There is a common uneasiness among “classic” system integrators:
“We are unable to grow”
Regardless of the daily effort, abilities and experience, year after year profit is stagnant.
Sales never really take-off as you would like, and the books cry month after month.
Have you ever thought about the obstacles that prevent you from growing like other companies in your area?
The owner of an IT company responded to this question saying, “each client is always different and requires custom technological solutions.”
Therefore, according to this vision, the system integrator would be nothing more than an artisan selling his own time.
The limits can be identified in the technical personnel and in the resources available in the company: without increasing resources, it is not possible to increase orders and revenues.
In reality, the stagnant business situation of the system integrator is not tied to “how scalable” the business is, but rather, how possible it is to increase revenues without being forced to hire more people.
Setting aside terminology that is too technical, I have decided to write this article to debunk the myth that a system integrator cannot grow!
There are basic errors in the way a system integrator manages their company, and if you do not attempt to correct these, your growth will be stunted.
I have identified 6 obstacles that will prevent sales and profits from taking-off, and that will prevent you from being able to state that your company is growing.
1- Lack of focus
This is the “original sin” of the system integrator.
I have seen it in practically ALL of the IT product and services companies that I have worked with over the years. The system integrator, by definition, is an expert of different technologies. But due to this, they tend to follow technological “opportunities” just to be able to close the sale.
When in front of a client, many system integrators are ready to sell technologies that they are not even familiar with or have never previously installed before. Those technologies lead to real earnings, so, therefore it must mean growth right?
The answer is no, and here’s why.
If your portfolio of products/services has hundreds of different entries, you are bringing complexity and unexpected events to your company. The hours of added assistance by the technicians, who have committed errors on technologies they are unfamiliar with, still need to be paid at the end of the month! So, that product that the client wanted at all costs (once you do the math) did not make you more money. Perhaps, it even made you lose money.
How to overcome a lack of focus
The solution is counter-intuitive. If you want to earn more (and therefore grow), concentrate the company focus on just a few activities.
A careful selection of the technologies you bring to the market will allow you to obtain two fundamental advantages for growth:
- Reduces costs of the unexpected technical events due to unfamiliarity with the technology, therefore increasing profits
- Increases earnings, because it qualifies you as a specialist in the eyes of the client. The specialist, contrary to the company that offers everything, can charge higher rates. Think, for example, of the difference between a specialized boutique and a department store, or between a general practitioner and a world-renown surgeon. The examples that demonstrate the value of being specialized are infinite!
Make a selection of the technologies you want to offer, and get rid of those you are not an expert on.
2- The business model
The overwhelming majority of system integrators are still involved in the sale of hardware and one-time software licenses. Sales of this type bring money essential to the survival of the company, but times are changing. The Cloud and the Software as a Service models are modifying the way we purchase technology.
Legacy technologies, software licenses, assistance man hours: all destined to disappear forever, making way for Cloud technologies that are paid for with small, recurring fees.
Faced with the opportunities offered by Cloud, clients will always be less willing to make large investments in technological infrastructures. If you want to think of growing in the market of the future, you will absolutely have to adapt to this model, and find ways to make your company sustainable, even with fragmented payments.
How to improve your business model
Introduce solutions in as a service mode in your product portfolio, or increase the incidence of the recurring on your total revenue. Start to “give away” iron and cables, transforming the on-premise sale you used to make in a subscription, to a service paid by recurring fees. Move the margin from the hardware to the services.
3- Daily dispersion
What do your employees do when they arrive at the office? Do they work according to business schemes, that are written by you and shared with the team? Do they work according to procedures engineered to achieve objectives?
I will tell you what I see in system integrators: the people get to the office, they reply to emails and then they do what they want. Urgent phone call, they up and leave. Last in, first out. And the tasks which are the least favorable are set aside until they become too urgent to be ignored.
Can you achieve results if people act in an unorganized and casual manner?
I would say no. The company can grow only if everyone acts in the same direction with the same goals; United, like a Roman legion, which moved in perfect harmony thanks to a maniacal training on the behavior of each single soldier.
How to remove the obstacle of daily dispersion
Define company objectives. Write them down and share them with the entire staff. Then, define and write down the procedures for carrying out functional tasks to achieve objectives. Hold weekly meetings with the team to verify the achievement of the objectives, and to verify if the procedures are efficient or if they should be modified.
4- Organizational choke points
How many hours do you work in the office to run your business?
Let me guess: at least 10 to 12 hours a day?
Without you the company stands still. Offers are not made, or they have huge mistakes. And what happens if you need to go out of town? Or maybe just be out for a few days because you are sick?
The entire company is stalled and the people are unable to complete their tasks; perhaps because they are unable, or they are not authorized. If you want the company to grow, you cannot think for even a second that you are the center of your business universe.
The owner who must control everything is an enormous obstacle to growth.
How to remove organizational choke points
YOU MUST delegate. There is no other way.
Define internal procedures in order to allow people to carry out their job without your supervision and obtain the same results.
Verify the final result to be sure that workers have reached the same result you would have obtained!
5- Lack of control of the numbers that count
What if I were to tell you that revenue is an absolute sterile piece of data to understand if growth is possible? What if I were to ask you, which product among those you sell, is earning you money? Would you know where to look?
A great obstacle to the growth of the system integrator is the total lack of control of the numbers that count. And this is a serious problem.
Serious because it means that you do not have any control over your company. You do not have a dashboard to tell you if your engine is revved up, if you have enough gas, if you can push on the accelerator pedal or if you should step on the brake.
How to remove the obstacle of lack of control on the numbers
Do not externalize accounting, but entrust it to a skilled administrative employee. Measure fixed costs, variable costs and earnings. Analyze the margins of the individual sales and of the products.
6- Waste of resources in the search for new clients
Dedicating enormous resources in the search for new clients does not always lead to economic-financial advantages that make your company grow.
A system integrator can only grow if the closed sales can indeed lead to a profit for the company…Therefore, ONLY if the margin is positive for every sale you make.
Now try to think of your salesforce who must:
- Invest time in searching for appointments
- Invest in meetings to formulate the proposal to the client
- (often) Apply a discount just to be able to close the sale
The difficulties in finding, convincing and earning with a new client are attributable to the skepticism towards you.
On an economic level, this translate to a sensible reduction in your sales margins. On the other hand, this does not happen with pre-existing clients, who know you already and are more willing to do business with you at your conditions. It is much easier, and therefore more profitable, to sell to a pre-existing client.
How to reduce the labored search for new clients
Carry out a thorough analysis of your client portfolio.
Identify the clients you haven’t sold to in a while, and set up appointments to propose a new sale. Do not send your salespeople to hunt for new clients if you have not investigated all the possible sales opportunities for your pre-existing clients.
From artisan to profit machine in continuous growth
My intention with this, was to summarize the problems that I have seen in system integrators all over the world for years. You were probably able to see yourself in many of the topics touched on in this article.
Perhaps you have seen the problems of your company, and you have understood that to improve, you need real changes and practical actions.
But if you have read up to this point, this means that you are an entrepreneur who wants to grow. It means that you do not settle and that you want to put your heart beyond the obstacle of habits (“we have always done it like this”), to obtain results that are out of the ordinary.◼