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Technical Trends: xSPs must make strategic choice

by Frederic Morrison

With Web services emerging as the new strategic buzzword in the e-business environment, FREDERIC MORRISON looks at the strategic dilemma facing service providers.

Current market trends indicate that service providers of all types in the Internet industry, generically classified as xSPs, are struggling to grow their businesses and achieve profitability amidst the industry churn and economic slump.

Given this situation, they may be tempted to put these rather complex, strategic issues aside to focus on near-term business. xSPs that are in it for the long haul, however, will need to address both the tactical concerns necessary for day-to-day survival as well as the strategic ones that will give them the headroom to have a sustainable future.

Among the most strategic choices xSPs must make are decisions about which hosting infrastructure to build upon and how to best position themselves to exploit future opportunities tied to Web-services.

To attract and retain customers, xSPs must guarantee high levels of service availability, performance and security. If they fail to meet any of these obligations, they can suffer significant financial penalties or, even worse, lose their customers to rival providers.

Beyond the obvious requirement of fault tolerant hardware servers, reliable operating systems and redundant network components, the middleware upon which hosted solutions are developed and deployed is the most critical building block in the infrastructure.

If an xSP’s middleware is not reliable, scalable and high performing, service quality can suffer and profit models can collapse.

Lately, customers have come to prefer the pre-integrated suite model as opposed to the more traditional best-of-breed model. Several major software vendors have initiated efforts to make the one-stop-shop option more attractive. Some have acquired and integrated best-of-breed components to their middleware suites, while others have relied on massive in-house development efforts.

According to industry analysts, every major infrastructure vendor identified support of Web-services as a strategic priority during 2001.

Many proponents describe Web-services as discrete software components that run on top of the Internet as if this, along with the diverse systems it connects, constituted a huge distributed operating system.

The middleware that does the best job of adhering to the emerging Web-services standards and best executes and manages this new category of components is likely to gain great advantage for its vendor.

How can a xSP determine which vendor will best address its needs?

xSPs need to start by assessing the functionality and integration capabilities that different vendor offerings provide. Then they need to look at the bigger picture to decide which vendor will provide them with the technical, marketing, business and strategic support that they need, both near-term and in future.

Frederick Morrison is CEO of Vesta Technology Holdings. he can be contacted on mailto:frederick@vesta.co.za

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Posted in the category: Trends

Companies: Dimension Data's strategy unraveled

By EYAL S SHEVEL

As South Africa’s flagship information technology operator, Dimension Data‘s new strategy will have a major impact on the hi-tech economy. EYAL S SHEVEL offers an investment perspective.

Dimension Data recently issued a trading update wherein it outlined its earnings forecast for the six months to 31 March 2002. In an associated presentation to analysts, the group also detailed its strategy going forward and the progress made in achieving the goals.

The biggest criticism of Didata over the past year has been the company’s reliance on reselling software. Earnings from reselling declined substantially following the IT slowdown in 2000. As such, Didata’s management have embarked on a new strategy aimed at reducing the company’s dependence on product reselling in favour of a model based on providing customers with holistic solutions.

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Posted in the category: News

Business during a Recession: Problems equal Opportunities

by Darren Chertkow

In the face of adverse economic conditions, many companies are tightening their belts. Almost inevitably, expansion plans are shelved, marketing expenditures are cut back and labour shed.

But for some canny businesses, these times of cost cutting may well be the start of their most profitable.

During a recession, many companies cut their marketing budgets, resulting in fewer advertisements, fewer promotional campaigns, fewer newsletters, and fewer sales visits.

But cutting back also means fewer competitors are as active in the marketplace, making it easier for your efforts to cut through your competitors’ clutter and reach your target audiences.

For many companies, an active approach to recessionary conditions right from the start can unlock business development opportunities that would not have been available to them before.

So while other companies hesitate and wait for signs the economy is improving, your company can be one of the few that moves the market ahead by seeking and seizing the inherent market opportunities.

These opportunities can be found all around. Remember, for every action there is a reaction. So:

* Look for emerging opportunities: What problems are companies in your market facing? What do those changes and challenges mean for your prospects? By exploiting market vulnerabilities, you have the opportunity to further bolster your market strength.
* Customise your services: It is important now to identify and advertise something your customer base actually wants, and to offer them a solution to suit their needs.
* Make better use of your sales force: Despite the downturn, clients demand greater levels of service and better business solutions that can only be provided by a well-educated sales-force with constant access to company and industry information.
* Create a strong first impression: When meeting with prospective clients for the first time, ensure you have a striking presentation at your disposal – this is your first opportunity to differentiate yourself from your competition. A strong first impression coupled with exemplary levels of customer service is the first step to building those pivotal customer relationships.
* Don’t lose site of what you already have: Traditional sales theory proposes that once you have an established relationship with a client, it is easier to cultivate ongoing business despite difficult times. It is imperative that these relationships are not neglected, so always ensure that you manage and optimise your relationships with existing clients. Try not to value your clients on a short-term basis, rather look to the future and build your relationship around a lifetime of business. Remember it costs up to 40 times more to gain a new customer than to keep an old one.
* 80/20 Principle: This principle states that 80% of your business will generally come from 20% of your clients. It is apparent that a greater amount of time and money must be spent looking after this top 20% – even if it is to the detriment of the bottom 80%. Companies should thus rather focus their limited budget on more profitable areas than taking a shotgun approach on everyone.

The same principle holds true for the different products and services offered by an organisation. It is vital to quantify the costs associated with, and the profitability of all products / services individually, in order to seek out the most and the least profitable.

*
Forge partnerships and co-marketing opportunities: Look at joint ventures, mergers and acquisitions. Consider how you can gain the market share of competitors who are hesitating in the market or who have fully withdrawn their marketing for the time being.

Remember, during tough economic times, it is important to revisit the tools used to attract and retain customers. Systematic investment in your brand during a recession can be extremely powerful when the economy snaps out of it, and can ultimately widen your lead over your competition.

Darren Chertkow is General Manager of Graphic Image Technologies, a media focused company operating in the digital video, advanced web and multimedia environment. He can be contacted on (+27-11) 880-2168.

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Posted in the category: Trends

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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