerings targeted at a range of companies, from the very largest down to a mid-size level – and it is this mid-size level where the powers-that-be are expecting significant growth. The only problem is that their processes and procedures effectively kill sales in this market and make them extremely difficult in their traditional high-end one, too.

Let’s assume that an end-user, we’ll call it Widgets Inc., wants to purchase a 100-user system from this company after being sold on the concept by a Reseller of ABSC – in line with ABSC’s policies that all SMB sales go through the channel. The outline of the process is as follows:

  • Reseller calls ABSC and requests a quote (they cannot yet provide a quote to Widgets Inc. as there are no official price lists).
  • The Account Manager for Reseller at ABSC in turn requests a quote from ABSC EMEA HQ as even he has no pricelists. The turnaround time for this quote is typically 2-5 working days (not helped by different working days in different countries).
  • The Account Manager receives the quote from ABSC’s EMEA HQ and emails it to Reseller who can then provide an official quote to Widgets Inc.
  • Widgets Inc., accepts the quote and asks to place the order. Because Widgets Inc., is a new customer (as are most SMBs!), Reseller has to supply Account Manager with extremely comprehensive information on Widgets Inc., in order that this can be properly recorded on the ABSC systems for, amongst other things, credit purposes (even though ABSC is not providing Widgets Inc., with credit as that is up to the Reseller).
  • Account Manager enters all the data and applies for the software licenses. This approval process generally takes some 10 working days to go through the various internal levels in EMEA HQ (although 4-6 weeks is not unusual). Eventually, approval for the sale is granted and Reseller can download the software licenses. Total turnaround time from when the customer firsts wants to buy until delivery is some 4 weeks on average, and up to 2 months if there are any problems.

Apparently, the rate of lost/cancelled sales as a result of this tedious process is very high – customers simply go with their #2 option for the solution, where that solution can be provided more quickly.

Of course, what should happen is that Widgets Inc. expresses interest, Reseller gives immediate quote from its own pricelist, Widgets Inc. agrees and places order on Reseller who places this on Account Manager at ABSC and is then given the licenses within a day (after checks are made that Widgets Inc. is not prohibited by US Law from accessing the software).

Unfortunately, though, this streamlined approach to business is the exception rather than the rule in our industry. ABSC is, admittedly, an extreme example (although absolutely factual), but most IT vendors have degrees of this sort of inefficiency built-in. We might sell software and/or hardware to make [other] companies more efficient, but our own processes leave a great deal to be desired instead of showing the way.

Isn’t it time the customers started expecting the vendors to practice what they preach? It would not only allow them to get what they want, when they actually want it, but should reduce prices, too, as the sort of process described above is extremely expensive in terms of manpower and, therefore, cost.

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The Perils of ‘Quarteritis’

FT ringing the Closing Bell at the NYSE

FT ringing the Closing Bell at the NYSE (Photo credit: Financial Times photos)

It appears that one potentially good thing to emerge from the global economic meltdown is a return to sensible business planning and cycles.

One of the scourges of many businesses – this started in the US and spread out from there – is ‘Quarteritis.’ Not strictly speaking a disease, but something that has probably resulted in a lot more suffering than most diseases, ‘Quarteritis’ is about an overarching focus on ensuring each quarter’s financial results are significantly better than those of the quarters that went before.

While we all want to be part of, and invest in, businesses that have good growth, the fact is that business, like most things in life, moves in cycles and the best long-term businesses are those that plan for the long-term, not just the next quarter. A short-term focus leads to rash decisions, decisions that might be good to “save this quarter” but disastrous in the medium term.

To illustrate: in the IT industry two popular results of this are distributors being forced to take huge amounts of excess inventory in a quarter (“channel stuffing”), or new distributors/resellers appointed suddenly to get a new stock order into the current cycle.

Both of these have similar results over succeeding quarters – reduced profitability for all concerned, stretched payment terms, credit limit issues meaning needed products cannot be ordered and, potentially, delays in releasing new products while excess inventory is moved out of the channel.

By taking the longer-term approach to ensuring that all parties in the channel can grow profitably, vendors may not grow as quickly in the short-term but will ensure happier customers – at all levels in the supply chain – and so more loyalty and a more sustainable growth well into the future.

Wasn’t it this short-term focus – albeit in the financial markets this time – that ultimately caused the current crash? Executives and others were induced by means of massive bonuses to find ways to grow well above the market average and so started giving mortgages to those that could never afford them, and repackaging these as “high quality” loans. Frankly, this would have been considered fraudulent in many places – it’s certainly ethically very bad anywhere – and it was only a matter of time before implosion happened.

However, those involved had already taken their money and run… Isn’t it this short-term bonus-driven culture that’s behind the trend to shorter and shorter tenure by CEOs of public companies? Can CEOs really be effective when they’re only in place for a few years?

It’s time we started looking at the longer term sustainability of business, and rewarding people in ways that encourage this and I, for one, am pleased to see a number of governments leaning in this direction. Authorities and shareholders should claw back bonuses paid for fraudulent practice, especially when taxpayers have to bail out the companies as a result. CEOs, and other officers, should be rewarded, and lauded, for long tenure and sustained growth.

Business needs to get back to a solid footing and good practice – we should support those that are trying to move in this direction.

Amazon

Amazon (Photo credit: topgold)

This blog piece was first published in Sep 2009, so it’s good to see that there’s growing acceptance of the need to look longer-term as this video from INSEAD clearly points out – Prof. Javier Gimeno talking about how “short-termism” undermines a company’s long-term competitiveness.