Post #38,875
5/16/02 3:03:58 AM
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PCs aren't coming back - but . . .
. . my take is a bit less technological: [link|http://www.aaxnet.com/editor/edit023.html|No Rebound for Tech Stocks] (9-2001).
[link|http://www.aaxnet.com|AAx]
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Post #39,163
5/18/02 7:58:47 PM
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What do you suggest for a company
to do to make a profit in the computer industry?
Hardware is just not profitable.
The Big Guys have locked in the services market.
What can a company do to make a profit in today's and tomorrow's market?
I am free now, to choose my own destiny.
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Post #39,174
5/18/02 9:58:37 PM
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You are wrong about services
The bug guys know how to do services for big companies. They haven't a clue how to serve small (or even the low end of medium) business. That sub-market comprises of most of the business market.
[link|http://www.aaxnet.com|AAx]
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Post #39,184
5/18/02 11:59:32 PM
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With the right connections
With the right connections or some luck you can even do contracting for the big boys. The company I work for now has contracts with 2 of the largest telecomunication companies despite being less then 50 people total.
The problem is, you can't really try to get that sort of contract. Companies that are huge are not going to put some little shop on their list of contracters. What you have to do is bypass the normal channels for contracts and sell to the branch and division managers directly. But people in those positions are not going to listen to you unless they have already decided to do something. You just have to be in the right place at the right time to run with it when it comes along.
Jay
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Post #39,217
5/19/02 12:40:27 PM
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Small and medium businesses
Two friends of mine and myself have tried to capture the service market for the small and medium businesses. The problem is that the small businesses cannot afford even the cheapest fee, and even if they do they stiff us after the job is done. An example is that we set up a system and software for a local convience store that also wanted to get into paging. The system required a modem, and a serial connection to a cash register for a POS system. We installed the system, and trained the employees how to use it, we also set up the software to send pages and sync the POS system up with the PC. They partially paid, and then the owner didn't return phone calls or letters about the amount they owed. Recycle and repeat for more customers and you have a business failure. One business we had went from 1995 to 1998, barely making it because of small businesses not paying their bills.
Medium businesses are harder to get into, you have to meet with managers and explain why your business is better than the other ones. Then you hope that you've impressed them enough to get the contract for the job. We couldn't do that and usually some larger company got the contract.
I am free now, to choose my own destiny.
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Post #39,219
5/19/02 1:50:10 PM
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Don't know where you were, but . . .
. . I've not had much of a problem - our clients know they'll need our services again.
Lawyers and doctors are exceptions. You need to be a law firm yourself to deal safely with lawyers. Doctors pay, they just won't ever call you back because you're "too expensive", and a "one night stand" job is usually not worth the bother. Both professions think anyone but a doctor or a lawyer should be getting minimum wage. We are reluctant to do business with either of these professions.
Certain types of business attract deadbeats. Photography, for instance, but not always. Our fastest paying client ever is a (very prosperous) photography studio.
Essentials
#1 - Always do a written proposal defining exactly what you are going to do and what the client's responsibilities are, right down to "client to supply 2 power outlets on the backboard" sort of stuff.
#2 - Right from the first quote, put in a "terms" paragraph. It's 50% to start, and work begins when that is received. If the client won't do this, they probably don't have the money, so there's no sense in doing the work. Don't be afraid to specify progress billing, especially if the hardware / software part exceeds that 50% up front.
#3 - Ask other business people about collection services. They vary greatly in effectiveness, and a good one can be invaluable. Get one that'll do a warning letter free or for a low fee - If that doesn't do it, expect to lose 30% or more of the due, but 70% is a lot better than nothing. Start collection proceedings early - the fee will be lower and the likelihood of collecting much higher. Collection agencies recommend putting a clause in the quote and on the invoice that collection costs are additional to the invoice amount. We've never done this because we very rarely have to send something to collection.
#4 - Seek clients where there will be plenty of follow-on work. Getting new clients is difficult and expensive. Follow-on work for existing clients is far more profitable.
#5 - Specialize if you can. That way you can train others to do the work. This allows the business to grow. Being a generalist, I've had a lot of trouble with that, so I'm drifting more into specialized work.
#6 - Make sure you are fully qualified to do the work, efficiently and effectively. If you aren't, bring in someone who is, or just hand the job off to someone who is. Everyone will be happier that way, including you.
#7 - Remember that you are a business person first - a techie second - a distant second. If you can't handle that distinction, then you need to get a job.
[link|http://www.aaxnet.com|AAx]
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Post #39,309
5/20/02 4:18:13 PM
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I'm in Missouri
they do things differently here, a lot of small businesses are deadbeats and the medium businesses will always go with whomever can score them sports tickets to sold out games.
#1 They do not want to be held to responsibilities in writing, a lot of them went with us only if we promised not to put a contract in writing. The simplier it is the better they will hire you.
#2 They will refuse to hire us if we don't do the work first and get paid later. There are few exceptions to this, but basically they agree to pay us, and then didn't return the phone calls. I wanted to do everything COD, or at least half down, but some people wanted zero down, or maybe 10% or 20% down. Otherwise no work.
#3 Most collection services around here want a large cut of the bill to collect. It is cheaper to write the warning letter ourselves, anyway and threaten legal action. But they ignore it awany and the legal fees to sue them will cost more than the bill anyway.
#4 Follow-on work. Usually we do so good a job that they don't need follow-on work unless they installed new software that hoarked everything up or they powered down a dozen times without first shutting down the OS.
#5 We were specialized. Did POS systems and Mitchell Series One systems for garages. Hardly anyone else was doing it in 1995, but by 1997 other companies got into what we were doing. We moved into web page design, Linux networks, and other stuff but it was just not profitable enough to stay in business. I invested $7000USD of my own money and didn't draw a salary just to keep the business afloat.
#6 I am one of the best Windows technicians in the area, and my partner is one of the best Linux administrators in this area. We had qualifications out the yingyang. We did the job better than most people could.
#7 We did try to be business people first, but the hard part is making people pay what they owe. Around here there are a lot of deadbeats.
I am free now, to choose my own destiny.
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Post #39,175
5/18/02 9:58:42 PM
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Manufacturing proprietary stuff is the only way to make...
a buck. Manufacturing commodity stuff is folly. Sad, but true. So you are right on with the box makers. Dell thinks it can do this at lower cost than anyone else, but could be copied.
In the services market, you do have a shot. The "Big Guys" charge a lot, so you have a price umbrella to work under. I sub-contracted with the part of AT&T that is now NCR and CSC (Computer Sciences Corp.) and these guys charge the customer about triple the rate my (one-man) company charged them for my time. There are small businesses that can't afford them and yet have needs. The problem is connecting with them and also know how to weed out the ones not worth doing business with. That's tough to do. I'm sure Andrew could tell you stories about that.
To stay profitable, a company needs some kind of real (or perceived) edge on it's competitors and work on maintaining that. No one seems to do it, on and on.
Alex
"Men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing had happened." -- Winston Churchill (1874-1965)
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Post #39,178
5/18/02 10:31:05 PM
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I don't believe that
It is possible to make very good profits in a commodity business. What you have to do to do it is first get your overhead as low as possible, and then minimize your turnaround time from expenditure to revenue.
Think Walmart. Or McDonalds. Outlays turn into revenue very fast, many times per year, resulting in healthy annual profits.
Just in time sounds silly when you first hear it. But if it reduces the time from expenditure to revenue by a factor of 2 then someone in a commodity business doubles their annual profit (actually they do better because of savings on warehousing).
Of course this isn't a business model that is consistent with taking risks, being innovative, or doing research. But my opinion is that this is where open source is taking the entire software industry, so it is a model that is worth giving some serious thought to.
Cheers,
Ben
"... I couldn't see how anyone could be educated by this self-propagating system in which people pass exams, teach others to pass exams, but nobody knows anything."
--Richard Feynman
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Post #39,180
5/18/02 11:03:24 PM
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Re: I don't believe that
I agree that the battle is on the controlling the expense side because it's cutthroat on the revenue (i.e. product pricing) side. The big guys you mention do have the advantage of being able to squeeze their suppliers more than their smaller competitors. Indeed, companies like Home Depot, bypassed some distributors, who were once their suppliers, to deal directly with manufacturers in the Far East.
But, I hasten to point out, the companies you mention are not exactly manufacturers but retailers. Now, Dell is both, and it is doing all the things you say and has gained market share in a declining PC market. H-P/Compaq could, over time, adopt the same business model. Then, Dell would lose its edge and margins for all would drop. After all the consolidations, look at how few disk drive manufacturers there are compared to the past. They're losing money as well.
Alex
"Men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing had happened." -- Winston Churchill (1874-1965)
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Post #39,183
5/18/02 11:57:38 PM
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As a market matures . .
. . it trends to a state where there are a very few large "economy of scale" producers dominating the market, and a larger number of small botiques to serve those who need/want something the volume producers can't provide - and very, very little in between.
PC manufacturing is going this route rapidly, because under the Windows monopoly there is no significant innovation except in marketing - definitely a mature market.
[link|http://www.aaxnet.com|AAx]
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Post #39,227
5/19/02 6:19:09 PM
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Applies in manufacturing as well
I used retail because that is visible.
But both Kimberly Paper and Gillette stand as excellent examples of manufacturers in commodity businesses who had excellent earnings year after year.
The economic principles are the same. In commodity businesses, aim for low overhead and rapid turnaround.
Cheers,
Ben
"... I couldn't see how anyone could be educated by this self-propagating system in which people pass exams, teach others to pass exams, but nobody knows anything."
--Richard Feynman
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Post #39,182
5/18/02 11:29:57 PM
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So your advice to the young would be . .
. . "don't go into programming, because it's all going to be done in India to reduce overhead"?
I can't really say that I don't agree with that.
As a side note, Microsoft's XBox assembler, Flextronics, is closing XBox production in Hungary and moving it to China for lower cost. Former Communist countries are getting too prosperous, so it's time to move the work to a country that's still Communist. Capitalism at work!
"The downfall of the Capitalist system came when it ran out of underdelveloped countries with repressed populations to provide exploitable workforces."
[link|http://www.aaxnet.com|AAx]
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Post #39,198
5/19/02 3:40:47 AM
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Da tovarisch, kewlovitch____ but
pleased be not speakink louds on wonderful ways we havink with words in the new speak. Is beink not good for the babushkas to listened.
I am nyever firget first time am hearink Green Chri$tma$, by Komrade Stan Freeburg, dollink. Is bringink tears with eyes.
er that is, thou sayest - but try to 'teach that'; it's gonna be Guantanamo, steerage class. (is that like bat guano?) 'Course if the gamers got no more couth than the UAV types, and continue to buy that Box no matter what? Self-immolation. Fun to watch. Die Yuppie Scum (local bumper sticker)
OR:
Tried to find a CD today at Tower, of Nakariakov (Russ trumpeter phenom). None of course. Said - what's the discount, if you order it? She: "none". Said - I don't pay $16 to RIAA for anything. She: "what's RIAA?". Asked, what ya think they pay the artist? etc. etc. Couldn't believe = <$1 and thought it was kewl to just pay the $16 and buy her own CDs there. Too much trouble to notice. Anything at all.
Yup, she and the Box-gamers think alike. And the Suits love 'em all: Just That Way. Unconscious.
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Post #39,181
5/18/02 11:05:07 PM
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Yes, many of the businesses with the greatest need . . .
. . are simply too cheap to ever have systems that work (not too cheap to buy that new Mercedes SUV, though).
Qualifying customers is very important. If the guy you talk to has a copy of Computer Shopper on his desk, it's time to say, "I'll get back to you", - and then don't. If he's got time to sift through Computer Shopper, he's going to be nothing but trouble.
Further, when he needs something done, since you charge "a lot", he'll bring in a relative who works cheap, who will screw up everything 'till it doesn't work at all, then blame it on you, 'cuz you "did it all wrong". Then he'll expect you to come in and fix it all for free (and do that other thing he needs while you're there).
I still laugh over one woman who called many years ago (as you can tell by the rate I quoted her). She gave me her story about how her "computer guy" had been working for more than a day to get a modem working, and it still didn't work. I told her I did lots of modems and could probably get it working pretty quickly, and at only $60 per hour. "Oh", she said, "No, that's way too high. The guy who's working on it only charges $35 per hour".
It's very hard to be a generalist, because then you end up having to do all the work yourself. Specializing in, say, cabling, auto-id and barcode, backup systems, a particular POS system, industrial controls, etc. makes it possible to train others to do the work. This does, however, require far more and better marketing.
Never do stuff "on the cheap" to save a customer money - it's a losing proposition. Offer a solution that costs enough to work well and properly, and put in enough for good support, and if they say they can't afford it, politely decline the work. Otherwise, the client mentally associates you with that cheap stuff that doesn't work quite right and bad support, and when they're a little more prosperous, they call in someone else to do it right. That's the guy you want to be.
[link|http://www.aaxnet.com|AAx]
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Post #39,185
5/19/02 12:15:04 AM
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Big companies can be just as bad
My dad does auditing and quality assurance consulting mostly in the power industry. And many of those companies are worse then the small fry I did computer consulting for. You can forget getting paid in less then 60 days, the ones that are good with paying their bills time things so the bills are paid 60 to 90 days after invoice.
The bad ones take 90-150, assuming they didn't 'lose' the invoice or something else didn't go wrong. If that happens don't expect to see your money until you hire a lawyer or they need to hire you again.
One company my dad did work for was so bad that the UPS guys wouldn't take anything off or put anything on the truck till they had a check in hand. Took my dad the better part of a year to get his money from them.
Jay
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Post #39,186
5/19/02 12:42:23 AM
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. . and in government too.
One of my clients has the Navy on C.O.D. because they can't pay their bills. It isn't that they don't want to, they just don't know how.
[link|http://www.aaxnet.com|AAx]
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Post #39,199
5/19/02 4:07:07 AM
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Heh.. I beat IBM
When I gave a sample of Tweek (the "contact enhancer" for 'dry' electrical connections) to Jerry Pournelle, at the SF Computer show, he named it Product of the Year ('85?) second to the original Laser Jet (!) This after he fixed an annoying keyboard intermittent.
I agreed to peddle small qty. orders to individuals and Cos. as sample/test orders (so he listed address in his column). IBM (Research Lab IIRC) wanted 10. Wanted me to invoice them. Said, not setup for that - send a check or MO. Wasted another letter re-asking. Week or so later a check arrived. Always wondered if they found out what a bizness advantage it could be: if your stuff had fewer intermittents, infant mortality failures - than your competitor's (?)
(In my experience.. most just didn't get it! The stuff worked - still does. All board edges, IC-sockets get Tweeked when I get something in. Just 'fixed' a SCSI board today, with some: BIOS chip not making contact. A lazy droid would have sold her a new board without even looking.)
Got the money from IBM in 7. Then shipped. [cackle..] But when the guy who did most of the design on Osborne1 wanted one: it was free :-)
Believe this-all has deteriorated in recent years; no such trouble in the audio consulting days with say, Crown, Revox, Marantz, or local distribs. If you were late-pay more than once: dogmeat.
Ashton
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Post #39,212
5/19/02 10:42:51 AM
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#1 Know your customer.
HP didn't start out making electronics boxes. They knew of a need for a customer - Disney - and made a box to solve their need.
Kamen had a customer in mind when he came up with the Segway.
In any business, you have to have a customer in mind first. Coming up with a new fancy box, or a new fancy service, or some new fancy software is the second step - you have to know your customer first.
Who's going to give you money for what you do? Can you make a profit by serving the needs of that customer?
Cheers,
Scott.
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