How Do Tight Budgets Squeeze You?

The adage, “Hell Freezes Over” seems to have gone into overdrive as far as the availability and liquidity of cash flow is concerned. While the general consensus that the majority of companies have not been impacted by the global recession, the ground reality of the situation seems to be this: because there is such limited movement of cash transactions right now, companies might be invoicing, but they aren’t being paid. Hence, the cycle continues, whereby companies don’t get paid cause vendors to be in a position whereby they are unable to clear their smaller suppliers, who cannot give anymore credit and are unable to sustain themselves, thereby being forced to close shop.

The moral of the story? The trickle effect will kill the guy who is at the bottom of the food chain. And slowly, depending on how long the freeze lasts, the depth of the food chain will continue to be slightly more shallow than it used to be. So if you weren’t at the very bottom being crushed, then you might be reaching that stage in the next phase.

With the reality of the situation being so ugly and, well, real, what advice should companies be listening to?

Fahad Khan, Business Development Manager, Lakson Business Solutions, draws out a list of things to do. “There are a few important things to be done in this case:

Provide excellent support to the existing customers, along with provision of information regarding updates that will cater to their new and existing needs. Renewal of maintenance contract can also result in flow of money.

Even though companies are spending less, they do are spending. Do a thorough research as to what the market really needs in this time of recession. Expand your network, let others be heard of what you are ‘selling’, and increase your competitiveness via strong communicative efforts, when going to a customer.

When nothing works here, look for outside greener pastures’. Desperate times like this should ask for searching for international customers in those areas that are not or perhaps less affected by recession hits. Be competitive, learn from lessons and hit hard!

Abid Latif, Manager IT Total Parco Pakistan Limited, offers some more advice for managing the small or non-existent budget. “Plan, do, check and act. Plan wisely and thoroughly, buy intelligently, spend in matching your needs – don’t get beat by needs. The sooner normalcy returns, the better. The economy will eventually revive but I do not foresee that happening before 2011.” So we do have a long one year before things begin to look up.

And that’s probably why Najam Khan, CEO at Softech Microsystems, takes the high road and has an almost military-like approach to the situation. “Tough times call for tough measures. Vendors will have to get their act together. Patch up the gaps your revenue is bleeding through, both inside and outside your office. Be even more sensitive to your customers. You may have to spend more to be able to do that, especially if you don’t have a good quality customer care system in place. Minimize mistakes, improve sales efficiency to make the most out of whatever customer base is left out there. You may have to survive in less, than before, which also forces you to revisit your pricing.” Hmmm.. All this sounds a lot easier to talk about than actually implementing it, which why companies are still giving the circumstances a knee jerk reaction more than a well-planned, long term strategy. Companies seem to be surviving rather than thinking about sustainability.

Najam continues by explaining that some people might suggest the revamping of your internal systems during the downtime, since you might have some extra time on your hands. Make better strategies so you are better prepared once the golden era comes back, he says. “Casualties in these circumstances are imminent, but can be minimized. Downsizing might be an option for some to survive, so look at it closely since some companies simply cannot ignore it anymore.”

Kamran Meer, CISO at a local bank explains, “During this downturn, there are great opportunities for companies to fine-tune the configurations (of equipment and devices purchased over the last few years). For companies selling solutions, base-lining and optimization consulting is the way to go. These are proven approaches to buffering economic downturns.” Right! Now we’re talking the talk! Don’t bulk buy. Analyze your weaknesses and see how you can convert them to strengths!

Mansoor Adenwala shares an innovative thought. “For the most part, I think it’s about keeping your HR intact. One area most businesses tend to forget is that no matter how technologically advanced your systems are, they are still maintained by IT personnel. For the downturn, it’s important to keep your people engaged to maintaining your systems the best they can through proper motivation and incentives provided at the right time. Like Najam mentioned earlier, the golden era is bound to come and you need to be in a better position to handle it.” If not, you’re bound to miss the boat… again!

“On the other side,” continues Mansoor, “revisiting pricing and generating products that will provide a small but continuous stream of revenue for the company is vital. Of course, getting them out the door and into the customer’s hand through sales activities is a no-brainer.”

Saba Jamaluddin, a Network Security Consultant offers a perspective. “At a time when IT spending is frozen, the companies providing IT services can gain new customers by offering subscription-based services. Those are lower in cost and allow a greater number of companies to run efficiently during the downward trend. This way, they can be ready once the economy turns around.”

And as for companies cutting back on IT expenditure in an economic downturn, this, Saba says, can lead to diminishing returns. “They are thus not equipped or ready when the economy eventually does turn around. During the downtime, they should be investing in IT and building processes and infrastructure as services so they are offered at cheaper rates. This will also ensure the company itself is “ready” when the good times roll again, as opposed to spending larger amounts of money later on and also trailing behind because, remember, that’s when the rush starts!”

In fact, she continues to explain, investing in IT will actually help jumpstart the turn around. “Also this economic downturn has not affected the IT industry as yet. It might over the next few quarters but those people who are claiming to be affected in the tech sector, are making use of this time to get rid of extra fat. But really, even Technology companies in the US haven’t been affected that greatly at this stage compared to the rest of the industries. Having said that, getting the management to see the merits of such decisions requires work and well, what can I say?! Again elementary, really!”

Perhaps not all that elementary when you get down to assess the ground reality of the situation. One perspective has been, shared and being churned out in the rumor mill is the fact that companies hired poorly to begin with. Otherwise why would they be “fat” to begin with?

Farook Khan, Project Director, Pipeline Projects – SIEMENS Saudi Arabia looks to, well, a bigger animal. “The companies that are giants in their technologies have understood that while the White Elephant Projects are not going to come any sooner, they have capital to invest. This is the right time for acquisitions, mergers and investment in new areas for them. This requires the courage and guts to make the investment. I would second Fahad Khan’s suggestions for improvements in the current installed base and customers. This is very important to sustain the cash flow. In fact, I think it is the key to retain your numbers.”

Fahad explains that new customers and areas would be difficult to acquire in these times, so maintaining strong customer relations with existing customers is very important. “The other major area that companies don’t really understand is the need for Project Management, in the true essence of the word. Cost reduction, or firing employees will not help, but worsens the situation in the long run. Employers need to retain their good resources.”