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Guy Whitcroft has helped many IT journalists find their way in over thirty years in the biz, and advised thousands of reseller businesses. But the business lessons from the man at the helm of Tarsus Technologies cut across market segments, and his insights can tell a buying corporate a lot about itself iWeek: Our last issue mentions perennially warmed-over research findings that operators still make too much on voice. When will that end?

GW: When the SNO is operational, bandwidth cost will drop, and bandwidth supply will increase. The curious side-effect of that is that voice traffic will still go up before it comes down [in relation to data] - especially with VOIP applications going mainstream. But data growth is even more pronounced than voice in the longer term.

iWeek: What are some of the winning applications you see coming out of that?

GW: Podcasting will be a nice turnout. Do we call that voice or data? Tough to call. Aspirant bands and broadcasting hams will use it most effectively. Training is another good application, as are informal meeting room applications with closed user group corporate blogs. The fact that you can do it asynchronously is a plus. Videophones are also a possibility, but you have to think about usability.

iWeek: But Vodafone has very nice video-on-demand within the walled garden of subscribers, of Sky News broadcasts and so on.

GW: I think future developments like highly portable, wireless foldable screens will make that a better reality.

iWeek: Local or international?

GW: HP and Acer are really starting to market the benefits of what they`re doing. Like the local brands, they basically bring in a case and components and put it together. The only local design the local manufacturers do is the badge, basically. The advantages of local assembly are huge for a mid-sized-and-up company buying sizeable numbers of PCs over time. You want consistency of imaging of the drives, and you have that with the international brands. The local ones sometimes change the drive, the chipset, CPU and so on, which means you can`t blast one image across all of them. That causes problems with rollout and replacement. Multinationals` R&D spend is another big plus. And they get it right because they don`t fly the entire box in - they save by shipping the low-value, high-bulk stuff [case, monitor] by sea, and flying in the high-value, low-bulk components [CPU, memory etc.].

iWeek: Beyond the badge, there`s also local memory.

GW: With dropping international prices, that`s basically gone away. At least one local memory maker closed down its SA manufacturing, because it didn`t have the volumes or the labour cost to compete with the reduced costs of imported memory, helped by the strong rand.

iWeek: The exchange rate fluctuations must kill you.

GW: Our resellers get requests for a deal-making 15% price cut. But resellers operate on single-digit margins. And the exchange rate can be a killer. Over time it seems stable, but one day can make 20 cents difference in R6, wiping out 3% of your margin. They quote, and by the time the order is placed, the margin is gone. Most distributors buy forward cover when invoiced by the supplier to fix costs at that point. You can speculate that the position will improve, but fiscal prudence dictates that you should always determine the real landing cost, especially when you can`t move around due to the low margins.

iWeek: Do buyers understand the value they get?

GW: Government often wants fixed pricing three months ahead of time, especially at municipal level. You can`t do that. If we knew what the order might entail, we could buy cover for a fixed amount. But these organisations are generally unable to give forecast usage. The motor industry doesn`t drop prices just because the rand strengthens, but the IT industry does. If you shop carefully, you`ll find a notebook for R5 000 today - half of what it cost 2 3 years ago.

iWeek: What advice do you have on credit control? Aren`t small suppliers between a rock and a hard place?

GW: More companies fold because of cash-flow issues than anything else. They may be profitable on paper, but they do not collect, for fear of alienating big debtors. Businesses are often run immaturely in this industry. Perhaps the fact that it was so easy to get into IT in the eighties and nineties is the root of the problem. Now we have to get the fundamentals right. There are things you have to pay - salaries, PAYE, VAT, landlord, utilities, . And if you aren`t bringing in the cash, at some point one of your creditors will wonder whether it`s best to let you trade and let it get worse, or whether they should get what they can, now. As a rough rule of thumb, government and large corporates are the worst at paying. Not because they don`t want to, but because of the red tape, so when dealing with these customers you need to be sure you have enough funding (and margin) to cover the payment lags. Smaller customers are generally better payers, though.

Tags: Business  Practices