The point of best return.

For the past 20 years, the IT industry has grown at a pace that has made the rest of the economy look glacial. But it won’t last much longer.

For years, companies have been persuaded to take on technology that has not provided a demonstrable return on investment.

Then there was the year 2000 fiasco, when UK firms spent £20bn preparing themselves for a ‘disaster’ that the Italians survived by doing next to nothing.

Now, it seems, patience has finally snapped. It is almost impossible to get a project signed off these days, complains one manager, unless you have a cast-iron case that it will result in an immediate ROI. And how can you prove that?

‘The way IT projects are cost-justified these days is completely different,’ says Holway. ‘Benefits have to be a lot more tangible and measurable in a way that no-one tried to enforce before. The problem is that it is the beancounters who control the IT budgets.’

There is one obvious way around this, which supermarket chain Tesco has already hit upon. When a large software vendor said an expensive upgrade would bring rapid ROI, the response from Tesco’s boardroom was abrupt. ‘If you think it’s such a sure thing, why don’t we hold off paying you until you can prove we have saved that much money?’ it asked. Needless to say, that deal was scuppered.

There are other ways to ease the pain of the initial investment. For example, a customer could pay by increments, on a pay-per-use model.

That way, if users aren’t convinced they are getting value for money, they have the option of cancelling the agreement.

Alternatively, you could find an area in which end-users are being ripped off, and rescue them. Telecoms billing solutions, for example, can bring instant gratification. Most end-users don’t know that 70% of call loggers are out-of-date and are not configured to give the latest and cheapest tariff.

The errors don’t ever seem to favour the client. So proof that you have cut phone bills will come in your customer’s next quarterly bill.

Simon Noble, managing director of ED Communications, which offers bill-saving products, confirmed that billing information from carriers is almost always incorrect. End-users are oblivious to this. ‘Our philosophy is every phone call is a purchase, but the majority pay their communications bills on trust,’ he says.

‘Last quarter it was £500, so this quarter £525 sounds about right. They’ll count every pencil in every stationery order they place, but burn thousands of pounds on lines that don’t exist any more.’

Noble reveals facts that make end-users livid. For example, between 75% and 80% of billing information from carriers is inaccurate. ‘It’s never been a priority for the carriers. They’ve always marketed themselves on things like bandwidth and being better than the rest. Billing has been ignored,’ he explains.

Billing should be a priority, and you can score some easy points with your customers because telecoms billing has no statute of limitations.

If you find, as Noble did, that one of your customers has been billed for the rental of lines that have not existed for years, that money can be refunded.

In the case of Noble’s customer, there were several bogus call line IDs that had been appearing on telecoms bills for 60 years. The client won nearly £40,000 in rebates.

And then there is the security market. Researcher IDC maintains this sector will grow by 27% a year, but only because companies are turning to alternatives that are easier to fund.

Even security is becoming harder to sell. Traditionally it was easier to sell to enterprises because they were less deterred by the high cost involved and dedicated resources needed. But they too are becoming suspicious of the overheads.

Quizid Technologies provides hosted authentication security solutions.

Security and authentication for instance becoming increasingly important in banking and e-commerce.

The customer will not have to draw on capital expenditure and is therefore independent of fixed costs and budgets, so sales cycles are cut and implementation times are reduced because this is not a major network or infrastructure project.

The margins are good, too: 25% for the reseller at list price, plus cheap entry for the reseller because Quizid provides training, demonstration equipment and collateral. Contracts are even underwritten by Global Network Solutions, so there is no risk for the end-user or the reseller.

Meanwhile, a device that offers firewall and virtual private network capabilities costs a great deal, creating an ROI lag of several years.

This, and the need to establish a support infrastructure such as a network operations centre, is a powerful disincentive for resellers that want to enter the market.

A managed security services provider, for example, is not regarded as a capital expenditure (being a rental agreement), so it will get the green light more quickly.

There are cheaper solutions. Preventon Technologies offers two services that offer a margin with every sale. The first is subscription-based, where the end-user chooses to purchase a firewall.

The second is available to any reseller that wants to put a logo on its site. If a user buys a product via that site, the reseller is paid.

Resellers are paid monthly and the fee depends on the type of deal and quantity, but it is between 10% and 20% of the final sale.

The beauty for the reseller is that the deal can be conducted online and therefore requires no stock holding. It also provides free income without investment and can be positioned in such a way that resellers are investing in the security of their end-users.

  • This is an edited version of an article that first appeared in our sister title Computer Reseller News.

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