Microsoft 365 is Out - Yippee or So What?

The top boys were rolled out at the London launch of Microsoft 365 this week and loyal resellers stood by their side.

Hails and whoops were in evidence as the long awaited official launch of the Cloud based Microsoft Office solution became a commercial reality after a longish period of beta trial. Microsoft resellers can sell the product - well sort of. Basically any end user is provisioned and billed by Microsoft, the reseller gets a finder's fee. The ongoing customer relationship is with Microsoft, not the reseller. Unless, of course, as a reseller you are big enough to host the solution on behalf of clients yourself but it's not entirely clear what the costs involved are for this and whether it will work out more expensive for users. I'll try and find out.

But there is no doubt that there is considerable angst amongst MS resellers about this very profound change in policy by Microsoft. Resellers basically will lose the commercial relationship on the product with clients and get no share in future revenue. To boot, at a start up cost of £4/user/month it is unlikely that resellers will fall out of bed in order to sell MS 365 to small users as the margin involved in a one off finder's fee sale is far less than the cost of sale. Let's face it, anything less than 100 users is a pretty grim return.

The sales model looks flawed. If Microsoft want to get into the SMB/SOHO market then they are going to have to do it themselves when most of those companies actually want the knock on the door of the friendly recommender who sells their IT kit. There is an opportunity for the likes of PC World but I would suggest Amazon might be the better chain as they are more geared for small transactions.

Somehow, it needs to be automated with lots of resellers setting up easy to configure portals where customers can get access to MS 365 quickly and with low intervention by salespeople. If all resellers could customise the portal too, then why could they not participate in the sale rather than remain a one off third party? I have no idea and it shows lack of planning.

The problem is this. I just set up, out of curiosity, Google Apps on my laptop on my own domain. It took precisely 5 minutes and cost nothing. Zip. Nada. I get 7.5Gg of email space and I have access to a ton of Google fancy apps as well as the core business ones. That's it, sorted.

The same on Microsoft costs £4/user/month and there are not the myriad of extra apps associated with the domain name. Further, SharePoint which is at the heart of MS 365 as the file repository does not allow multiple users to access the same files.

It's clear that existing Microsoft partners will all be trying to punt MS 365 to larger customers to justify the selling time so who will address the SME market space is the big question? Will that be surrendered to Google? Surely, SMEs were the point behind MS 365 and will be the heartland of Cloud applications?

Some People Don't Get The Cloud At All

You may be surprised to know that many people in the industry, even amongst the channel and the vendors, don't get The Cloud and why it is important to small businesses. Such companies constitute 97% of the hundreds of thousands of companies in Britain and carry the bulk of the workforce, around 13 million staff in total. The opportunity is pretty big is the first thing you will notice. I have heard a director at Microsoft say that they expect up to 60% of all seats of certain software will be based in The Cloud in the future.

These SME companies want scalability of services, up and down, at a smoothed cost, lower risk and without massive capital costs every so often. They don't want to add or upgrade a server every time they go above a certain size of user or find it is out dated within a year or run out of disk space every 3 months or pay for licences they don't use as they have restructured or been sold. The world is changing and companies understand that The Cloud means that they get real scalability by buying essential services through The Cloud.

The Cloud is a reality anyway. Most companies run websites and domains - these exist in The Cloud. The internet, believe it or not, is in The Cloud. Nearly every company in Britain then already uses The Cloud for some part of its business. Even huge, security befuddled companies like banks use The Cloud - internet banking, IFA portals etc are all presented as Cloud applications and are highly secure. Travel agents, supermarkets, flower shops - you name it they all have secure Cloud based options to purchase on the web which now constitutes a huge portion of our annual spend and it is growing exponentially whereas High Street trade is falling. The Cloud is actually quite passé when you really think about it.

Google as a company was predicated in The Cloud and I doubt if anyone has ever received a disk with a Google App on it - the whole thing is based in The Cloud. A significant number of people even in corporateworld have their first task each day to look at their Facebook page - in The Cloud. It's little wonder why such companies have massive valuations when they have that kind of reach.

It is a short step then to believe that the new generation of business applications will be served in The Cloud. The old objections on downtime and security have long since been dealt with. Today, the bulk of the world's financial transactions are conducted in The Cloud. What happens if internet connections are lost is the same as the corporate network failing which happens more regularly than most would admit. The fact is that I have a full mail client wherever I am in the world on any device I carry accessing the web by broadband, WiFi and 3G in any combination. I am online to all my applications from mail to CRM to travel agent to Evernote to back up manager all the time. I am trialling my accounts on NetSuite too.

I still run an Exchange server through a hosted site as I have tree hugged. But why will I continue to do this? MS Office 2007 is still the same as it was when I bought it 5 years ago. The applications have not moved on, it looks the same and crashes in exactly the same way with monotonous regularity when it cannot find its server even when my other applications work fine. Why do I keep it? Probably because I am a slave to the Microsoft machine.

Things are changing. For simple monthly costs, I can have the vast majority of every serious applications and thousands of frivolous ones served from The Cloud - securely and with 99.99% uptime - and wherever I am, using whatever device I have. As a small businessman, I don't have to worry about IT, managing servers, increasing disk space, security and the like. I just focus on creating revenue with the right tools at my fingertips, wherever I am. Scale that up to a 100 person company and suddenly you can see a fast moving, dynamic workforce dedicated to revenue creation and not encumbered by outdated or constrained systems. Even as I waited to get acces to my client's network this morning, I was able to access salesforce.com, my internet banking facility, Twitter and Evernote using 3G. I can be productive more easily in The Cloud, unrestrained by creaking private networks with limited accessability.

As Google says, the web is the platform not the PC. For those executives who do not get it just watch the PC market as it declines as new platforms drive sales. Just watch how traditional, on-premise licence sales will drop as SMEs drift toward buying online and only what they need, when they need it. It's all there to buy - even Microsoft is there now. The problem for SMEs is buying it all from one point, with one bill and having 'one neck to choke' if it goes wrong is not viable today. You have to buy from multiple sources, often only from the vendors themselves. The traditional channel is at risk but SMEs would not be happy to have to keep buying from multiple sources. The channel somehow has a role to play.

The change is happening. Embrace and get prepared or whither on the vine. For Microsoft, to make MS 365 successful, they need a business model that leverages their partners for fear of cutting them off. Considering that channel of thousands of partners has put Microsoft where it is today, that isn't shrewd thinking.

However, as was echoed by distributors like SDG and vendors such as IBM at the Cloud Forum this week, a value proposition needs to be clarified to see how the channel can play. Distributors want justification on the benefits - in my opinion, that shows a lack of understanding. If you want to share in the benefits, you need a plan. In my experience, markets have rarely landed on a plate. You need to go make it happen. It seems that in many cases in distribution, no decision is at least a decision. I don't think vendors will wait - as in Microsoft's case they have defined their own plan in which it is hard to see where channel exists in the future. No decision could cost distributors dearly if that's the case.

Meanwhile, MS 365 could be brilliant. It could also fail. Now wouldn't that be an unusual thing for Microsoft as Google Android and Apple start eating into their share of the device operating system market?

Acer - The Untold Story?

Finding $150 million of inventory you 'thought' you didn't have is quite a mishap.

I mean, it isn't that easy to miss a pile of computers that high. So when this small line in $4bn+ quarter of sales that Acer reported cropped up it was very big and bad news. But it's a governance thing really as a write off of that size isn't that huge, it's only Europe that had the problem and it's a one off anyway.

It is a one off, isn't it?

The share price over the last 3 months has halved, the CEO, JT Wang, has foregone his salary and 300 staff will be fired in Europe. I am not sure what percentage of the European staff that is but Acer are traditionally a lean and mean company in Europe so I would venture not for off a third of the staff in the region. That's a big, big mistake then.

Against the back drop of the actual performance numbers, this write off, embarrassing as it is, should not be such a massive blow to the company. And that sort of makes you think, 'What other bad news is to come?' Not that I am rumour mongering but it does reflect a feeling in the channel.

The trouble is that some pundits believe that this little accounting error has been going on a while. When you take industry figures there always seemed to be a mismatch in sales in and sales out data at Acer. In the old days a distributor might have thought about having a lorry circling the M25 at year end with excess inventory 'sold' on phantom orders to be booked back in on day 1 of the new year as 'returns' but in these modern times to do so would be to cheat investors and markets don't forgive.

So are there bigger and wider problems at Acer? We know the PC market has taken a bashing and figures suggest as much as 14% down for Europe, and as Acer is a big share of that it has to hurt. But such figures could be aimed at HP, Dell, IBM and others generally.

I think this story has a way to run. Yesterday alone, Acer shares hit the Taipei stock market limit for a fall in a single day. There may be no smoke without fire.

Social Blunder

It's very humbling to know that even savvy guys like Eric Schmidt, Chairman of Google, can get it wrong.

He cites not reacting to the amazing growth by companies like Facebook, Twitter and LinkedIn as being 'His biggest regret'. So even Google underestimated the impact of social media. Even better, when asked why he missed all the tell tale signs, he responded simply, 'I was busy' (as told to the WSJ).

It's easy to get wrapped up in the day-to-day running of your company and, perhaps, the belief that the exciting world of technology revolves solely around you. Heaven knows that IBM were guilty of that in the 80s and Microsoft has been a repeat offender. Now we see Nokia stumbling over its own self-importance and paying the price in the smartphone arena.

It's a harsh lesson and one I will focus on in the build up to the opportunities The Cloud presents as you can feel the inertia in the channel already.

There's nothing like a challenge to the status quo to flush out the tree-huggers.

One Way To Alienate Customers

I mentioned some while ago that the Sun-Oracle proposed hook up was going to be an uneasy marriage. Their latest marketing effort illustrates how silly this can get.

On the back page of The Economist is an expensive advertisement that proclaims that the performance of Oracle working on Sun machines is better than the same software running on IBM machines. Thus, they proclaim that ‘Sun + Oracle is Faster’. The proof of this claim rather bizarrely will be published or at least be available from 14 October. It does not actually say which October this will be, but we can only assume that it is this year. IBM, meanwhile has about one month to respond to this claim and before they twist the argument, this is as compared to an IBM Power 595 Server Model 9119-FHA to be exact (plus a few caveat figures to prove they actually ran a test) but they do point out in the same small print that this model was available back in December of 2008. So Sun and Oracle have had around 9-10 months in order to beat the performance of that IBM machine and have not considered any subsequent models in between. Oh, and the model, or at least the solution package, is presumably not available until 14 October of some indeterminate year in the future.


So what does this advert say to Oracle users? Not much really. The software is not getting any better and that you need a damn powerful machine to get performance out of it. And if you bought an IBM server to run it, then you are a chump, basically. Yes, in the world of negative advertising this takes a good bite of biscuit. You can infer from the new line of advertising that there must be some kind of ‘tuning’ going on by Oracle to make the behemoth software (they are the second largest vendor of software worldwide with over 50% of their market) run slightly faster on their now home brand hardware – making any other type of Oracle user at a disadvantage. The advert does not mention Dell or HP or any other brand of hardware but one can infer that if the software is now specially tuned for Sun then users of those other brands will also be disadvantaged for the future, if not by 14 October.

What would happen if Microsoft adopted the same approach? It would alienate just about every other manufacturer of PCs should they throw their lot in with, say, HP. Immediately, all those years of careful building of an independent software brand that runs on any x86 chip at speeds controlled by the manufacturer (but the user gets a consistent look, feel and features no matter which one they choose) would be lost as Microsoft would be saying, ‘run it on any other brand than HP and you are getting less than your money’s worth’.

That’s effectively what Oracle has done. Many market analysts saw this as a natural move by Oracle to fight IBM, but it just erodes the software vendor’s independence on hardware. Whether they like it or not, there is a vast world of business users out there that have chosen platforms other than Sun to run their software – now they would really have to start questioning whether their software company is committed to their end user customers or ONLY those end users who run Sun hardware. And remember, Sun were struggling prior to this $7.4bn proposed takeover.

From a customer perception, this advert is the first major manifestation that Oracle has ditched its independence and will be preferentially developing software tuned for the Sun platform only in the future and that there is even now a risk that subsequent versions of Oracle will only run on Sun. So if you are an Oracle user today and not using the Sun platform, perhaps this advert poses two questions rather than the one intended: 1) Should I buy Sun in the future and if not, 2) Should I be reconsidering my choice of software for the future?

In the world of large scale software sales, while you can have umpteen nice OEM deals, latest offers and special relationships with lots of hardware vendors but, ultimately, the last thing you want to do is to lose a deal because of hardware allegiance. Better to make sure they buy your software because it best fits their needs rather than the needs of the hardware they run.

Maybe I am being pedantic here, but I found this advert astounding – then again, I thought the Sun-Oracle tie up a big mistake and smacked more of desperation by one or other of the companies rather than of real strategic thinking.

Sunny, With Dull Patches

So Oracle has bid $9.50 a share for Sun Microsystems, valuing the US hardware fallen giant at $7.4bn. It's a far cry from what Sun might have been worth a few years ago but it currently is worth a 42% premium over Friday's closing stock price for Sun - how the mighty have fallen.

IBM had tried to secure a deal with Sun last month but nothing came of it. To be frank, it may have been a more natural fit in some ways - two hardware vendors with software and services interests combining to plug the gaps in each others' portfolios. But the recent past has seen the once mighty Compaq get severe indigestion when it took over the lumbering has-been Digital only to see the failed combination being bought by HP under Carly Fiorini.

The fact is, Oracle is a software giant and although threatened by the likes of IBM, in reality the two models are poles apart. The computer industry has always segmented the business models of software and hardware. Many hardware companies had software interests but they never really came to the fore and dominated any specific space. Similarly, some software companies have had some hardware interests but again, none that ever really dominated a sector.

The plain facts are that software is a gross margin rich business model with development costs underpinning it. Hardware has seen its gross margins eroded, made worse as each vendor has attempted to service major supply agreements as Prime Contractors and therefore had to buy other hardware vendor products in at reseller type margins, often securing long term supply at single digit margins on other vendor equipment and so dissipating its true gross margin on deals. It has been the nature of the beast in getting revenue growth at the cost of profit. Dell, in particular, has felt the pinch using this tactic.

So what would happen when you combine the two models, particularly of two giants of their specific sectors? I have to say, that the jury is out for me. Sun made a walloping $1.9bn loss last year on £13bn of sales but Scott McNealy, the colourful Chairman behind Sun, reckons that Sun will contribute $1.5bn of profits this year and $2bn next year to the new group.

Industry Speak

Industry analysts reckon that Sun's customer list will give Oracle access to those customers who are not currently using their database products. How often have we heard that kind of speak before? The fact is that hardware vendors rarely 'own' their customers in the way that a software company does unless they have a major stake in their applications or infrastructure. The chances of Sun dictating what database it customers use are pretty slim to say the least. Moreover, it is not as if Oracle is not known in the corporate world so that Sun customers will not have heard of them - all in all it's a silly argument and would be similar to Microsoft buying Apple to force their operating system and products down the throats of Apple customers.

The best way to make such a combination work is to produce database-engine boxes which were tuned in performance to run Oracle applications - 'Appliances' if you like. The storage industry has a number of such products and giants in this sector like EMC and NetApp have acquired strongly tuned software products to work specifically with their hardware.

But such an avenue is fraught with danger, as EMC has seen in acquiring VMware. As great an acquisition as that was (EMC got its money back by floating just 10% of VMware stock), the issue was always that VMware had to remain independent of its parent in order to remain the credible market leader, particularly with Microsoft gearing up to get on the attack. If VMware were to favour its parent by tuning performance or showing preference, long term it could ruin its position with the likes of HP, IBM, Dell and others and so allow Microsoft in as the 'independent vendor' who was hardware agnostic.

This is the danger for Sun-Oracle. If Oracle tries to leverage its new hardware purchase by tuning the performance to the hardware or showing preference in development, then the vast array of hardware vendors will slowly but surely get jaundiced and it allows a gap for an independent supplier with good brains and products to win their hearts as there is no vested interest. Right now, HP or IBM executives who have a strong relationship with Oracle, are probably thinking that all their Oracle installations are potential Sun Microsystems targets.

Long term that may not be proven to be the wisest of choices. If you are going to buy a hardware vendor as a leading software supplier, make sure you buy the biggest as your first step, not the cheapest, as you may just have bought yourself not just a chump but a liability that will lose you a lot of friends.

What may have started as a plan to strengthen Oracle's position against IBM may be the first gong of the death knell of a giant of the software industry. If there is one watchword in this industry that determines success it is FOCUS.

Google Conspiracy Theory?

Yesterday, I was rightly picked up on a few points in my article entitled 'Google's Gonna Get You' by SEO expert and entrepreneur, Mark Lewis and he was worried as to whether I was fuelling some 'Conspiracy Theory' on Google. I am not sure that is the case, as I have stated before, I am a huge fan.

But now that he has raised the subject, it is worth exploring that the company that has done so much for releasing the power of the web has big plans for the future. Whether those plans were the brainchild of the two founders, Larry Page and Sergey Brin, it is not clear. What is clear is that CEO, Eric Schmidt, is taking a greater lead in the company and perhaps he has a point to prove. Schmidt was the driving force behind Novell which had so many high hopes of being the dominant network player. Schmidt is an unusual man in Silicon Valley terms, he is one of the few, if not the only, people to become a $billionaire via stock options, perhaps he considers that to be the 'nearly man' route.

In the final quarter of 2008, Google had revenues of $5.7bn and made a profit of $382m, down from the previous quarter of $1.29bn - Google is a seriously huge and profitable company. And this revenue is almost all due to its search engine technology which creates rankings.

In theory, for any string of words you enter in the search box, Google will report back impartially based on its complex algorithms which work on raw data acquired by 'crawlers' which go through the vast amount of content on the web. This is called 'naturals' and is supposedly very distinct from the paid-for results which is the box of 3 or so main choices at the top of the page and the context sensitive adverts down the aide. To get higher up the rankings and so appear more regularly in the 'naturals', SEO experts advise the use of 'keywords' embedded in the html on your web pages - these are invisible to the readers but Google's army of crawlers knows how to find them.

For mortals like me, it's a confusing subject. My website and my blog contain my name and yet if you 'Google' it, only my LinkedIn and Ecademy profiles occur, no mention of the fact I submit articles to ezine, Newsvine or author a blog. In fact, only if you use the exact titles of my blog articles will you ever get to any of them, and that is by no means in all cases. Yet I have written over 200 articles and written hundreds and thousands of words. By contrast, Nigel Dunn, a jeweller in Worcester, a wood shavings expert and a song writer appear many times before I get a mention despite the fact at some points in my life I have been on national radio and quoted in National Newspaper articles as well as industry magazines (I haven't had my full 15 minutes yet by far, believe me).

It's a perplexing subject and, having been in involved in parts of the industry, I know that some companies specialise in getting you much higher up the 'naturals' and that costs money.

What Conspiracy?

No company becomes this big, this quick by being benevolent.

It is obvious and a commercial fact that those who pay the bills get the service and that is perfectly fair. Also, no company gets this big without aspirations to get bigger and, as usual, Google has Microsoft in its sights. Would this have been the strategy at outset by Page and Brin? I doubt it - they were kids who had a superb idea, had great fun making it work and getting rich beyond their dreams as a nice side effect. When Schmidt took over, things changed somewhat.

Google Apps was to be the way of the future. Google Mail is already a very interesting and useful take on email. Hosted entirely online by Google, it arranges mail by subject strings and it means it is far easier to search for things than, say, MS Outlook. Again, the founders' influence is very much at the fore. But things get a little hairy after that. Google Apps is all about hosting your entire set of office applications in 'The Cloud' along with all the content. Across the globe, a vast network of storage and servers, owned by Google, is being commissioned to support this. Some major companies have already switched to this new suite and embraced the 'devil' of hosted applications - they have fantastic economic and, for that matter, environmental advantages, which I have blogged about before.

Then up popped, iGoogle. This neat application sat as a dashboard/portal in your browser, it arranged and delivered your chosen content regularly to your PC. The weather, sports news, interesting industry snippets - you name it, you can have it. The trouble was, when you first downloaded the tool, there was an innocent looking option to allow your progress across the web to be recorded - by Google. The outcry was similar to the furore surrounding Facebook's bodged implementation of something similar. It was, in the view of many, an invasion of privacy in order to be able to make more money. In essence, this was true, but it did not fit with the shiny, friendly face of the Google we knew.

More recently, there has been furore about Google's addition to its Maps facility. Not only do we have terrain, road and the highly detailed satellite views but we now get cameras with 360 degree views of the areas at the addresses entered. Whinging civil righters felt this was an intrusion on privacy while there was a real case where a woman who had changed address to avoid a violent partner was in view outside her new home. Google's ability to fuzz out faces and number plates had not worked properly and some people or vehicles were recognisable. Of course, all views were freely available over the entire web.

In reality, Google Street View is a fantastic addition to already amazing facilities at Google Maps. I don't think anyone would really think theives are going to get better ideas on who to rob and where but they may check a target address as before. Terrorists aren't going to get any better idea of a place than a satellite view or going in person to check out an area. But for me, as a visitor to an office in Valencia next week, I could even check out what the road looks like, the office block and the parking facilities.

How cool is that?

Google and The Future

There is always a risk that companies who grow fast have to become more aggressive and grabbing on order to grow similarly in the future. Microsoft became an all-consuming ogre off the back of a virtual monopoly in the PC market and many, like myself, would argue they have some of the least innovative products on the market but get through by sheer presence, the old IBM way - you never got fired by choosing them even if the products aren't the best. Microsoft and IBM have shown that there is a time when you are big enough, that you can become complacent and the innovative edge wanes. Companies like Microsoft need to be challenged to keep moving and Google is certainly doing that.

But Google is different. There is still a nerdy, geeky feel about what you see. Presentation isn't everything at Google and the information is the important part still. They may be exercising too much muscle over the content providers like newspapers but we could equally argue they have had a good long run at things and maybe it is time to innovate more. Google genuinely is still providing excellent products and facilities and is clearly innovating at every step. It is still free to consumers in the main, corporates are different. I like 'The Cloud' concept and I have little fear of the idea of hosted applications and data - I have worked for two companies in that field and use datacentres and hosted applications extensively today. I disagree with companies that believe there is either a risk or that the web is unreliable - data outages on private networks are so common that people don't notice anymore while the web is obvious.

To get prominence on the web costs money and requires some skill - it's clear I haven't got enough of either to get my blog or website into real prominence. I have only been at it 3 years and still those crawlers and bots haven't found me. I don't blame Google for that - I'm just glad, like so many others, that I have a little pitched area of my own where people can find me if they look hard enough.

Unlike my net-colleague, Mark Lewis, I am cynical of the 'big company getting bigger' syndrome but like Mark, I think Google is a company to embrace rather than fear. There is no conspiracy other than to make money and bring cool services to all users.

Who could deny them that?

The Nature of The Beast

'Banks are in a dangerous frame of mind: they feel isolated, the whole system of mutual support and syndication has broken down and they are not doing what the government tells them to do.'

The words of Lord James of Blackheath, or to you and I, David James the renowned Company Doctor. Interviewed in this month's Director Magazine from the IOD he insists that in over 55 years in business he has been through 8 recessions and has seen nothing like this one.

At Christmas, a good friend of mine had a very good business, growth was good year on year, his customers seemed buoyant and he was very dismissive of how the recession could affect his business. We talked about diversification and protecting customers by offering them extended deals early but he dismissed this as he 'had never offered a discount in his life'. In February he made 5 people redundant justifying it on the grounds that the chosen people were poor performers. By the end of this month he will have made a further 7 people redundant - in total nearly half his workforce has gone in a single quarter.

Here's the rub. He isn't short of cash - he's short of sales. In a single quarter, his major customer indicated he was no longer in the market for his services and then a few more hit with the same message. Of course, he had reviewed the pipeline and tried to reason that each deal was good but he had failed to talk to his customers early and address the issue of those who might actually not continue to buy. By the time he had realised what was happening, a massive drop in sales left him with no course other than to cut costs radically.

Economic Shock

I have blogged before on the extreme speed at which this recession has hit. But there are survivors, there are losers and there are winners in the tumult. While Sainsburys reported a recent rise in sales, Marks and Spencers have just announced a 4% like for like drop - they have already announced the closure of many of their smaller outlets which had so much captured the public's eye at service stations and the like.

David James asserts that anyone who tries to expand through bank borrowing is likely to find their funding withdrawn - and this echoes concerns I raised yesterday that many small businesses are not getting access to the Enterprise Finance Guarantee (EFG) scheme as put up by the Business Secretary which made sure banks were only liable for 25% of any loss on lending. Yet little of that money has been released to businesses while banks are busy converting current lending to the scheme by offering small top ups and then getting 75% of previous borrowing covered.

It's a blatant scam and as usual the Government's implementation of what on the face of it was a decent idea has been incompetent to say the least.

The emphasis from senior business luminaries (and not people like Ruth Badger) is to look at cash-based rather than sales-and-margin-based sales. This will put a pressure on the social cycle we all want like suppliers paying on time, which has been an exaggerated problem in the last few months for many, but the advice is that we should also pay our suppliers on longer terms and conserve our cash while offering incentives for sales which bring cash in quickly. In the same breath we are advised to cut capital spend, cut people, take no risks, do nothing novel and batten down the hatches or go bankrupt. This is the advice of Jon Moulton, founder and Managing Partner at private equity firm Alchemy.

As he puts it, 'When there are seven of you and only five seats in the lifeboat, what else do you do?'

Risk in A Recession

No one could argue that Moulton's advice is not sound. In the teeth of the worst economic recession since the 1930s, it would be suicidal to start taking daft risks. However, that does not mean that there are not opportunities out there. Yesterday, I gave the example of Richard Branson seizing the opportunity to sponsor the new F1 Team Brawn who had formed from the ashes of the Toyota Team. With two decent drivers and a team, Ross Brawn has developed a car that is not only competitive at the first time of asking, but actually qualified in positions 1 and 2 on the grid and finished the race in the same order. Branson, not even an F1 geek like some sponsors, seized on the fact that there was not a single logo on the car and signed a hastily put together, tentative deal by his standards, to sponsor the Brawn cars. It could not have been a more spectacular coup for a man known as the master PR expert.

Virgin will be in pride of place at the next race, at the top of the driver and constructor tables and feted as the saviour of the team. Such bold risk taking in hard times is a priceless gift.

Business Myopia

The car industry is an example of a tragic crash in the heart of this recession. Hit by the dual cosh of lack of credit and lack of sales, production has slumped dramatically and this means that the car makers are quite literally in survival mode. Promised a £2.3bn package of rescue by the Business Secretary, none of that money has yet flowed to the companies, and across the UK it is estimated that over 800,000 jobs are directly or indirectly dependent on the industry. In the '80s, Sir John Egan epitomised Margaret Thatcher's industry boot-boy who got out and kicked the unions and slammed Jaguar back into shape after years of fattening under state control. He improved productivity by some 70%, slashed the workforce by 40% and exceeded the cash targets set.

As Egan said recently, 'For all but the grandest companies, cash will be more important than profit right now.'

John Mumford, a former BP executive and now at risk of my haranguing for being on the board of several companies, claims that companies he has worked with, large and small, suffer from what he describes as 'business myopia' - a lack of empathy with introversion regarding what is going on in the real world. I can only agree - too many companies I have spoken to recently who poo-poo'd the recession and claimed that they were having a record year, had a recession-proof business and thought people like me were 'talking up the recession', have had to lay off staff at minimum and, in some cases, tried to get emergency loans.

Mumford believes there is a 'high level of dysfunction in terms of talking to outsiders and seeing problems coming.'

Mumford also believes that in larger companies there is a level of 'group think' and that those who do not share the collective view are cast aside politically. In the past IBM suffered from what was called internally as managers giving 'Good slide' - a vernacular that described their ability to dress up the issues and results. In the aftermath of massive failure, it took a breakfast cereal executive to rescue the company and bring it back to leadership again, though never with the same dominance. Many would suggest that Microsoft could be going through the same problems, Apple did some years ago until Steve Jobs was brought back and more recently, Dell has recalled their CEO, Michael Dell, in the face of business problems.

Too often management just ignore the real world in favour of looking politically good and agreeing. Dissenters are seen as whistle blowers, pariahs or unnecessarily negative.

Company Politics Can Kill

The issue highlighted above does not have to be a large company. Medium and even small sized businesses suffer from inertia due to internal politics. There is an element of group think that suggests that no one should tell the Board or owner that he/she 'has no clothes on' and is out of touch with reality like the fabled emperor.

Sometimes it takes guts to challenge management views and get a taste of reality.

The best way I have seen this work is by staff actually talking to customers and feeding back their views. If you can combine that with some simple research about each customer, an informed report about the actual state of each customer and therefore the dependencies of deals becomes more fact than supposition.

This is vital in seeing the issues companies face.

There is no tried and trusted method as to who should do this. Sales Directors and managers who dare talk to customers about the potential of their orders arriving and state of their company are seen as 'making excuses' for poor performance often but if they can combine that with a realistic action plan then they may be able to be seen as forward thinking.

However it is done, Board Directors and executives need to take a longer, closer and more realistic view of their position and make sure that they clearly understand the implications to their future. The worst that can happen in any business, large or small, is that warning signs are ignored. Face them, act on them, communicate with everyone and tackle them.

After all, you don't want to be branded a real politician, do you?