If The Recession Affects Microsoft, What About You And Your Clients?

In an email to all Microsoft employees today, CEO Steve Ballmer announced the elimination of 5,000 positions in R&D, marketing, sales, finance, LCA, HR and IT over the next 18 months, with 1,400 of these cuts occuring today. This represents 5.5% of its total workforce, as reported by CNNMoney.com here. Microsoft has also instituted a pay freeze for remaining staff in 2010, and expects to save $1.5 billion in operating expenses through these actions.

In addition, Microsoft is cutting travel expenses by 20% and reducing spend on vendors and contingent staff, as well as scaling back campus expansion plans and reducing marketing budgets. Read Ballmer's entire email on Mary-Jo Foley's blog here.

This news comes on the heels of Microsoft's reported second-quarter net income falling 11% from last year, missing analyst's earnings per share estimates.

The good news is that Microsoft is taking action to insure they remain profitable through these tough economic times, which prompts my questions to you:

What are you doing to insure your I.T. Service organization remains profitable and grows revenues in the future? How are you advising your prospects and clients to remain profitable and competitive during these uncertain economic times through your services?

Consider the Managed Services Model

Of all service delivery models,the managed services model enjoys the highest profit potential of all, based on the MSP's ability to illustrate real cost savings to their clients and prospects. As business owners look to reduce their costs in 2009, the ability to outsource the management of their I.T. infrastructure for a fraction of the cost of maintaining their own internal staff for this purpose is very attractive.

With the right tools and technology, processes and procedures, the MSP will benefit from the highest margins for their services as well. Implementing and extending the capabilities of their existing technologies gives the MSP the competitive advantage to increase profits in 2009 and beyond. Maximizing the remote management and remediation capabilities of the MSP's existing tools and technology reduces truck rolls and increases the MSP's efficiency and utilization significantly, netting additional profits to their bottom line.

Strategies for all I.T. Service Delivery Models

One key to maintaining and growing profits is to target the right clients. Generally, the more dependent upon technology a client is, the easier it is to sell them solutions that increase their efficiencies and productivity and mitigate business pain and risk. So we are looking for heavily technology-dependent clients and verticals as well as technology-strategic clients. Technology-strategic clients are those that see their IT expenditures as strategic investments that help them achieve their business goals. These are the best clients to have, and economic downturns will have a lesser impact on their I.T. purchasing decisions than it will for other clients. In fact, in many cases the opposite may be true, as these clients see downturns as opportunities to gain a competitive advantage in their markets by investing in their technology and infrastructure.

Messaging and Marketing

True for all I.T service providers, effective messaging and marketing is the key to increasing client opportunities, but what messaging is the most effective during uncertain economic periods? Messaging that conveys the following concepts seem to work well:

• Cost savings
• Improved efficiency/productivity (increased profitability)
• Pain reduction
• Risk mitigation 

A consistent marketing process is crucial to maintaining a consistent sales funnel of opportunities, and increasing marketing activities over historical levels is recommended in 2009. Look to vendor co-sponsoring opportunities and leverage marketing development funds wherever possible in order to defray marketing costs. Include multi-vendor participation for local events where your message can be delivered to large groups, instead of individuals.

Final Thoughts

In order to maximize service revenues during uncertain economic times:

• Reduce internal costs wherever possible
• Look to tools and technology, process and procedure to increase efficiencies and utilization
• Partner with other providers and vendors to deliver additional valuable services to clients
• Target technology-strategic and technology-dependent clients and verticals
• Build deep client relationships as your clients' Trusted Advisor and outsourced CIO to ward off competitive threats
• Leverage vendors and distributors' services and support offerings, as well as other benefits such as facilities tours and product and solution demos and Marketing Development Funds
• If your client base averages less than 26 users, move up to the 26-100 user space
• Add financing as an option to each and every Proposal

Click here to view my recorded Webcast titled "Maximizing Service Delivery Profits During Economic Downturns". You'll have the opportunity to download my white paper of the same name at the conclusion of the Webcast (you'll need to register for a free basic MSP University membership to view it, if you don't already have one).

Erick Simpson
MSP University
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Comments

[Robb Luther]

Microsoft with a 11% loss in 2008? Only a year after the release of Vista. I wonder how much that hurt?

Hopefully Windows 7 will help them out... because I love the Mac PC Ads.

[Ed Daniel]

Hi Erick,

as the industry transforms I guess one area that seems to have had little attention thus far for which I'd be keen to see debate around is that of identity, brand and differentiation amongst MSPs.

It appears thus far that MSPU is doing a splendid job of inspiring many existing and nascent leaders of MSPs however what gems of intuition can you and your team share that help this horde differentiate against each other rather than appear like a vendor-sponsored borg (last comment more from wit than accurate reflection).

My question might be obvious but I think it might be of interest to others to hear your views on this, perhaps even a retrospect on how you approached and continue to approach this challenge.

Thanks for listening