Is The Tech Recovery Upon Us?

Let's face it, things still aren't great economically: unemployment is over 10% nationally in the US, credit is tight for small businesses as well as reduced access to investment capital, and consumer's moods, while improving are still not positive.

However, while I don't want to overstate the case, but I do believe we are on the way to recovery. This has strategic implications for software and tech companies.


A look at the positives:

Stock markets on the rise--The Dow Jones Industrial average is up nearly 65% in the last nine months. Tech stocks in particular have been strong: the benchmark NYSE Arca Computer Technology Index is up nearly 95% in the same period. This is from a very deep bottom, of course. But it adds considerable wealth increases optimism, which usually leads to positive momentum.

Search firms are adding their own staff-- ExecuNet's benchmark Search Firm Hiring Index has increased the last two quarters, after many quarters of decrease. This is a nice indicator of expected increased hiring by businesses overall.

Worldwide employment on the rise -- Manpower, Inc.'s Global Employment Outlook Survey for Q1 2010 states that the employment outlook is mostly positive in the Americas and Asia-Pacific, while still somewhat mixed in EMEA. Labor market strength in Asia-Pacific, which is becoming increasingly important as a consumer market, is expected to return to levels similar to before the global downturn.

VCs still have lots of money to invest -- After sitting on the sidelines in fear (like everyone else with money in their pockets) during this great recession, Venture Capitalists are starting to poke their heads out among the economic green shoots. They were sitting on huge amounts of capital that was raised in the pre-recession bubble environment, much of which is still not invested-but still accruing management fees. I have heard that there are now many limited partners filing lawsuits as a result of their funds lying fallow, which may stimulate an acceleration of VC investments in the coming year.

IT spending is forecast to rise -- After several down years and a very bad 2009, Garner is projecting an increase in excess of a 3% in IT spending worldwide in 2010. This is very important, and a bullish signal for the tech sector heading into the New Year.

The IPO market window appears to be opening -- Security software company Fortinet had a very successful offering in November. Meru Networks, a supplier of wireless LAN solutions, announced today it planned to raise $86M in an initial public offering. IPOs tend to drive increased capital access up and down the food chain, and that window has been closed for some time. If it opens significantly, that bodes well for growth in the software and tech sector.


No more bubbles - at least anytime soon

We're not heading toward another bubble anytime soon. It appears we're headed for moderate, but hopefully sustainable growth as a result of our two catastrophic burst bubble in the last decade. Government debt, commercial real estate and inflation potential are concerns in the long run, but appear to be manageable in the near term.


What should tech companies do?

First of all, don't be stupid and increase spending if your situation doesn't support it -- credit is still very tight, and access to investment capital still remains below typical levels of the last decade. So make sure your plans are supported by cash flow, or in the case of early stage companies, at least access to reasonable levels of debt financing or investment capital.

If you are able to spend, it's a great time to grow fast or take share from competitors -- when the economy is just starting to take off and buying is accelerating, act before your cautious competitors have come out of their shells.

In general, companies tend to be too conservative in their investment and hiring plans -- Take note that hiring tends to peak at the apex of an economic cycle, just before growth slows or turns negative. In fact, many experts consider strong hiring a leading indicator of an economy that's lost its momentum. I've never been a fan of hiring just because you have the money and growth rate to support it. This is a leading cause of bloated cost structures and bureaucratic, slow moving organizations. But most companies are pretty lean in staff after several years of recession. So if you really do need people, it's more productive to hire them now as we begin an up cycle, instead of waiting until the very end of it as so often happens.

That's my forecast and advice for the software and technology business sector as we enter 2010. What's your forecast? I'd love to hear it. Post a comment or shoot me an email to add your own spin to this discussion.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, RSS, or the PJM Consulting Quarterly Newsletter. Contact Phil via email at info@pjmconsult.com.

Cloud Computing, SaaS and Such--Have We Read This Story Before?

I have this incredible feeling of déjà vu.

Cloud computing and Software as a Service is all the rage. In my practice at PJM Consulting, I am very involved in software startup activity. Nearly every new software company that I see today is being built on the Software as a Service business model. It's all the rage--so much so that it appears that any self-respecting software entrepreneur would be embarrassed to start a company using the traditional software licensing model. Even if an entrepreneur was so inclined, good luck finding a VC who would even consider funding such a company. No one wants to look like a dinosaur.

It's all well and good--there is definitely a real trend toward SaaS and Cloud Computing, with many good reasons for it. But most high technology trends are initially a bit over-hyped, and tend to get ahead of themselves. In addition, this particular story seems ever so familiar to a tech veteran that's been around for a few of these cycles.

The first bit of history this reminds me of is the old terminal/mainframe model from the early years of computing. There were some real advantages to this model, but also some big disadvantages as well--which opened the door for the golden age of PCs and networking.

The second era that the current SaaS wave reminds me of is "Web 1.0", when Web-based hosted software (then called ASP rather than the modern SaaS terminology), was first going to take over the world. The current trend seems so very similar because it was around the Web 1.0 years of the late 90s/early 2000 when the traditional software license business model was first proclaimed dead. At that time nearly every new business plan was based upon an ASP model.

So some of this fast-moving Cloud Computing or SaaS trend is new--but much of it could be viewed as recycled from past trends. Let's look at the Pros and Cons of this computing model:

ADVANTAGES

* Enables "Utility-Style" computing - variable expense instead of. capital investment
* Allows an end run around overwhelmed IT departments (like PC networking did)
* Supposedly "On-demand"--use only what you need, when you need it
* More efficient use of compute resources by time-slicing large farms of cost-efficient computing resources
* Web-based allows anywhere, anytime availability
* Off-site storage of data assists disaster recovery preparedness

DISADVANTAGES

* Immature and inherently more difficult Security
* More difficult integration with other applications
* Internet latency
* Internet reliability
* Data resides outside the company firewall
* Costs over time aren't necessarily lower for customers
* Lower margins for software vendors--aren't always accounted for in current pricing

SUMMARY

I believe that the trend toward computing in the cloud will continue, but there will be some stumbles and pullbacks along the way. Cloud Computing and SaaS has some inherent strengths--but also some under-publicized weaknesses. Many software vendors are overlooking the weaknesses at this time, as is typical of any new and hyped technology. Traditional licensed software hosted by the user still has its strengths and a definite place in the market. Like many mature technologies and business models, the death of traditional software licensing has been greatly exaggerated. Once the early hype passes, decisions on whether to computer within the firewall or in the cloud will once again be made on the individual merits, costs and user needs for a particular application within a particular company. That's how I see it--post a comment with your opinion so we can look at all viewpoints.

Phil Morettini
PJM Consulting
http://www.pjmconsult.com/

White Papers in the High Tech and Software Marketing Mix

There are many marketing methods in Software and IT marketing that can be appropriate in some, but not all situations. I'd put White Papers in that category. The term "white paper" is a broadly used term, and can mean different things to different people. I define a white paper as a document written to provide insight or expertise specific to a market, process or product category.

PRODUCT & MARKET APPLICABILITY

White Papers are used far more often in B2B marketing than in B2C marketing. I have seen them used in a B2C environment, but only infrequently. A White Paper is most often useful when there is complex technology or work processes involved. In a B2C environment, they would usually only be used in an "early adopter" market where a product concept is new, and prices and sales cycles are still long.

MARKETING RATIONALE FOR WHITE PAPERS

Why use a White Paper at all? The best reason is to build credibility for your company or product. White papers are most frequently accessed by prospects early in the sales cycle, when a prospect is just beginning research on a product category. These documents allow company personnel to show off domain or technology expertise, which should reflect well on the product you eventually want to sell the prospect. The white paper shows off your company as thought leader in your category. It also allows you to subtly and gently position your company and product in the prospects mind, very early in the sales process. It is often helpful to designate one (or a few) people in the company as the author of the white paper and as an expert in the field.

THE "RIGHT WAY" TO DO WHITE PAPERS

So what are the key factors to creating a successful white paper? Here's a few:

* Written by a domain or technical expert
* Succinct-no fluff or overt marketing, to the point
* Aimed directly at your target prospects
* Provides valuable information to your target
* Mostly solution-agnostic, any product or company promotion must be subtle

WHAT NOT TO DO IN A WHITE PAPER

And what are the things to avoid a wasted effort? Keep these points in mind:

* Can't be a product brochure -no relentless promotion
* Don't make it the length of a book
* Never stretch the truth
* If it's too general, so that no one will invest time to read it

BEST USES FOR WHITE PAPER

What can you do with your white paper, once you've put in the time, money and effort to create one? There are many good uses--here's a few to consider:

* It will contribute positively to Search Engine Optimization on your website
* An excellent item to use in a PPC campaign offer
* A great email marketing campaign offer
*An important intermediate step in the sales process; often useful just after a website visit, but prior to a webinar or product trial
* Versatile as "lead bait"; regardless of the medium or campaign, you should require contact info from the prospect prior to a white paper download
*Assists in moving a prospect along without "high touch" interactions--helping automate the sales process and shorten the sales cycle

SUMMARY

White papers can be very valuable tools in a number of market segments. These documents should be used to differentiate your company as a progressive thought-leader in your market category. The optimal goal for a successful white paper is to position your company as a preferred vendor or serious alternative for prospects in your market segment. This is accomplished by demonstrating expertise and providing credible, valuable and unbiased information which is valued by the target prospect. It is NOT accomplished by "tooting your own horn", playing fast and loose with facts, or duplicating your company brochure. If you want to be a successful white paper marketer, it's important to restrain yourself from tactics in the latter category. That's what I think about making white papers an important part of your marketing mix. Please post a comment and add your experience and thoughts on this topic.

Phil Morettini
PJM Consulting
www.pjmconsult.com