There has been a lot of chatter lately on the boards and newsgroups I monitor about the economy in 2008, and whether we can classify its current status as an economic downturn, mini-recession, recession, etc. It's been generally accepted by noted economists that we are certainly experiencing an economic downturn, if measured by a significant decline in activity spread across the economy, and lasting longer than a few months. On the other hand, the technical indicator of a recession is defined as two consecutive quarters of negative economic growth as measured by our GDP.
We'll need to wait for this quarter's numbers to see if the US economy will indeed be categorized as in recession, based upon last quarter's decline in growth, even though most economists agree we are heading that way, led by indicators such as the fall of the housing market to its lowest level since 1993, and consumer spending posting its smallest gain since 1991. The most telling news heralding the severity of our current economic climate is Sunday's announcement of the buyout of Bear Stearns, one of the world's largest and most venerable investment banks by JPMorgan, for the fire-sale price of only $2 a share.
So what does this economic downturn mean to us as service providers? Businesses traditionally are much more careful in their spending during times of economic uncertainty, and I.T. projects are normally among the first batch of initiatives to be placed on hold, as clients and prospects tighten their belts to weather the storm. It's important for us to identify this reality and shape our internal processes, deliverables and their supporting technologies, message and value proposition accordingly so that we can take advantage of these opportunities.
Did that last sentence confuse you? If it did, let me explain my position. If we, as service providers, shape our message, deliverables and pricing in such a way that we are seen as a cost-saving solution to clients and prospects that can mitigate their business risks and increase their efficiencies and productivity; and therefore net profits, we have a really good shot at not only weathering economic downturns ourselves, but actually growing our businesses during these periods. Sound crazy? Let's dive a bit deeper...
As a reactive service provider, we are most profitable when our clients are experiencing the most pain. If there is an outage or disaster event, we react to and remediate the problem, then bill our client. Our clients are never prepared to pay for these reactive emergencies, so the negative impact to their cash flow and operations is very high. This is the reason many clients and prospects have a less than positive opinion of I.T. maintenance costs in general.
As a proactive service provider (read: MSP); however, our relationship with clients is the complete opposite, as we are most profitable when our clients are experiencing the least pain. The better we proactively manage and maintain their environments, the higher their efficiencies, productivity and profits. The more we integrate enabling tools and technology such as vPro that reduce our service delivery costs, and utilize processes and procedures to remotely monitor and manage our client environments, the higher our staff's utilization becomes, and the lower our cost of service delivery, increasing our net profits. So in this example, our business goals are in perfect alignment with our clients' - we are the most profitable when they are the most profitable.
So how can we reduce the cost our deliverables, and improve our efficiencies with technologies such as vPro, and shape our marketing message and value proposition to take advantage of the current economic downturn?
Watch my next blog post to find out...