Is the Dell Buyout Simply Buying Time on a Trip to Nowhere?

I’ve watched the history of Dell closely over the last several years. Several of the companies Dell recently acquired, principally Quest Software, are familiar names to some of my clients. I’ve also listened to several of Dell’s most recent quarterly earnings reports and supported some of the notions management presented in these meetings.

But Dell did not schedule a quarterly earnings report for the last fiscal quarter, so those periodic management presentations came to an abrupt end. I have to say, coincidentally, I also lost interest in the company. I find it hard to follow businesses with a history of missing on objectives. Recently I had to place Dell in this group.

So when I read an article in the online edition of the New York Times, on Thursday, September 12, 2013, Dell Shareholders Approve $24.9 Billion Buyout, I came away with the thought this buyout, worst case, may prove to be no more than a means of buying time on a business plan with an ambiguous objective, going nowhere.

As Michael J. De La Merced and Quentin Hardy note in this article, “Mr. Dell has not given detailed plans for how he hopes to bring his company into the modern tech world, though he has already spent $13 billion on acquisitions, primarily software and networking companies, to build a cloud business aimed primarily at small and medium-sized businesses, long a core market for Dell.” (Quoted from an article published on the New York Times website on Thursday, September 12, 2013. I’ve provided a link to the article above), I silently noted, “what else is new? After all, these acquisitions began a long time ago. Now, after over 10 years of acquiring, digesting and integrating market leading businesses into the Dell pantheon of technology offerings, it can no longer be acceptable not to have a plan of “where we’re going”.

Of most importance, regardless of whether the company operates privately, or as a public company, there is still an imperative to make money, if for no other reason than to grow the business. So we all could use a better idea about how Dell plans on replacing lost dollars from shrinking sales of PCs, laptops, servers with seats on cloud offers.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


Microsoft Reorganization Promises to Remove Internal Impediments to Growth

We’ve written often in this blog on the topic of sales team architecture. One of the concepts we’ve written about is a matrix sales team structure. Early stage technology businesses gain a substantial amount of momentum by implementing a matrix sales team structure, which fields a healthy, but, nevertheless, contentious set of teams to do the job required of the revenue generating side of the business. When geographically focused sales team compete with national account teams, and even OEMs for the same business, you’ve got three operative units working to successfully close business for you. If your competitors have merely one unit competing with you, the odds are 3 to 1 you’ll win, right? So contention between Line of Business (LoB) units certainly has its place, at least for emerging technology businesses.

But contention between LoBs does NOT work well for mature ISVs with enormous market presence. Microsoft is an example of this type of business. Steve Ballmer’s One Microsoft announcement, and the supporting Memo, Tranforming Our Company illustrate the depth to which LoB contention probably undermined the company’s efforts to move forward from an on premises, enterprise-centric brand to a brand more in keeping with its new rivals — Linux/OpenSource (Google Chrome, Ubuntu, RedHat, etc), Google Apps, and, on the hardware front, Apple’s iPad and iPhone.

As we wrote in this blog in a post we will publish shortly, the Apple contention was really not Microsoft’s problem at all. So their announcement in late June of a port of the Office suite of apps to run on the iPhone makes perfect sense and exemplifies a big step forward — at least as we see it — towards disconnecting their brand from the brands of Intel hardware OEMs who also happen to be Microsoft customers.

From what we see of the reorganization, at least on paper, we think it’s a powerful move in the right direction for the company. We hope the results prove the announcement to be accurate, but only time will tell.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


Some Thoughts On the Reliability of Forecasts for Business Planning

We recently watched an interview with Mark Cuban taken at the Clinton Global Initiative America Meeting, held in Chicago in June, 2013. When asked about the value of loans for very early stage businesses, we heard Mr. Cuban reply as follows: ” . . . loans are a dumb move for entrepeneurs. Banks expect regular repayment on specific dates. When you’re starting a business you have very little indication, if any at all, where your first or next sale will come from.” (this is merely our summary of what Mr. Cuban actually said)

We think his position is absolutely true, and brings into question another point, not touched on during the interview, but, nevertheless, very important for entrepreneurs thinking about starting tech businesses to consider: Forget about forecasts, they will not be reliable. Revenue and sales activity for very early stage tech businesses are especially difficult to forecast. There is a hidden moving target at work. Markets themselves can change, radically.

If forecasts are inherently unreliable for very early stage tech businesses, then why does a business plan remain an essential document for financing discussions, and, in some cases, customer relationships? Business plans are especially popular with banks, and the U.S. SBA. But remember Mr. Cuban’s point. Better to forget about conventional financing if your start-up business notion is in a technology area.

Venture Capitalists (VCs) also like to read business plans. Perhaps it’s easier to broadly estimate revenue for the types of markets of interest to VCs. These markets may not even exist, so estimating zero revenue for the first one to three years, as markets are built, may be acceptable for a business plan for VC review.

Even mature businesses built around technology products are tough to forecast. You can’t lose sight of an important variable largely out of your control: market sentiment about specific products. In 2013 PCs are largely out of favor, but just five years ago they were a very popular and accessible method of computing. So even the best sales team will have a tough time hitting their numbers in 2013 if they are selling commercial software to a PC market.

The key point, for tech entrepreneurs is to approach the task of forecasting with a very strong sense of skepticism.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


Manage Conflicts Between Line of Business Silos to Ensure a Successful Acquisition of a Competitor

In an article published on the TechCrunch site on May 9, 2013, titled Microsoft To Fold Yammer Sales Team Into Office 365, Identity Surfaces As A Core Focus, Alex Williams the author of the post notes “Microsoft also is making a point to focus on identity management and other issues as part of its road to full integration [of Yammer].” (quoted from Alex Williams’ article as published on TechCrunch. A link to the entire article has been provided here).

We’re not sure what Mr. Williams means by “identity management.” But we think it’s safe to assume he’s referring to “identity management” as the task of managing public perception of the product brand of the SharePoint component of Microsoft’s Office 365 offering as well as the same brand messaging for Yammer as the two products are integrated.

We’ll spend a couple of posts to this blog on the news Mr. Williams reports in his short post. A lot of tech businesses have attempted the same type of identity management in the past. This activity comes up as businesses are folded into one another as marketplaces consolidate. More often than not the efforts fail. As the emperor’s new clothes fall away, what looked to be a promising marriage of two organizations disintegrates into not much more than one business digesting another. It makes sense to eliminate competition, but buying them out is a comparatively costly method.

Most of the difficulties arise between line of business units (LoBs). Usually, as in this case, the recently acquired business is a direct competitor of an LoB with a lot of power in the acquiring business’ organization. Rather than fostering a healthy environment of contention, a decision is made to “fold” or “integrate” the acquired business into the new parent, as Mr. Williams has noted in his article.

Almost always this decision works to the detriment of the acquirer. More on this topic with the next post to this blog. If you’re grappling with a decision about whether or not it makes sense to buy out your competition, drop us a message. We would welcome an opportunity to learn more about your objectives.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


Opting to Service a Niche Market can Provide a Small ISV with an Attractive Revenue Stream

The concept of a “mom and pop store” is seldom applied to the ISV business. But we think that it’s worth the time required for a small ISV CEO to think about a notion like this one, meaning a plan that promises a healthy, albeit, limited revenue stream. The macro setting for this discussion, of course, has to do with scale, which is a very important setting, indeed, but one that we haven’t plans to cover here.

So how does one apply this cliche to the small ISV business? Attending to the specific needs for computer processing for niche markets can produce software that will not only pay for itself, but generate an attractive revenue stream in much the same manner that a small country store that serves as the only source for groceries for a town of a 1,000 people can do so for its owner.

In fact, we saw this done several years ago when we were based in just such a rural locale. A colleague (an ex professor of computer science from a prominent local university) set up an ISV around no more of a business model than as a production house for a software package that automated all of the steps required by non profit organizations as they plan conferences and actually manage them. One can argue that, today, there is a cloud application somewhere that will do all of that, but we have to say that we are not aware of such a package. An attractive unit retail price for this software application promised to keep this ISV running profitably with a staff of 4 or 5 programmers for quite a while.

It makes sense for entrepreneurs committed to an ISV business model, who want to maintain complete control over their business, and are not reluctant to address the needs of small markets with deep pockets to seriously consider product development for highly specific needs. Of course, an effort must be made to ensure that these small markets, nevertheless, still include some players with deep pockets. Certainly there is no excuse for wasting time developing solutions for highly limited markets that lack the financial means to feed a growing business.

But for markets that measure up, it should certainly make sense for small ISVs to build solutions, especially where these solutions can be delivered to customers via a subscription offer that avails of the cloud. Sometimes it makes sense to “think small.”

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


Can You Fast Track an Endorsement for Your Product by Hiring an Influential Person with an Address Book?

Technology businesses familiar with the positive impact that can be produced by winning the endorsement of an individual who is well respected in a market, often attempt to obtain comparable results by hiring staff members (usually for a sales role) who seem to know all the right people in a specific geography or market segment. This type of sales person is referred to as someone “with an address book.”

In a best case scenario for this strategy, prospects will gravitate towards a product based upon an endorsement from this sales person with an address book, who either “knows everyone” or looks as if she played a key role in a number of successful implementations of similar products for the same markets. In our experience, sales people with address books are generally no more productive than their peers. There a couple of reasons for the rather poor return on effort:

  • the hiring business failed to carefully review the contacts listed in the sales woman’s address book
  • or the sales woman did not actually play the project role that she should have played if she were to successfully deliver on her potential for the hiring business

In either case, it should be clear that obtaining the most benefit from hiring someone who looks like an influential party in a market depends upon thoroughly checking credentials, and really understanding the roles of individuals who will make purchase decisions on one’s product. Successfully implementing a background check can be a difficult task for a technology business that is new to a market, and otherwise unfamiliar with the information that must be collected to make an accurate call as to whether a candidate for the position can deliver on an investment, or not.

Simply put, if the contacts in an address book are to be useful, then they must be widely respected as individuals with a long history of successfully implementing comparable solutions for projects. Further, the candidate, herself, must be able to demonstrate, without a doubt, that she either sold the components to these decision-makers, or played a key role, herself, in the project, itself.

Often, the individual hired into one of these positions proves to simply have all the right names on her list, but not much more. Perhaps she worked alongside a successful colleague who actually closed the sales, or she played a role in the implementation of competitive products, but in a capacity far removed from the actual decision-makers. If either of these scenarios are at hand, the hiring business should pause to carefully consider the hire. Better to move slowly, for a right candidate, than to move quickly where there are clear gaps between what a candidate offers and your business requires.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


Dell Implements an Acquisition Strategy to Fundamentally Transform Its Business Model

As we wrote in the prior post to this blog, “ready, fire aim” as a product development strategy should not be applied to fundamental transitions in a business. “Ready, fire, aim” is a method of entering markets, and, subsequently, effecting very rapid changes in product design. Doubtless, an approach like “ready, fire, aim” can be very effective for product development as it permits businesses to enter markets very early, albeit with some risk to brand should early version of products fail to meet minimum levels of satisfaction in a market.

The key objective that should drive a decision to implement “ready, fire, aim” is timing an entrance to a market. With particular regard to technology products and services, it is generally advantageous to enter markets early. Further, it is generally the case that early entrants to markets for technical solutions are harder to displace by competitors who arrive later. Therefore, “ready, fire, aim” is a sensible approach to the right set of opportunities.

Making fundamental changes to what you sell does not constitute a right opportunity to implement “ready, fire, aim”. On the contrary, it is critically important that this type of fundamental change be carefully thought through, with especial care to consider the negative ramifications of mistakes. We treated some of these points in the prior post to this blog. For the remainder of this post, we think it will be useful to present our view of what Dell is up to with its recent set of acquisitions, given its intention to transform its business. We do need to note that we do own shares of Dell stock; therefore, we have an interest in Dell succeeding at its strategy. The reader has now been warned.

In fact, Dell is looking to make the same type of fundamental change in its revenue model that we have presented in these recent posts to our blog, albeit at a much bigger scale. We are focused on emerging tech businesses. In contrast, Dell is a mature, publicly traded businesses with a major presence in the markets for hardware products like desktop computers, servers, networking devices, printers, backup solutions, and more.

Back in 2007 Dell publicized its intention to enter other markets, namely the solutions markets for enterprise business (we are using this label to include public sector organizations of comparable size, as well as comparable size organizations in the not for profit sectors) needs for software solutions, and, integrated solutions that include hardware and software components, together with the specialized expertise required to put all of these components together into a working system.

Over the last four years Dell has consistently executed on this strategy, albeit with a level of positive effect on its bottom line that has not meant with widespread approval from the investment community. It is not our intention in these posts to opine on why Dell has only marginally benefited from these acquisitions; rather, we make reference to Dell as an example of why a business should consider buying its way into a market, rather than trying to build a presence from ground up. We think Dell’s plan makes sense, and, further, constitutes a safer method of fundamentally transforming a business revenue model.

In the next post to this blog we will look at a typical problem area that can stymie a business looking to buy its way into a market — assimilation.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Early Stage Enterprise IT ISVs can plan on a Single Role for Head of Sales and Marketing

Enterprise IT ISvs can plan on combining responsibilities for marketing (including product marketing and marketing communications), and sales into one leadership position. In fact, it makes complete to implement this staffing strategy. The facts are that it is critically important that product marketing, communications, lead generation and sales move, almost in lock step through this early stage of growth. There is no better way to respect this requirement than to select one leader for both of these business functions.

The individual selected for this role should have first hand experience with all four sets of responsibilities. Individuals who can demonstrate past successful roles as a pitchman are usually worth consideration.

What’s special about a pitchman is that this type of sales person is very comfortable delivering presentations. Of course, marketing communications is all about branding, presentation and audience. Therefore, a pitchman who is adept at delivering presentations may also be comfortable producing them. If a sales person is identified who meets these criteria, then management should move quickly to interview and determine whether or not there is a fit, as this type of hiring opportunity seldom arises.

It is important to keep in mind that there are many types of presentations that can be suitable for pitchmen. An ability to produce high level presentations — meaning those presentations that communicate concepts, and, even, methodologies to business users who make purchase decisions — represents a skill that should be highly prized.

A hire for the position of head of sales and marketing must also be able to demonstrate an ability to deal with data for the purpose of performance analysis, etc. Usually an Excel whiz who can write macros and produce charts makes a good hire for this role.

Finally, a successful leader for these functions should be able to demonstrate past success managing teams of subordinates. Certainly, at an early stage a head of sales and marketing will be called on, personally, to at least contribute to closing business, if not close the deal him or herself. Nevertheless, as the business grows a head of sales will likely add additional staff; therefore, a good choice for the position is an individual who can demonstrate at least 10 years prior experience in this type of leadership role.

We do not advise bringing an individual into this role who may be a very strong individual contributor, but has little, if any experience leading teams. The rewards that motivate an individual contributor will not likely motivate a team leader, and vice versa.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Selling Enterprise IT Software Without a Marketing Plan is Like Looking for an Outfit in a Very Cluttered Dark Closet

Depending on the size of one’s closet, and the amount of clothing to be found in it and, finally, the manner in which the clothes are organized, it can be very difficult, if not impossible to find an outfit when the lights are out and it is not possible to illuminate the closet. Of course, once the lights are back on, it may be only a matter of a couple of minutes between deciding on an outfit for a day and actually finding the jacket, slacks, shoes and tie that match. Therefore, it is safe to say that light goes a long way to hasten the process of locating items in a cramped, very, very busy closet full of clothing.

Selling products/services/integrated solutions into the complex market that operates on enterprise IT software is very much akin to finding an outfit in the busy closet that we just described. Top ranked sales people, with exceptional backgrounds closing large ticket sales, can still prove to be completely ineffective in these markets. Sales forecasts can prove to be useless predictions that are rarely, if ever achieved. The missing piece, for better or worse, is a lack of a clear marketing plan for

  1. the business
  2. products
  3. and how to promote 1) and 2) to the enterprise IT market

In fact, a plausible marketing plan functions much like a brilliantly bright halogen lamp with a diffuse, wide beam that successfully illuminates every cranny of the closet mentioned in our analogy. We cannot overstate the importance of the fact that the plan must be plausible. The best way that we know of ascertaining the plausibility of the plan is to circulate a formal document to a group of carefully picked individuals who can provide the opinions required to ascertain that the plan is, in fact, realistic and workable. Therefore, we counsel entrepeneurs contemplating starting a business to make sure that a circle of confidants is in place who can keep a business effort on track with their opinions prior to launching a venture. In fact, the best way to put together this circle of reviewers is to form a board of directors, which is, traditionally, the manner in which businesses have been organized in the past.

The sum total of a marketing plan that has been vetted by a board of directors, and a capable sales team can, in fact, be promising for a business venture. If you understand the importance of both of these components, think that you have an excellent business concept, but neither have the personal connections required to assemble a useful board of directors, nor the resources to produce a formal marketing plan, then you should contract with a third party to get the job done.

IMB Enterprises, Inc. calls on over 25 years of continuous experience with early stage tech businesses. As well, we maintain a network of contacts that may produce the board members that a business like yours requires. Our retained services (3 mos minimum) start at $3200.00 per month. Please contact us to learn further. You can call Ira Michael Blonder at +1 631-673-2929 to further a discussion about our services plan. You may also email Ira at imblonder@imbenterprises.com.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


A Business Plan Provides an Enterprise IT ISV with an Important Reality Check

Most entrepeneurs understand the value of a business plan. For example, anyone who has ever availed of the free-of-charge advisory services offered by SCORE has had to deal with the question: “Let’s have a look at your business plan”. In turn, the United States Small Business Administration and other financing entities strictly require that any funding application include a copy of a business plan.

But for many businesses, including a proportionate number of very early stage enterprise IT ISVs, producing a comprehensive business plan that accurately reflects each feature of a business concept is a monumental task that somehow “just doesn’t get done”. This reality is, in fact, a shame, as an oversight like neglecting to complete a formal business plan can prove to be a life threatening matter for a business.

In fact, a business plan constitutes a highly useful reality check for the business, especially for one that is built on technology innovation. For example, where a tech start up is otherwise weak with regards to marketing and sales, a well put together business plan that talks to these two essential topics in a plausible manner can be convincing and useful. Of course, if the sections of a business plan devoted to

  • a presentation of a market,
  • to the depiction of planned products/services/integrated solutions and, finally,
  • to the method by which a business will generate revenue through sales of the products into the market

are to be believed, then the historical performance of the business must bear out the points of the plan. In fact, it is easier to follow a plan that is objectively found to make sense, and promising, without key marketing and sales staff than it is to proceed aimlessly with marketing and sales personnel who seem to have the “right” skills and experience set, but still fail to deliver required results. The difference, of course, amounts to the fact that the company without staff that, nevertheless, still hits its numbers is operating under a plan, whereas the company with staff, but performing poorly neither has a plan, nor understands the importance of operating from points that must be formalized in a plan prior to activation.

Bear in mind that by plan we are referring to the document that we have described, which formalizes the features of a business. Further, this plan has been reviewed by a number of different parties who, in a consensus, have agreed that its features are plausible and ought to be activated.

If you understand the importance of a formal business plan, but lack the internal resources to either contribute the features required, or to produce a well written formal document that conforms to the style conventions required byt the individuals to whom you intent to present it, then you should contract with a third party to get the job done.

IMB Enterprises, Inc. brings considerable experience to this type of requirement. Our retained services (3 mos minimum) start at $3200.00 per month. Please contact us to learn further. You can call Ira Michael Blonder at +1 631-673-2929 to further a discussion about our services plan. You may also email Ira at imblonder@imbenterprises.com.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved