Of Markets, Pills and Timing

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Let’s talk about timing. Or about that job we didn’t take that would have turned out great, or the project we should have skipped that turned out so horribly, or the plan that we should have implemented a year ago.

Let’s talk about business technology timing. Let’s also talk about vitamin pills and pain killers, and let’s talk about buying and selling technology and the really big drivers of technology decision-making.

So here’s the deal: Capital markets drive spending, which in turn determines the market for vitamin pills and pain killers.

Bear markets kill technology (and other) spending. Bull markets cause us to lose our heads and buy just about everything we see. Vendors, of course, hate bear markets — but buyers should love them.

Pain killers include those investments that reduce costs and increase efficiency. They’re usually made at gunpoint: someone decides that an investment has to be made before some huge technology problem arises. It’s usually the CIO that holds the gun to the CFO’s head.

Vitamin pills — those to-die-for applications that will completely transform your business — are the elixirs of bull markets. Vendors love bull markets because the normal business-case-before-we-buy discipline flies out the window propelled by unbridled optimism about business technology success. Bull markets breed silver bullets; bear markets take silver bullets for the team.

Why Should You Care?

Why is it so important to understand where we are, where we’re going and the competitive advantages each place provides?

Let’s first pretend that we’re buyers inside a company that spends serious money on business technology every year. Let’s assume that we’re in a bear market where capital spending is generally — and specifically in technology — way down.

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First, don’t even think about proposing huge “strategic” enterprise projects. This is not to argue that they might be necessary and even prudent, but when competition for funds is fierce, it only makes sense to fight battles you can win.

Second, work your vendors to a price unheard of during bull markets. Will they “cooperate”? Absolutely. They have to make their revenue numbers — which supercede earnings in bear markets.

Third, take a hard look at your infrastructure with an eye to what it must do when the market turns. In bear markets, we expect relatively little from our computing and communications environments, but as the market transitions from bear to bull, expectations will rise. Can your infrastructure handle the transition?

When times are tough, it’s time to tune-up the infrastructure, assess its vulnerabilities and get it into good enough shape to scale in anticipation of the transactions it will need to support. Any outsourcing deals you do in bear markets should be shared risk deals, where the vendors only get paid as they perform well, not as they just “perform.”

Now let’s pretend you’re a vendor. First, you need to embrace total cost of ownership (TCO) and return on investment (ROI) calculations. You need to champion tough business cases and pilot applications. You need to offer incentives to your buyers to open their checkbooks; you need to stay close to them during all phases of the work. In short, you need to hustle.

But unlike the hustling you do during bull markets, bear market hustling must be quantitative. In bear markets vendors must sell pain killers, but in bull markets they sell vitamin pills. The trick is to morph the same products or services from pain killers to vitamin pills as the capital markets swing.

However, this is tougher than it sounds. Some products just don’t morph well. Customer relationship management (CRM) applications are optimistic, enthusiastic applications that assume more and more customers that have to be handled just right.

They’re often expensive with long payback periods. But some other investments — like data and applications integration — can be sold offensively and defensively, as investments that can help you protect and optimize what you have as well as tools that can help you grow. Pretty cool, huh? In this case, timing is flexible.

When times are good vendors splurge because their customers splurge. If you sell stuff in a bull market you want to be on commission. But if you start your career as a salesperson in a bear market, negotiate a high base salary.

Do You Know What Time It Is?

Regardless of where you sit, you need good timing. And you need to know what to do with it. It’s essential that we all understand market context, that we understand what’s expected of us and what’s realistic. Capital markets fundamentally change the buying and selling climate; capital markets determine the popularity of pain killers versus vitamin pills.

How sensitive are you to context? What changes have you made to how you buy or sell business technology since capital technology markets weakened? Can you morph your product and service pitches? The rules of the game change as markets swing. You can increase the chances of a successful sale or a productive deployment if you know exactly what market you’re in and what each market wants to buy and deploy.

Timing is still everything.

Steve Andriole is the Thomas G. Labrecque Professor of Business at Villanova University where he conducts applied research in business/technology convergence. He is also the founder and CTO of TechVestCo, a new-economy consortium that focuses on optimizing investments in information technology. He can be reached at stephen.andriole@villanova.edu.