October 4, 2008
I have been getting more and more questions on where the communications market stands in light of macroeconomic conditions. It is a constant in my frequent conversations. In most cases, when I get this question, people tell me their business is good but they wonder if the housing market problems will trickle down into the telecom space.
The answer is simply, I do believe there is risk to all sectors of the global economy. For the first time in my memory, US and other political leaders have come on TV and mentioned the term global crisis on a frequent basis. This sort of talk shakes confidence. This is simply the way it works.
The question we need to ask is how do we benefit in such a scenario or at best, how do we tread water so our sales, revenue, income does not decrease?
Most importantly, you need to focus on areas which save your customers money and make them more productive. UC, telepresence, workforce automation, FMC and other technologies pay for themselves quickly. In addition, SIP trunking is a natural in this market... You save your customers money and get a recurring revenue source if you are a service provider or reseller.
Subsets of the communications market are on fire. Mobile banking and WiMAX are a few. Emerging markets and rural America are ripe for wireless broadband.
In fact, these markets are ripe for all forms of communications and penetration in many cases is extremely low. Of course this equals tremendous opportunity.
In a slow market there is pressure to purchase less but we have crossed the chasm of mobile web browsing these past years and we will see more devices with mobile broadband and this leads to the increased use of the internet on the go. As this trend continues - the opportunity for wireless services increases as well. This leads me to the mobile application market. You need to have an application which works on the iPhone, RIM devices and eventually the Gphone. Don't forget about Windows Mobile or Nokia by the way.
I have seen many recessions in my day and the telecom space is one of the few which saw something called a nuclear winter between 2001-2003. What I learned from these experiences is that every slowdown ends at some point and customers do not ever stop buying - they may slow, they may delay, but they don't stop.
In other words, even if things slow down in our space, they will speed up again. The strategy for making sure you come out the other end of a slowing economy in a better position than you are in today is as follows:
Conserve Cash: This is obvious but how you do it is crucial. If you cut your PR, marketing and R&D, where do you think you will be in a slowing market? None of these areas can be cut by more than a few percent. If you have to cut a bit more, R&D is the area to cut incrementally from. The reason is that the feature wars most companies fight are less important than explaining to customers why they need to buy your products.
Keep in mind, every company you sell to now has to go through more internal scrutiny before they buy. You need to reinforce sales with more marketing and sales efforts. In order to last in a slowing market you need to ensure you are still selling. If you are too heavily R&D focused and don't do marketing and PR effectively, hire an agency to help you immediately.
Become More Productive: Every company needs to operate at 100% efficiency. Cut off your dead wood. Do it today. It is time to let the complainers and high maintenance people go. If they aren't happy, you are doing them a favor. Believe me; it will work out better for you and for them.
Rally the Troops: Explain to them why they need to work smarter, harder and faster. Customer service is key. Don't lose customers because of bad service.
Hire PR/Marketing People: If you aren't strong in these areas, you have to hire an agency or top people who can help you market more effectively in slow times. I have witnessed many millions of wasted marketing dollars in my life. Spending a marketing budget and spending it wisely are totally different things. A million dollar marketing budget can be blown stupidly with 10 newspaper ads or used much more effectively in focused media vehicles where your potential customers are actually looking for your products.
Market Analysis: There are hundreds of small companies which are engineering driven in the communications space which do not know how to market. Companies founded by engineers are typically the worst run from a marketing perspective. (Remember - I am an engineer myself so no insult intended - we aren't sugar coating here). These companies - where the engineer runs marketing are likely going to have trouble selling products in a slowdown (or any other time for that matter). Keep your eyes open for acquisitions or weakness in the markets you serve. Keep your ear to the ground. One of these small companies about to go under may have good ideas for products but just no clue how to sell them. You may determine developing a competitive product/service to one of these small companies makes sense.
Speed: It is better to be fast than right. After all, you can't be right every time but if you are fast, you can adjust and become right faster than the other guy.
Optimism: Be optimistic. If you are smart and run things well and your entire team works together to support you, your company can come out of any downturn stronger than it went in. Sure, be cautious --but in the end, business is cyclical. It just is. That is the nature of the beast. Work harder, faster and smarter and you will be rewarded.
Remember, things are still generally good in the communications and technology markets and if you follow these rules you should make it out the other side of any slowdown in better condition than you are in today.
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