2010
Why survive
when you can
thrive?
The Five Alternative Ways
for Technology Integrators
to Reduce Costs
2Solutions360, Inc.
Areas Covered
• Growth in technology integration services and displaced IT resources
is resulting in heavy market saturation.
• Technology expansion and trends in Converged Communications is
resulting in new companies entering the market place.
• These two factors have created a bid-based industry where margins
are reduced and the cost of labor has increased.
• The five alternative ways for technology integrators to reduce costs.
• The ten things technology integrators must do to succeed and thrive.
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Technology Integrators have grown
dramatically in the last few years
• The VARBusiness 500 solution
providers grew an incredible
24.3% in 2007.
• The 2008 VARBusiness 500 is
worth $377.76 billion. That is
slightly larger than the GDP of
Saudi Arabia.
• In 2008 the top 500 solution
providers increased revenue
26.4%
Source: ChannelWeb 2008
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Worldwide technology integration and
service will be growing rapidly
• This year past, 113 companies debut on the VARBusiness 500 list, the same number as in 2007.
• 359 from the VARBusiness 500 experienced revenue growth.
• BlueWater Communications (VARBusiness 500 No. 467) was the fastest-growing company on the list, with revenue that increased 1942.3 percent.
Source: ChannelWeb 2008
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Unfortunately, many specialty trades and
general contractors do not always survive
600
800
1000
1200
1400
# o
f busi
ness
failure
s
1992 1996 2000 2004
General contractors Special trades
Source: Dun & Bradstreet Business Failure Report
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Being an „industry veteran‟ doesn‟t
guarantee existence either
0
10
20
30
40
% o
f fa
ilure
s
1992 1996 2000 2004
Represents # of years in business
Less than 3 yrs 3 - 5 yrs 5 - 10 yrs More than 10 yrs
Source: Dun & Bradstreet Business Failure Report
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“Those who do not remember history are
doomed to repeat it” –George Santayana
• Historically, the number of specialty contracting businesses that fail have remained fairly steady at about 1000 per year.
• Statistics show that older businesses have a much higher rate of failure than newer businesses.
• However, these numbers have been steadily worsening and are not expected to improve in the future.
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Converged IP Growth has become a
double-edged sword
• IP Convergence has been creating
opportunity for many integrators.
• IP Convergence has also created
opportunities for large contractors to
enter this specialized field.
• To survive tighter margins many
vendors have also been offering value-
added services.
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Skilled labor costs increase
• IP Convergence requires more
certifications and highly skilled labor.
• The cost of these specialized skills are
rapidly increasing.
• Compliance requirements are changing.
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Bad news in payroll…
• In 1997, electrical and specialty
contractors payroll was $21.7 billion
which represented 34% of their gross
revenue.
• By 2002, the same contractors were
paying out $29.1 billion which
represented 36% of their gross
revenue.
• With industry specialization, the
burden rates for staff are increasing
at an unprecedented rate.Source: US Census Bureau, 1997 & 2002
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Margins are slimmer than ever
• With increased competition, the high
cost of labor and tighter prices from
vendors, profit margins have greatly
been impacted
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Meanwhile, there are five alternative areas
for technology integrators to reduce costs
1. Project Accounting
2. Employee utilization
3. SLA effectiveness
4. Real-time financial visibility
5. Overstaffing
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1. Project Accounting
• The scope and complexity of new projects is on the increase, putting greater risk on profitability.
• A lack of accurate and timely financials reduces the access to larger and more affordable funding.
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1. Project Accounting
• Lack of visibility prevents you from proactively adapting to changes.
• Maintaining real-time project profitability is imperative.
• Challenge of reconciling projects. (accuracy, timeliness and revenue realization)
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1. Project Accounting
• By increasing visibility and reducing the effort of accuracy, you are freed to maintain effective project delivery at greatly reduced costs.
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2. Employee Utilization
• Time billing is difficult to capture accurately or in real-time.
• The “true” time expended by all employees is unknown and often not recovered in billings.
• Time Billing invoice disputes are a challenge to resolve with poor data.
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2. Employee Utilization
• The easiest way to increase revenue is to bill for more work you have already done.
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3. SLA Effectiveness
• Lack of SLA visibility increases
operational costs when incorrect
service or tech is dispatched.
• Increased SLA agreement violations
reduce contract renewals.
• Replacing a client is 6 times more
expensive than keeping them.
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3. SLA Effectiveness
• Challenge of contract renewals
results in errors and lost revenue.
• Lost profit due to inaccurate SLA
billing (T&M, Block Time, preset
rates etc.)
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4. Real-Time Financial Visibility
• Lack of Real-time billing for service
work.
• No consistent and accurate progress
billing on projects.
• Manual audit trails
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4. Real-Time Financial Visibility
• Too many “touches” required for an invoice.
• Lost and inaccurate time sheets.
• Lost revenue due to the traditional slow process of project reconciliation.
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5. Overstaffing
• Technology integrators are often over
staffed.
• Over-staffing is a symptom of trying to run
a business with two distinct operational
models:
• Continuous operations of post sale work
• Vs. Finite time / budget sensitive
projects.
• Not acknowledging the differences can
mean big losses in productivity
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5. Overstaffing
• 95% of most single business systems
cannot support these two business
models of a technology integrator
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These 5 Key Factors can mean trouble for
your business
• An outbreak of low priced, so-called
„competition‟ requires greater
internal control
• Your customers and prospects can
begin to perceive no difference in
value, service, or quality
• They of course may gravitate
towards the lowest price …
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Your dreams of growth or
exit strategy are under attack!
• When customers and prospects do not recognize the value of your high standards and quality, there is no loyalty
• When price is king there are no profits to be had
• A business that does not stay profitable does not stay in business
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Remember, you need to separate
yourself from the other guys…
• Everyone in your industry is pitching
how great their products and services
are and how they have the lowest price
• But in order to seize control of your
market you must also be
organizationally strong and lean
• You will need to revisit your business
processes and your business systems
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Why Integrators Are Different?
• Two Business Models under one roof:
• Service / MAC / Break-Fix
- A continuous operation
• Project Implementation
- Specific start / finish and budget
Service Projects
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What has occurred?
• No SINGLE system was available
• Multiple data systems and spreadsheets were required
• The 5 key factors effecting technology integrators is amplified
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The challenge of multiple data
systems and spreadsheets
• “Organizations must gain control of
spreadsheets if they are going to use
information to operate more
efficiently and compete more
effectively.”
• “Without centrally defined metrics
and a single version of corporate
information, organizations can no
longer compete effectively.”
Source: Wayne Eckerson, May 2005 | SearchCIO.com
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High Cost of Multiple Systems
• Duplicate data entry
• Data corruption
• Increased training
• Complicated vendor relations
• Greater IT support
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The Purpose of Technology
Technology
Process
People
Technology enables process to achieve measurable outcomes
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Integrated Data Systems – ERP/CRM?
• ERP/CRM?
• “Fully” integrated – what is that?
• Data silos
• Cumbersome Reports
• Drill-Down
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Managing Business Processes
• Document processes
• Manage by exception
• Roles and responsibilities defined
• BPM
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Business Process Management
(BPM)
• Process management
• Workflow management
• Activity management
• Software & data management
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The 10 things technology integrators
must do to succeed and thrive
1. Establish Business Process
Management (BPM), it‟s more than
workflow.
2. All business intelligence in a single
location.
3. Establish an efficient workflow and
communication system.
4. Empower sharing of business
intelligence.
37Solutions360, Inc.
The 10 things technology integrators
must do to succeed and thrive
5. Shorten billing cycle of service
work by technicians.
6. Better management of inventory.
7. Real-time visibility of projects.
8. Improve job costing and progress
billing.
38Solutions360, Inc.
The 10 things technology integrators
must do to succeed and thrive
9. Automate recurring billing.
10. Empower staff to become more
customer centric.
39Solutions360, Inc.
The cost of doing business
is skyrocketing!
• Payroll, capital expenditure, rental
equipment, and material costs are
now making up 75% of gross revenue
• These factors are all increasing
exponentially
• This disturbing trend is expected to
continue
Source: US Census Bureau, 1997 & 2002
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Trends within the industry are making
tough times even tougher
• Equipment vendors are offering
smarter self-service technology
• Vendors have started competing for
service dollars
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These trends require companies to change
the way they operate
• When customers see no difference in
value, service, and quality they
gravitate towards the lowest price
• When price is king nobody profits
• A business that does not profit does
not stay in business
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Where do you start?
• Find out where you are today?
• You need an effective strategy
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Developing a well defined strategy is a
huge key to long term success
• Appoint a Software Selection
Committee
• Avoid applications that do not
understand technology integrators
• Clarify if you are dealing with a VAR
or direct with developer
44Solutions360, Inc.
Learn to work and plan
smarter…not harder
• What are your strategic objectives?
• Growth
• Acquisitions
• Divesture
• Understand best practices, develop
policies, procedures and training
tools to follow these practices
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Introducing Solutions360
• Solutions360 is a software
development firm that specializes in
end-to-end professional services
automation applications for
technology integrators.
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Introducing Solutions360
• We possess over 20 years of
experience in field service and low
voltage construction industries
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Introducing Solutions360
• Solutions360 knows the obstacles
facing your business and has
developed a SINGLE solution to help
you achieve your business goals.