Monday, April 20, 2009

MPS: It's hard to make money from boxes and software. The real margin is by giving support.

I just heard on Bloomberg that Oracle scopped up Sun, beating out IBM. I think I heard that Oracle is making money by providing software support. I also think I heard that Oracle is giving a dividend for the first time in it's history.

Here's what Larry said in a PR release:
"Oracle will be the only company that can engineer an integrated system - applications to disk - where all the pieces fit and work together so customers do not have to do it themselves," CEO Larry Ellison said in a press release this morning.
Here's how I think that's relevant for MPS.
" . . . so that customers do not have to do it themselves."
If you don't have to do it yourself, you have a much nicer day.

If you sell a box or a system you have one chance to make money. Given that your margin is limited by the cost of stuff that you resell, it's by nature a low margin business. If you think you are going to get high margins on supplies and paper, you're kidding yourself.

But, if your customer grows to depend on you to solve problems that they don't even know they have, that only needs smart. You are already paying for smart with salaries and your own common sense. The marginal cost of smart is free. There are always very good margins if your marginal cost is zero.

Smart is easy. It just needs experience, focus and common sense. You can't do smart if you're running around all day in meetings or always stressing about x, y or z. Commuting is actually a good time to do smart, if you stop focusing on what is making your life hard. Instead get your brain to focus on what is making your customer's life hard.

Once you focus on that, you'll see that if you just relax and let it rumble around a bit, you'll find what's "hard for them, easy for you." Once you locate "hard for them, easy for you" you've got something that will probably have a healthy margin.

Then the job is to get your customer to focus for a minute or two, instead of running around all day in meetings and stressing about their lives.

1.Stop thinking about ROI!
The only purpose of ROI is to give someone a good reason to write a check. Only the very, very best organizations have people who make real decisions because of ROI. The ROI spreadsheet comes after the sale is made, not before.

Think about the people in your customer's outfit and what makes it hard for them to have a nice day. People make decisions because they want to have a nice day.

2. You have to do it all the time.
Once a problem is solved, you have to find either another customer with a similar problem or another problem to solve for the same customer to make your month.

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