How do companies navigate a slower economy? Well, you first need to show strength to ensure your potential customers are not scared off. As Jon Arnold points out today, this is a challenge companies like Vonage have struggled with. You also need to provide ROI. In a recent conversation with Joel Hackney (pictured below), President of Nortel's Enterprise Business, he tells me customers are now looking for ROI of a single year or even nine months!
As he puts it, "Projects must be self-funding." He also told me yesterday at an event the company hosted at the New York Stock Exchange that customers in the financial community are still spending as long as they see a one-year or better payback. This is perhaps the opposite of what you would think. Let's put it this way... The financial markets are so bad that when we entered the NYSE on our way to the sixth floor of the building, there was a gift shop which was closed. One of the people who was headed to the meeting entered the elevator with me and wondered aloud if the closed gift shop had to do with the state of the financial markets. It was a joke - but only sort of.
This is a brave new world for the communications market but you know what? As an industry, we are up for it. We can without a doubt sell solutions to our customers which will make them more productive, save communications costs, save travel costs and in many cases save energy!
I queried Hackney about his company's Cisco Energy Tax ad campaign where the company focuses on the savings of their equipment over comparable products from Cisco. I mentioned my thoughts on oil prices heading to $30 (just a hunch - no letters please if we don't get there). He asked if my utility bill increased proportionately with the price of oil on the way up. I said no. He then told me it likely won't come down proportionately either.
He went on to say that 40,000 people used the company's energy calculator in the first ten weeks it was available. Furthermore he discussed how his company is selling solutions designed to work on heterogeneous networks, while utilizing SOA and web services, allowing solutions from competitors to work cohesively with those provided by this Canadian telecom vendor. This by the way is a big part of why the company is able to provide increased ROI levels as forklifts are minimized.
I queried Hackney regarding the financial strength of the company and he told me Nortel is as focused on the enterprise as ever and to be honest this makes sense as this seems to be among the strongest groups in the company. Moreover, I believe the company's products and technology partnerships in the enterprise space position it better here than virtually any other market the the company plays in such as wireless or cable.
We would have had a more in-depth financial discussion but the company is reporting earnings soon and can't comment on these issues at the moment.
For Nortel and other communications companies looking to maximize sales and profits, the focus needs to be on ROI. It is all about how fast can you sell a product or service which will return real money in the pocket of the customer. Companies have not stopped spending and by all accounts they are spending more on solutions which pay back rapidly.
What this means for all companies is a renewed focus is needed to ensure products increase sales or boost productivity. Vendors also need to ensure they focus on the products which customers are most likely to purchase in this environment. Communications and technology companies can and will grow in the next 18 months if they project strength and focus on solutions which return investments to their customers rapidly.
As communications vendors rethink their business models for the future, the successful ones will keep these ideas in mind.