Keep Your Head Above Water

Veterans of recessions past offer advice on managing in an undertow.

In the Marx Brothers classic, "Horsefeathers," a drowning Thelma Todd cries out for a "lifesaver," to which Groucho responds by tossing her a Lifesaver candy. Its a situation sadly familiar to drowning high-tech firms, which last week expected a lifesaving interest rate cut from Alan Greenspan, and instead got the equivalent of hard candy.

The unfortunate truth is that in times of economic hardship, the Fed, your investors and your customers are apt to desert you, leaving you to your own devices. It may seem like a Sisyphean task, but if you look around, youll see plenty of solutions providers that have navigated their way out of much worse storms than this. Companies like IBM and EDS have been to the brink and back numerous times.

Indeed, says DiamondCluster International CEO Mel Bergstein—himself no stranger to recession—its the "ability to manage through the cycles" that separates the wheat from the chaff.

So, in that spirit, here are five time-tested survival tips to help you through the dark days:

1. Find Your Focus Thats the strategy at Unisys Corp., which over the past dozen years has experienced myriad bumps in the road. But the company actually has held up well in this downturn, says Susan Thomas, VP of e-biz integration services.

One reason is a refocusing on three horizontals—e-commerce, CRM and enterprisewide supply chains. To support those services, the company is offering bonus commissions and other incentives to its sales force.

"You always need a strategy for growth, no matter where you are in the buying cycle," explains Thomas. "When more time and effort is required [to close deals], you create targeted incentives that will propel your new services into the marketplace."

Many other solutions providers are tightening their focus. American Management Systems, for example, is streamlining its vertical-business units. And, of course, there are all the Web consultancies that are reorganizing along lines of business. For many of them, however, it may be too little, too late.

2. Sell ROI Thats what business used to be about until e-hysteria set in. "Your customers have no clear visibility of where their e-commerce strategies are going," argues Jean Kovacs, the CEO of Comergent, a developer of sell-side B2B e-commerce software. "What they want from you now is a quick win, and then theyll go back to their own customers and calibrate their future direction."

Kovacs advises strongly against making ambitious promises. "You can pitch a 10 percent gain in revenue, but nobody will believe you. However, save the client 1 percent in costs and youve got a sale."

3. Swizzle Your Offerings At EDS, that means shifting from labor-based to electronic delivery-based services, like centralized support desks, which a year ago would have been tag-along offerings.

In addition, notes EDS senior VP Joe Sindelar, down times are good times to be pushing "out-tasking," as opposed to outsourcing; the difference being that in out-tasking, you manage the systems but the customer still owns the underlying assets.

"Customers dont want to give up control in a recession, since with lower volumes, it pays for them to [own or lease the hardware]," asserts Sindelar. "But when the economy improves, you can easily transition to an outsourcing arrangement."

4. Go for the Cash If the venture capitalists turn their backs on you, go where the money is—to your distributors. A prime example is the Westcon Group, which this week is rolling out "I-Qualify," a credit package of up to $250,000 for start-up solution providers.

"Theres a credit crisis in the channel," says Jenny Pappas, VP of marketing for Westcon. She adds that the IQ program addresses that problem for companies in business two years or less that lack sufficient credit histories to obtain traditional financing.

Westcons options include letting a solutions provider establish a master account agreement, which allows for payments and disbursements through an escrow agent. Or, executives can use their own net worths to secure credit lines via personal guarantees.

5. Cry "Uncle" Uncle Sam, that is. The federal IT market may be slow, but it has the wonderful advantage in a recession of being steady. The feds spend $40 billion a year on information technology, and that budget has been growing 4percent to 5 percent a year.

Getting the message are such e-biz specialists as Ariba, ATG and USinternetworking, which are linking up with government contractors.

"The battles will be won or lost at the partnering table," observes Larry Den, a VP at Vredenburg, a document-management solutions provider that teams with such integrators as Science Applications International Corp.

USinternetworking is currently subcontracting to integrator SRA International on the "Millennia Lite" deal, an omnibus IT support contract.

Ariba, meanwhile, has joined with American Management Systems, and ATG is teaming with GTSI Corp., a federal reseller.

Few economic forecasts have been on target of late, but one things for sure: Partners know that theres safety in numbers.