A New Year, SOS (Same Old Stuff)

During this time of year, we traditionally sit back and reflect on what went well during the past year, what didn’t work so well, and what we plan to do for the next year… SOS (Same Old Stuff).

So, last year our industry saw that there finally seems to be some light at the end of the tunnel. Partners I have talked with around the country say that it appears as companies are finally beginning to think about opening up their wallets and making investments again.

Optimism for the ERP/CRM Industry

Overall, partners were telling me that business for the year was pretty good, a fair number say quite good, and the outlook for the coming year is quite optimistic. I believe their optimism is based on the fact that the average life cycle of a traditional ERP / CRM System has been 7 to 10 years.  These optimists point to the fact that Y2K forced lots of companies to break their cycles and prematurely buy systems to be date compliant, resulting in a much higher number of systems purchases in the late 90s.

Some quick math says that all these systems are now 10 to 12 years old, overdue to be changed out. Many industry experts say that if the country hadn’t gone into the economic downturn that we went through the past two years, we would have banner years for our industry. I used to agree with them.

Lasting Effects of the Great Recession

However, as I see the impact that this economic downturn has had on typical companies, I get concerned. I get concerned because during the past 18 to 24 months, I’ve seen companies  radical changed their budgeting process.

In my belief, this is because in the last 10 or more years American Business had become FAT. By this I mean, that when CEOs did budgeting they looked at major initiatives put forth by each department, skimmed the content, verified the bank account and granted the overwhelming majority of the requests received.

During this economic downturn CEOs got scared, they held onto money. The fears of not knowing exactly how their company might be impacted forced them horde cash, and trim any non-essential expenses. CEOs from all size companies formed the “habit” of justifying every single line item in their budgets. If there wasn’t a compelling business reason to spend the money they didn’t.  This is what made the past couple of years become bad years for our industry.

Money Diets Become Lifestyle Changes

I believe that even though there is the prediction of improvements across the board, these same CEOs are seeing that after being forced on a diet for two years, they feel pretty good.  In fact, after shedding some excess weight, they are more competitive than they have been in a long time. They want to emerge and stay lean/strong. They want to rebuild bank accounts and improve overall financial strength. They will not hire new people until they have no other choice.

Meanwhile, they will get as much as possible out of what they already have. They will not spend money unless they feel it is a smart investment. There is no going back to the old ways of blessing budgets just because…

This means CEOs will continue follow their newly formed habit, and to scrutinize budgets, refusing to approve anything that does not present a strong business case.

90s Demos Don’t Make the Sale in 2011

Partners that believe they can simply show up, demo, befriend and sell to companies will have a rude awakening as the game has radically changed. While this strategy may have worked in the 90s, it will not work anymore. The past two years are proof.

Successful partners will be the ones that can best develop strong business cases and compelling reasons for CEOs to fund the projects they bring forward.

2011: Focus on Strong Business Cases & SaaS Offerings

If I still ran a partner business today, the one thing would be looking for is a team of people that were experts in creating and presenting strong business cases to “C-Level” executives.

By the way, the other part of my business I would be developing is my SaaS offering. SaaS is not a trend, it’s a tsunami and it is coming quick. More on this next time…

So, as you plan for the coming year, make sure you avoid using the SOS!