Software & Services Safari

March 18th, 2010

oDesk and the inadvertent freelancer

Posted by Brian Sommer @ 9:37 am

Categories: Contracting, Current Affairs, India & Services, Professional Services, Service Providers, Software Vendors, group dynamic

Tags: Assignment, Worker, oDesk, Generic Skill, Labor Relations, Human Capital Management, Operational Accounting, Development Tools, Human Resources, Workforce Management

Can you become a great freelancer?

I’ve written a fair bit lately about the phenomenon where millions of workers have been recently let go from their employers and have been inadvertently thrust into the world of freelancing. In one of the first pieces I did on this subject, I asked companies such as Fieldglass, Elance and oDesk how they would respond to these newfound freelancers. Brian Goler of oDesk was the first to respond.

oDesk background: oDesk lists approximately 40,000 new jobs every month. The assignments are widely distributed in size ranging from a few hours to many, many months. oDesk claims people spend more time working than hunting for new assignments. The company also takes away some of the billing and cash flow issues that may occur in freelance assignments workers book independent of a system like oDesk. Of this subject, I can speak with some authority as some of my clients are very good at paying me on time while a few can hold up a payment for upwards of 90 days. Of the latter, I can sometimes rationalize that delay when it’s the first payment and it is taking time for me to be set up in their supplier/procurement system; however, continued delays like that force me to either change the terms of our relationship or end it all together. Cash flow is a top of mind concern for freelancers.

The average project size for an oDesk assignment is around $4268. oDesk provides real-time statistics like this on its website. Freelancers that want to take advantage of the oDesk guaranteed payment program must log in to the oDesk system while they are working on an assignment. Time is automatically tracked and billed to the client. Brian indicated to me that software developers often make approximately $25 per hour, consultants may make $22 an hour while data entry personnel make around eight dollars per hour.

Becoming a better freelancer:
Brian and I discussed how someone who used to make, for example, $120,000 per year could replicate that success on a system like oDesk. This was an interesting conversation as Brian showed me profiles of oDesk members who had built quite a sterling reputation for themselves within Odesk and had become very much in demand within 12 to 18 months. While one individual he showed me was making just under $70 per hour, the real back story was that this individual had also developed a cadre of other software developers with which he subcontracted work. In consulting terms, this is called leverage. In this case, a freelancer has hired other freelancers to work for him and he makes a percentage of every dollar billed by these other workers.

The most successful freelancers that Brian showed me were those who took the time to develop their personal brand, delivered quality solutions for their customers and did so in a timely basis. As result, many of these individuals, especially those involved in software programming assignments, found their initial assignments extended from mere days to months or years in length. That scenario turns out to be quite common according to Brian because many perspective users of freelancers will establish a short-term trial assignment with the intent of extending it significantly to workers it learns it can trust.

The long-term freelancer:
Brian and I also discussed whether people “graduate” from oDesk. While some individuals do develop a strong following, many individuals continue to acquire new/additional customers via oDesk.
The best long-term freelancers though maybe individuals who are able to develop a unique set of skills or capabilities that are hard to replicate or are in scarce demand. Generic skills are being bought and sold on a global basis for a global market rate. Freelancers must differentiate themselves based on being either the lowest cost resource, the most customer attentive resource or the most knowledgeable resource.

March 17th, 2010

The Cost Difference Between On-Premise and SaaS

Posted by Brian Sommer @ 9:26 am

Categories: Current Affairs, ERP, Notable Research, SaaS, SaaS and Beyond, Think About IT

Tags: Software, Software-as-a-service, Webinar, Software As A Service (SaaS), Managed Hosting, Cloud Computing, Emerging Technologies, Brian Sommer

A couple of weeks ago, I did a televised webinar with Bob Evans of InformationWeek and two major CIOs: Andy Schlei of Sony Pictures Entertainment and Kate Bass of Valspar. Workday, a SaaS HR and Financial vendor, sponsored the event.

I have listened to a lot of webinars, earnings calls and conference calls in my career. It’s very rare to attend one of these and hear a lot of questions get put before the presenters. Sometimes, this is due to the desert-like nature of the dry material presented. Sometimes, people don’t like to ask questions of others in a public setting. Sometimes, it’s because everyone’s in a hurry to get back to work. And, sometimes it is because the material is something everyone already knows.

This webinar was interesting in that it generated an exceptionally large number of questions. I’d love to say it was because of the sparkling repartee amongst the panelists but it probably was due to be subject matter. What did we discuss?

The webinar was on the inroads that software as a service (SaaS) has made into large businesses.

I recently interviewed a number of CIOs with very large corporations. Each of these companies has implemented a software as a service application software solution. Of the many things I learned in this effort, I was most taken with the financial results businesses were achieving via software as service. To the one, these CIOs reported their SaaS solutions had a total cost of ownership that was one third to one half the cost of an on-premise solution. The biggest cost savings actually came from the reduction in manpower required to maintain the applications in-house. There were also considerable savings from other areas such as reduced or no capital expenditures, reduced implementation costs and other areas.

I produced a white paper as result of those interviews with large company users of HR, Finance and CRM SaaS solutions. You can get a copy of that white paper and/or see a replay of the webinar at this Workday link.

March 16th, 2010

PSA/PPM Goes Vertical – Better Time to Value for ChangePoint Solutions

Posted by Brian Sommer @ 7:25 pm

Categories: Current Affairs, India & Services, PPM - Project Portfolio Management, PSA - Professional Services Automation, Professional Services, Selling Professional Services, Service Providers

Tags: Changepoint Corp., Professional Services, Compuware Corp., PSA/PPM, Tools & Techniques, Software As A Service (SaaS), Management, Emerging Technologies, Brian Sommer

Compuware Targets the High Tech Space

The project software space has been going through a lot of consolidation in recent years; however, the amount of innovation in this space has been thin. Acquisitions generally are about market share increases not necessarily about innovation.

I had a good quick call today with Lori Ellsworth, a vice president at Changepoint Compuware. We discussed the latest Accelerator that Changepoint Compuware was introducing today. What I liked about the conversation is that it shows a focus in the PSA (professional services automation) and PPM (project portfolio management) space around building vertical versions of solutions that enable faster time to value for prospective customers.

In the case of today’s Accelerator announcement, Changepoint is delivering a preconfigured version of the software for software and hardware companies. This focus on the technology sector is based on a number of data points Compuware has seen related to faster than normal economic growth occurring in the technology sector and in the services sector. Given the growing importance of service revenues inside technology companies, this seems like a good fit for another Accelerator in the Changepoint offerings. (see screen shot below)

I discussed with Lori my observations that many service organizations are still not operationally excellent yet. As Changepoint approaches software firms, they will undoubtedly encounter a few firms that are growing at an exceptionally rapid pace. These high-growth technology firms may have old solutions for resource management, billings, etc. that are woefully inadequate for the growth they have encountered or will soon face. It is very difficult for any company to remain operationally excellent for any period of time when that company is undergoing rapid growth. Compound that with a phenomenon in software as a service companies (SaaS) where service professionals may work on dozens of unique clients weekly in small doses of time, and we see a very different kind of service operations challenge appearing.

On balance, I like the concept of creating these vertically specific, preconfigured solutions for service-based companies. Changepoint should be able to assist technology customers in new product development, professional services deployment, help desk and support services and other areas. The challenge these customers will face though is to continue to grow, mutate and adopt ever more efficient and effective business processes that help them remain market relevant and operationally excellent. Any smart high-tech company that has not embraced an enterprise-wide PSA/PPM solutions set does so at its own peril.

February 25th, 2010

The Inadvertent Freelancer (Part 3): Pre-Sales Homework

Posted by Brian Sommer @ 12:38 pm

Categories: Contracting, Current Affairs, HR, Marketing, PR, Professional Services, Selling Professional Services, Service Providers, sales

Tags: Sales Call, Prospect, CV, Invisibility, Sales Strategy, Sales Force Management, Sales, Brian Sommer

Use your subject matter expertise to make selling a pleasure not a chore

Never call or meet someone without having done a lot of homework on their firm, their economic situation, their markets, their market challenges, etc. Then, and this is the most important point, you must develop a point of view around them.

The purpose and focus of a sales call should always be about the prospect: NOT YOU! As bad as you want to talk all about your credentials and how bad you want this work, you need to focus on the prospect. Make them the center of your universe. It’s their firm and their money.

I do a number of tech selling courses every year to teach people Point of View selling. Here’s the short version of the course in a couple of paragraphs:

- take the time to research this firm

- identify the top three business problems plaguing this prospect. These should be material issues that must be corrected asap or the company will suffer dire consequences or will be exploited by the prospect’s competitors. It doesn’t help you if you identify 10 or 20 problems as most executives can’t solve more than 2-3 issues simultaneously anyway. Also note that these issues better be on the top of this executive’s personal problem list as they’re not focused on problem #21 when problem #1 could cost them their job next week.

- quantify the cost of inaction. If this number isn’t big and believable, it won’t get acted on. Alternatively, identify the magnitude of the opportunity. I once found a way for a company to free up over $450 million in working capital. That earned a big seat in front of the CEO and CFO of these Fortune 500 firm.

- present no more than three solutions. Make sure these address one or more of the problems you’ve highlighted.

If you do this correctly, you don’t even need PowerPoint slides. You’ll be able to speak to these points in an elevator, over drinks, in the Admiral’s Club, etc. But, if you do develop a deck, keep it really short. The purpose and focus of a sales call should not be around the tedious poring over of a 100+ slide PowerPoint deck.

Today at lunch, a CIO was regaling us with the story of an ERP vendor she invited to have speak to her IT team for a one-hour lunch. Would you believe the vendor brought a 320-slide deck?

Generic slides, too many slides, no focus, no attention on the prospect, no idea what the prospect’s problems/issues are, etc. are all formulas for sales disasters. Don’t do it.

As a freelancer, you need to be different. You need to be better than others. Just because your old employer did things a certain way does not mean you should.

Try this exercise: Identify at least five things you’ll do differently than those still at your old firm. Will you deliver a better product or outcome? How so? Do you have a better approach? Can you act faster? Do you have some super talented team members or partners you can bring into a deal? Do you, a seasoned professional, deliver the work instead of a green staffer? Are you more accessible? Are your solutions more flexible or are they a one size fits all commodity that old employer sold? Have you got some special intellectual property that you’ll bring to bear on your gigs? Do you have great references from other clients?

In crafting your differentiation, avoid telling anyone that you are less costly. Whether you are or not, is not the point in any sales call. If you’re saying you’re a low cost commodity, you’re showing people that even you don’t think you’re worth a solid billing rate. Well, you are. In fact, if you don’t walk away from some low price deals every year, you’re probably hurting yourself and your business. Don’t get me wrong – be reasonable. But, don’t take bad deals just because the pipeline’s low at the moment.

Prepare to invest in your brand.

I go to a few tech trade shows every year – not to cover them – but to learn a few new things and re-connect with peers and prospects. Sure, I may do some ‘meet and greet’ stuff at other events, but, attendance should make you smarter and better known in the industry.

Take a look at your CV (not resume). The resume is what a job seeker polishes up. The CV lists all those brilliant things you’ve written, patented, presented, etc. The CV should show the trade shows you’ve spoken at and the topics you’ve wowed others with. On this point, I’m unforgiving. If you don’t like public speaking, then write. If you won’t write, speak. If you won’t write or speak, you better be a damn good inventor. As a freelancer, inadvertent or otherwise, you’ll perish if you don’t get your name and brand out there somehow. Invisibility is death to a freelancer.

As a subject matter expert, you absolutely should have something to say about your area of expertise. If a prospect is trying to choose between you and another freelancer, most will take the one with a recognized area of expertise. Anyone can say they are project manager but how many can say they gave a talk on “PMO in multi-national software implementations”. Shoot, I’d probably call you for a conversation just to hear what you know on the subject. And, as someone who has hired scores of people, I’ll hire the more expensive expert who has proven expertise over the cheaper person who may or may not. What employers or contractors want is ‘proof’ of expertise. They see the proof as a proxy for the value you can deliver. Without the proof, value could be a crapshoot.

(to read part one, click here)
(to read part two, click here)

February 25th, 2010

The Inadvertent Freelancer (part 2): How to Sell

Posted by Brian Sommer @ 12:28 pm

Categories: Current Affairs, Professional Services, Selling Professional Services, Service Providers, group dynamic, sales

Tags: Brand, Newsletter, Sales Strategy, Branding, Corporate Communications, Sales Force Management, Sales, Marketing, Brian Sommer

Selling when selling isn’t your forte

In an earlier post (link), I wrote how thousands, maybe millions of workers have been shoved into the ranks of freelancing but their skill sets are better suited for being employees not freelancers. I wrote how not everyone is great at selling, marketing and delivery. Many of us are great at delivering services but struggle with sales and marketing.

Judging by the emails, tweets and calls I got on that post, I thought I’d do a couple of companion pieces. This one focuses on the how an inadvertent freelancer can do a better job of selling work. And, in this economy, that’s got to be #1 on the inadvertent freelancer set of worries.

First, let’s debunk something right away. You don’t have to be a sales professional to sell. Have you ever noticed the absence of sales degrees and courses in colleges? Selling has a lot to do with two things:

1) your willingness to push forward and do something you don’t like or understand and
2) your ability to prepare for a sales situation

I learned a long, long time ago that most people hate to sell. They’d rather do public speaking, skydive from a plane and other terrifying acts before selling. A wise person once told me that I should make a to-do list everyday and add a few sales items to each day’s list. Then, I needed to move the most dreaded item to the top of the list and act on it the first thing everyday. This forces you to confront this task, every day. This is your demon and conquering it is your issue. Maybe you didn’t ask to get laid off and become an inadvertent freelancer. But, these events have occurred. You can’t live in the past – you’ve got to forge ahead.

I did that to-do list trick. Initially, I hated it but deep down I knew it was the right thing to do.

Then, I realized that selling proficiency comes when you really understand what you’re selling. People buy from those who know what they’re talking about. If its services you’re selling, you need to convince people you are the tops in whatever it is you do. That’s when I devised a number of ways to directly and indirectly sell myself. Steal all of these ideas if you like.

I created a newsletter with a decided point of view. I sent it to several hundred tech CEOs I knew. But, I created a newsletter that was absolutely absent of self-promotion, self-congratulatory hyperbole. Trust me, no one wants to hear about what LinkedIn group you just joined or your kid’s soccer prowess. Instead, I wrote about a key issue in the market. I provided a number of insights into the matter and then I detailed what these CEOs were going to have to do to remedy this matter in their firm. That newsletter was designed to get a lot viral pass around action and it did. People who got it knew I was onto these issues and called me. I got work this way.

I contacted others in my situation. I first took the time to understand their business and its offerings. I then expressed my interest in not only helping them complete work but also in helping them shape deals, sell follow-on work, etc. for the deals that they’d help bring me into. If you want to differentiate yourself as a freelancer, you need to bring something extra to the table when you meet with potential channel partners for you. This is a key point many freelancers overlook. Few firms want just arms and legs. They need people who bring something with them whether it’s a team of others, unique intellectual property, etc. This is your entrée into these organizations.

You then need to identify what makes you different/special. If you’re just an undifferentiated commodity, you’re going to face a tough slog. Your skills are a commodity to be bartered down to the lowest price possible. You need clients and partners to ask directly for you not someone, anyone, who can write C++ code for $40/hour. If you’re not special now, get special asap.

How do you get special? You need to think of yourself as a brand now and not as an employee. In the past, your employer kept all of the good ideas, intellectual property, etc. you created. They probably didn’t let you write articles let alone a blog. They didn’t let you speak in public venues. They made sure your personal brand was subsumed into the larger corporate brand. Your firm may have even had one of those toxic cultures that shot anyone who stood out, who was special, who was different.

Those days are gone – gone – gone. You are now the company. You are the brand.

A brand should be one of those instant blurbs a person instantly recalls upon the mention of your name. While I’m terrified to think what the readers of this blog might say upon the mention on my name, I try really hard to deliver some really deep insights into the tech space for my clients and I still operate with the professionalism I learned years ago at Andersen. What’s your brand all about? What do you want it to be? Does anyone know what your brand is about?

If you take my newsletter idea from above, make sure the image you’re creating with it is consistent with the brand you’re trying to create. And, while you’re at it, check the rest of your online persona to see if it’s consistent with the freelancing brand you need. Is your Facebook profile helping or hurting your professional brand? How about your website? How about those comments you posted on some naughty website? As a freelancer, you are, to a great degree, what your web presence dictates.

Now, we get to the sales call. Let’s face it. You’re probably more of subject matter expert than a schmoozer. If you’re like me, your golf game sucks, too. When you get on the phone or get a face to face meeting with someone, MAKE IT COUNT. How do you do that?

HOMEWORK

(to see part one - click here)
(to see part three - click here)

February 20th, 2010

The State of Professional Services 2010

Posted by Brian Sommer @ 7:27 pm

Categories: CEO Interview, Current Affairs, India & Services, Notable Research, PPM - Project Portfolio Management, PSA - Professional Services Automation, Professional Services, Service Providers

Tags: Revenue, Professional Services, Service Organization, Organization, PS, PSA, Brian Sommer

The services space in this economy - Major research findings

Dave Hofferberth at SPI Research is a good friend and colleague. He covered the services marketplace forever at Aberdeen and is doing even cooler things at SPI Research.

Dave was super nice to shoot me over a copy of their latest mega-opus research report: 2010 Professional Services Maturity Model Benchmark. I’ve read prior year’s reports and noticed a lot of different material and conclusions in this year’s report.

I got Dave on the phone last week. We had a great conversation and I got a chance to hit him with these questions. As interviews go, this recap’s pretty good as there’s lots of content below:

“Dave, I just read your 2010 Professional Services Maturity Model Benchmark. It’s quite a comprehensive compendium of stats and facts re: service organizations. I noticed you’ve added sections on culture and other areas. What were some of the newest additions to your benchmark?”

We’ve added several interesting chapters on “What the Leaders Do” profiling the Top 15 best-of-the-best PS organizations; a chapter on “Going Global from the Get Go” showing the growing trend for PS organizations of all types and sizes to use a global workforce from inception and a chapter on “Service Transformation” showcasing our experience in helping service and project-oriented organizations build and execute business improvement initiatives. We’ve also augmented our coverage of software applications and developed detailed profit and loss statements by organization type and size.

“What were some of the bigger surprises you learned this time around?”

We were pleasantly surprised by the extremely high net profit margins leading firms were able to achieve despite lower revenue growth due to the recession. We were also surprised at the frugality, ie extremely low costs for facilities and management overhead posted by the leaders; many top-performing firms are operated “virtually” with almost no brick and mortar facilities and almost all members of the organization are billable. Another big surprise was that almost all the top performers focused intently on specific vertical markets and business process optimization. Biggest losers were broadly oriented horizontal organizations due to skill and price commoditization. Bill rates have been relatively stagnant for almost 10 years so PS organizations are demanding and getting more and more productivity from their employees every year, remote service delivery has been a big catalyst for higher productivity.

“I noticed you started the report with some observations regarding the economy. Can you elaborate on some of the short-term and long-term changes the economy will push onto service organizations?”

We follow the service economy very closely. Now, more than ever, professional services are a critical component to both long-term growth and profitability for both product and service organizations. For embedded PS organizations within product companies, the increase in services as a percentage of revenue has enabled them to weather the recession while becoming more intimate with their customers. The other pretty amazing statistic is that the broader professional service industry including legal, accounting, engineering and business services in addition to IT services produced over $1.2 trillion in revenue in the US alone. A mega-trend is that the global economy has shifted to become a services economy.

“You’ve got a maturity model in your research. How many service firms do you encounter that are really at the highest level of service excellence? Why aren’t there more?”

We built the model to allow only a small percentage of firms to operate at the highest levels. Level four and five firms account for 20% of the survey population. The difficulty in achieving level 4 and 5 performance is intentional to give organizations something to shoot for that is not impossible, but is definitely difficult to attain.

Given the tough economic conditions of 2009, the financial key performance indicators like revenue, margin and backlog actually went down in each of the five levels of our model. This is to be expected during difficult times, however, they will be raised again as overall performance improves. We have many clients who aspire to improve one maturity level annually per performance pillar. That goal is difficult, but attainable.

“There’s been a lot of consolidation lately in the PSA (professional services automation) software market. Is that a good or bad thing from your perspective?”

The PSA software market has been consolidated significantly over the past five years with acquisitions by Oracle, Microsoft, Compuware, Deltek and NetSuite. The PSA firms did not go out of business, but rather were acquired by larger solution providers who realized the importance of improving services and how PSA can do just that. Now, all of the largest players are under the umbrella of enterprise resource planning vendors, who look to integrate PSA capabilities with their financial and CRM solutions. While this could be seen as a bad thing if PS executives prefer to buy individual business solutions, rather than a comprehensive, integrated enterprise solution, overall the market continues to grow. Several new SaaS vendors have also entered the market. In general, consolidation has been a good thing because more money is being invested in enhancing PSA as part of a suite and capabilities to support a multi-lingual, global workforce are being added.

Thanks for the time Dave - If you haven’t seen one Dave’s reports and you’ve got either a captive or customer facing service organization, find a way to get one.

February 17th, 2010

The scary side of freelancing: the inadvertent freelancer

Posted by Brian Sommer @ 8:37 am

Categories: Current Affairs, Professional Services, Selling Professional Services, Sourcing, Think About IT

Tags: Skill, Branding, Intellectual Property, Internet, Marketing, Research & Development, Business Operations, Brian Sommer

Freelancing because you have to

I was at a meeting the other day when two former executives from a major consultancy started chatting with me. It seems they were in the freelancing space these days. As our conversation continued, I heard some things that were pretty upsetting.

Both of these fellows are doing some freelance work, looking for full-time gigs and are trying to stay connected with executives at established service firms hoping some crumbs (or a permanent gig) fall their way. These guys are freelancers who really don’t want to be freelancers. Instead, these are employees who are without an employer and are doing freelancing as a means to provide an income. Worse, since both are over 50, they expect to be freelancers until they retire as they aren’t finding prospective employers too interested in people of their age.

I’m also concerned for these individuals and millions of others who have found themselves in similar straits in this economy.

My concern is that many freelancers are quite competent individuals in executing work but may not have the skills, discipline or appetite for selling it. To be a successful freelancer, one must have knowledge of opportunities, the timing to know when to ask for the work, the ability to close the deal and the ability to execute the work once sold. That is an exceptionally tall order as it is rare to find individuals who can market, sell and deliver work.

I’m also concerned that many freelancers are stuck doing commodity work with commodity skill sets and may lack the time or resources to enhance their current skill set. Seriously, can you make a living, learn new skills, be selling the next piece of work, build your brand, honor the delivery commitments on the sold work, have a life, etc. all at the same time? Is that realistic or desirable? This lifestyle creates additional problems as the freelancer often becomes less and less differentiated and more of a commodity to be bargained with on a low-cost gets the work basis.

The best freelancers, in my opinion, are the ones who develop a brand for themselves, create their own unique intellectual property and have a reputation for creating value for their customers. What these freelancers succeed in doing is moving themselves into a higher order of freelancer: the 1099 worker who does not negotiate on price. People want them because they’ve heard about the results they deliver. People hire them based on good word-of-mouth recommendations. People hire them without beating them down on price.

While much has been written about the freelance nation, little has been written about those who are involuntarily thrust into it. Not everyone was cut out to be a freelancer. Each of us can bring a different set of skills and capabilities to our employers and/or assignments. But not all of us can source, market, sell and deliver work. I am concerned about the inadvertent freelance nation that is forming as I am not sure that all of these newfound freelancers can or will succeed.

Many technologies exist on the Internet to help freelancers. There are sites that will match freelancers to short-term opportunities. There are sites that allow many freelancers to collaborate on a specific assignment. But there don’t seem to be sites designed for the inadvertent freelancer and I suspect they have very different needs wants and requirements.

So, for those of you at Elance, oDesk, Fieldglass and other vendors let me know what you’re developing for the inadvertent freelance nation because I’d like to write something very positive about this phenomenon today.

to read Part 2 - click here
to read Part 3 - click here

February 16th, 2010

Career success in today's businesses

Posted by Brian Sommer @ 8:04 am

Categories: Current Affairs, HR, Professional Services, Service Providers

Tags: Entrepreneurial, Newbie, Professional Development, Entrepreneurship, Business Structures, Career, Management, Finance, Brian Sommer

It’s not always obvious how to succeed

The other day I had the occasion to speak with a fellow, let’s call him the “Newbie”, who had recently been given an offer to work at a major consultancy. The gist of this call was quite simple, he wanted to know how to succeed and prosper in a consulting organization.

What made this conversation so intriguing to me was that Newbie had spoken with someone else who had been hired by the same consultancy and let go some 12 — 18 months later. We’ll call him “Surprised”. Since Newbie knew that Surprised was a bright sharp fellow. Newbie was concerned that Surprised had been let go and when these two discussed the matter, Newbie sensed tremendous frustration on the part of Surprised.

How could Newbie avoid the same fate?

I’ll skip much of the back-and-forth of our conversation but it did involve quite a bit of discovery to understand why one person can work out in this type of organization and another will not.

Surprised came from a command and control career background. He awaited orders and then acted on them. When he went to work for the consultancy, he asked his superiors on multiple occasions what he needed to do and how to get promoted. He apparently got his fair share of assignments but was not going to be promoted. And, eventually, Surprised was cut loose. Waiting for orders may work in some organizations but it doesn’t in others.

That one paragraph contains plenty of clues for me. While this consultancy is a corporation today, it used to be an up or out oriented partnership. To get ahead in a partnership, one must absolutely demonstrate that one is entrepreneurial. People get promoted in this type of business based on their ability to find opportunities and grow the business. Those who wait to be told what to do, when to do it and with whom to do it are not business builders. Partners will not open up their earnings to share them with those individuals who do not help them build the business. This data point is absolutely critical for one to understand if one is to succeed in this type of business.

Just being entrepreneurial is not enough though. Being entrepreneurial means that one is taking risks. But those who get promoted are the ones who take risks but also manage downside risk exceptionally well. No one likes to see the capital of the firm, its assets or its reputation put at risk needlessly. So the challenge before aspiring career oriented individuals in this type of company is to find opportunities to grow the business without putting the fortunes of the firm’s owners in harms way.
Finally, I told Newbie that when I entered the partnership at Andersen Consulting (now Accenture), a senior partner in the firm explained the concept of stewardship to me. In short, the concept is that I was to leave the company in better shape than it was in when I started with the company. That, in essence, was to be my job.

So, if you are lucky enough to get a job offer in this economy, the first thing you should do is do what Newbie did: talk to others and find out what are the rules for success in that firm. Assuming that your new employer works like a previous employer could be an expensive career mistake. Second, the concept of stewardship as described above is still a good concept and one that continues to serve me and so many others well in our careers. The stewardship concept one is portable and transferable. Take it with you wherever you go.

February 12th, 2010

Layoffs are bad for service firms

Posted by Brian Sommer @ 12:27 pm

Categories: Current Affairs, HR, Professional Services, Service Providers, Stories That Should Upset You

Tags: Layoff, Stock, Labor Relations, Workforce Management, Human Capital Management, Human Resources, Brian Sommer

Layoffs - A poor ‘management science’ overused by poor managers

This week’s issue of Newsweek has a must-read cover story. It’s titled “Layoffs are bad for business” by Jeffrey Pfeffer. Except for situations where businesses are facing permanent structural changes to their industry or company, layoffs are often the result of poor management, poor management planning or knee-jerk allegiance to short-term earnings to appease Wall Street expectations.

The Newsweek article starts off by telling this one instructional vignette. It tells how Southwest Airlines chooses not to layoff employees post-9/11. Turns out, they were the only major carrier who didn’t and now they are the largest domestic carrier with a stock valuation in excess of all other carriers combined. Mr. Pheffer then adds a remark made to him by the former HR head at Southwest: “If people are your most important assets, why would you get rid of them?” Service firms often tell me that their people and their reputation are their most important assets. But, the numbers of service professionals laid off tells me that service companies don’t think much of jettisoning their ‘assets’ and they don’t seem to see a connection between their layoffs and their reputation.

Today, I was on a call with colleague Dave Hofferberth of SPI Research and he related to me the story of how a service firm he tracks made cuts for the recession and now faces a conundrum. They made the cuts to maintain (and actually improve) the margins expected of them by Wall Street. Now, as business is picking up, they have too much work and too few employees. Their problem today is that they don’t want to hire new employees as these people will not be as chargeable in the near-term as they come up to speed. That lack of chargeability will depress margins in the short-term. But, if these people aren’t hired, then the current staff complement will start to revolt under the overly burdensome workload.

I’ve heard the same story at another firm, too.

Years ago, in my early consulting days, my employer would shift resources from one economically challenged market (i.e., a region, an industry, a country) to another where work was more abundant. Yes, that meant the consultancy took a bit of a hit in added travel costs for the out-of-town workers but these temporary market movements were not going to impact the long-term success of the firm.

I was in an office at the time that was reeling from a major dropoff in work to the energy sector. About 40% of my colleagues were re-deployed to projects in the Northeast and Midwest. About 18-24 months later, the price of oil recovered and business was booming in our neck of the woods. Our office got its people back with a lot of side benefits:

- no re-training or learning curve costs were incurred as these people never left the firm
- morale was great – People appreciated having the out-of-town opportunity as it meant no disruption in their career
- returning staff possessed ever more skills and had higher billing rates upon their return

I saw this cycle repeat itself several times. I, as an employee, took comfort in the knowledge that my career was secure as there would always be some demand for my skills somewhere in the firm’s global operations.

That feeling, though, went away in the mid-1990s when the company’s newer leaders terminated several pyramids of professional staff in the Northeast. In management’s review of the industry requirements of that part of the country, they felt that a ‘correction’ was needed to better balance demand with supply. The affected personnel, generally, were not offered opportunities in other offices. They weren’t sent to other projects in other parts of the firm. They were laid off.

The morale in the firm fell that day and, in my opinion, never fully recovered. That first layoff decision reminded everyone that:

- They really didn’t have careers. They were workers who would remain employed as long as the company had localized demand for them.

- The company is now making short-term labor and earnings decisions. The company was no longer concerned about optimizing for long-term results. Staff were no longer long-term assets of the firm but short-term costs of doing business.

- The company had begun its pre-occupation with always exceeding its quarter-to-quarter financial operating guidance.

While Valentine’s Day is coming, I’m not writing this as I’ve got an overly romantic or out-dated view of worker/employer loyalty. I’m writing this because too many employers do layoffs without considering:

- whether this is a short-term blip in business conditions or a permanent correction. If you’re a Detroit-based automobile supplier, I understand your need to downsize your firm as your market has massively contracted. But, if it is a short-term blip, would your firm be better served with something other than layoffs? Would a few mandatory days off work better? Should workers be re-deployed to other locations/tasks?

- how they will ramp up again when market conditions improve. Once you fire workers (or shutter a plant), it’s pretty hard to get back that ‘old magic’ again. If an employer laid me off, I don’t think I’d return. If I did return, I’d never consider my relationship with my employer to ever be the same. Once the trust is gone, can it ever be restored?

The Newsweek article goes on to dismiss a lot of myths around layoffs. Much of these contradict the prevailing ‘wisdom’ of modern management theory. Read this article to the end and you’ll see a lot of this wisdom corrected.

One of those pieces of wisdom that Pfeffer discusses is the myth that layoffs often boost stock prices. It apparently isn’t true. My theories as to why this is false are that:

- Short sellers in the stock market do a lot of work to assess the current status of a company, its sales, etc. A layoff announcement probably just confirms what they already know – this company is in trouble. They’re already shorting the stock and the stock price will head south as soon as the layoffs are announced.

- Damaged firms use layoffs, a lot, as they ‘restructure’, ‘downsize’, ‘rightsize’, etc. Because they are already damaged, stock buyers/sellers are not bidding up the price until they see some signs of a positive turnaround. Layoffs are a sign of continued problems not upside. Without evidence of an upside, the price will, at best, languish or fall further.

- Post-layoff, the company’s employees are going to be overworked and not engaged with the company. Many of the best and brightest will have bolted for better run companies. Now, what you have left is a company with poor management, a sub-stellar, de-motivated workforce and declining prospects. Yeah – I’ll short that stock, too.

Bottom line: I think layoffs are generally the tool of weak management. Again, if the company is in real trouble or its markets have fundamentally changed, layoffs are acceptable but how many people today were cut loose by failing companies versus companies who couldn’t see beyond the next few quarters. Layoffs rarely are the fault of the people who got let go. They are often the fault of management.

If you’ve been laid off and are looking for a new gig, evaluate your next prospective employer with an eye to how they view employees. Will you be an asset of the company or a variable cost? If it’s the latter, run. They don’t deserve you.

February 8th, 2010

iPad musings - How big is the market for this anyway?

Posted by Brian Sommer @ 8:27 pm

Categories: Current Affairs, Fun With Tech, Think About IT, Web/Tech

Tags: Device, Amazon Kindle, iPad, E-books & E-Readers, Personal Technology, Brian Sommer

Back in my college days, I worked with a fellow at an auto parts warehouse. He asked me “Man, how many books do you read in a year?” I gave a number in the dozens. That produced a scoff from my co-worker and the following comment “I haven’t read a book since I left high school!” He was, incidentally, a man in his 40’s and he was dead serious.

I kept thinking about that comment as I read my daily dose of fawning comments about the iPad. Everyone out there seems to unquestionably think this device is a great thing. If they have any criticism it’s usually the name of the product.

I think everyone’s giving Apple too much of a blanket attaboy on this. I may be wrong but I wish more people were looking at this device with a more dispassionate eye.

Let’s consider that:

1) There’s a finite market for tablet format e-book reading devices.

2) That market is smaller than the market for PCs, laptops, netbooks and PDAs. How do I know this? I see very young kids with cell phones. I see all kinds of families, children, etc. using home PCs and notebooks. I don’t ever think I’ll see casual readers plunk down big bucks for this device. Will trendy, early adopters get one? Sure! Will most folks? I don’t think so. If there are 300 million US citizens, how many will buy an iPad? Not that many I’m afraid.

3) There are already millions of Amazon Kindles already out there according to Jeff Bezos. How many people will abandon a Kindle to buy an iPad? Sure, some people will but the high switching cost will mean that Kindle switches may take years to materialize. And don’t forget the Sony Reader. By December of 2008, Sony reported they had sold 300,000 units of their device. That number has most certainly gone up since then. That prior install base of Sony and Amazon products may have already snagged a lot of the early adopter market. The real question is how many more buyers are left?

4) At $499, one could buy a lot of books. Seriously, how many people do you know that spend anywhere that much on books in a year? In two years? In five years? Ever? The fellow I used to work with wouldn’t spend that in a lifetime. I looked up the size of the book industry. The current market estimates fall between $26 -40 billion annually depending on whose stats you review. That works out to a maximum of $133/US citizen. I think the iPad would have to price out at something like $99 to get really competitive with books.

5) The iPad is a discretionary purchase. It is not a business requirement. It is a convenience for those who like to read. More specifically, for those who like to read a lot. Sadly, I’m not convinced that this describes a lot people. No, we’ve got generations of citizens who get their political knowledge from Jon Stewart’s comedy show and their current events from TMZ.

I know what you’ll say “But Brian, the iPad can do more than present book content!!!!” And, you’re right. But recognize that’s how the product is positioned for now: an electronic book reading device. Yes, I know that someday many of us will be able to pick up our Kindle/Sony Reader/iPad/et.al. device in the morning and see it has all of today’s news, comics, movies, television shows AND books pre-loaded for our convenience. Yes, I get it – it’ll be like TIVO for all kinds of media except the display device is part of the solution.

But, not everyone is ready for that yet. Some of us may never be ready. Some of us still like to pick up a real book, a real newspaper, do the crossword and the Suduko on paper, etc. I know I do. I like that a book doesn’t need a wi-fi connection or a power cord to recharge it. I like that I can read a book in any light – even bright outdoor sunlight. I still can’t do that with my cell phone. I guess I don’t find these devices to be all that amazing or indispensable yet. And, they’re expensive.

Last week, I sat next to a fellow on an American Airlines flight. He was a 7 million miler (I’m just a 3 million miler myself) and he had a Kindle. He was reading the NY Times on it. He particularly loved how he could load lots of books on it before flying out to Asia for weeks on end. For him, an e-book is a great technology. But how many of us live his lifestyle? Not many.

I’m keeping an open mind but I’m not saving my spare change to buy one of these either. I need a better value proposition for the iPad for now.

On the plus side, I am pleased that Apple continues to innovate and step outside its comfort zone. That’s something that’s something too few tech firms will or can do. Maybe I’ll get more rabid when their next breakout product rolls out.