SMALL BUSINESS BLOG

OK, sanity actually returning when it’s not shown all that many signs of having been around in the first place is a bit of a stretch. Nonetheless, there’s a lot to be said for Anatole Kaletsky’s recent column in the Times about the current economic crisis. Like the Bank of England last week, and the US Treasury today, he thinks it’s all been a bit overstated and suggests everyone should calm down a bit.

Long-term readers will be aware that I have a lot of time for Mr. Kaletsky. When everyone was panicking about the UK’s withdrawal from the Exchange Rate Mechanism over a decade ago, it was he who observed that this would offer a chance of lower interest rates and therefore a better standard of living. He was right then and I suspect he’s right now.

As always, however, the difficult stuff is in the detail. He is not, repeat not, saying the easy credit is going to come back. Business loans, like personal loans, will be harder to come by than they were six months ago. There are solid reasons for this. Banks had estimated the value of their assets at least partly on untested items - for example if you had a house and wanted to remortgage, the Bank would probably make you an offer and yet without the house on the market nobody would really be able to establish an actual value. This, on a massive scale, is what’s caused the short-term problem we’re suffering now.

If Kaletsky and two Treasuries including ours are right, that problem is about to go away. With a bit of luck its cause will also go away, and people won’t make rash valuations of assets and borrow against them again, either on an individual or national scale.

Unfortunately I remember saying something similar in 1995..

P. S. Interest rate day tomorrow and I got it completely wrong last time. So I’m going to stick my neck out and say ‘hold’ this month.

Are you assaulted daily by people claiming to make you greener? Do you listen?

I must confess that I get irritated by many of them because they’re using my guilt to stuff their pockets with money. And, very often, what they’re offering as a ‘cure’ to CO2 emissions or pollution actually turn out to be emitters and polluters in their own right, through their use of raw materials, manufacturing processes and delivery.

For example, do we really need one button to switch off multiple devices? Can’t we just take thirty seconds to switch them off individually. Or run them off a power block and switch that off? Or, as I do, use power blocks with individual switches, so that I only power the items that I’m using at any time. (I’m not claiming any great environmental virtuousness, by the way.) Perhaps the manufacturers would be able to tell us how much switching things off standby results in a nett gain to the environment.

Then you have the measuring things. They tell you how much power you’re using. Well, if you’re being sensible with your power use, do you need a measure? It’s a bit like bathroom scales. In my case, they merely confirm to me what I can see by looking in a mirror.

Okay, measurement can be useful. You can log progress and ‘prove’ to whoever needs to know that you are doing a better job than you used to do. This, no doubt, will come in handy for reporting your carbon footprint to those who wish to tax you. (Or reward you? I won’t be holding my breath.) Some computer companies are licking their lips at the prospect of selling you even more hardware and software just to enable you to keep track of, and report, this kind of thing.

Without question, a conscientious approach to the use of raw materials and noxious emissions is very important. It always has been. But, when faced with a green product or service, do take a moment to work out whose bottom line is really being served.

At least that’s what Mervyn King, governor of the Bank of England, seems to think according to today’s Times. More particularly he’s concerned that the top executives at said banks are using other people’s money to do it. So the bail-out the other week should be seen as an offer of breathing space and time to put financial houses back in order rather than license to continue as before.

In other words there will be no return to the good old days. Anyone thinking the current tightening was going to be short term was kidding themselves.

It might be a surprise to hear that I believe this is a positive move. I’ve said a number of times in this blog that we need to stop living on borrowed money and actually earn and save something. This is going to happen now because people - and by extension the mass of people that is the economy - won’t have the choice.

The problem is going to be that a number of small businesses tend to survive on other people’s credit. Would the likes of Amazon really be as big if it didn’t have the facility to order items on a credit card with one click? Personally I think not. This isn’t to blame online retailers for people losing control of their willpower and buying stuff they can’t afford, that’s down to the individual, but facilities like one-click make it very easy to do.

The challenge is going to be for retail businesses to restructure themselves so that they’re less dependent on people’s plastic. This is going to mean lower turnover, which in turn will need to attract more margin to keep a business running.

There are industries in which this will be possible. People will pay a premium for goods if there is genuine value in the form of services to be had. They don’t mind paying a fair price if they can understand why. Companies like Richer Sounds never compete with Internet companies because they know people will pay the money to keep them in business for next time they need advice from a human.

The difficulty is going to be in the commoditised markets. You can add value to a sound system in a way that can never apply to, say, a book. These are absolute commodities and will sell on price alone. How you keep that sort of product profitable in an environment in which people don’t want to use credit is beyond me.

I spent a goodly chunk of last week in California and kept bumping into people who bandied about the term ‘cloud computing’. Without question, the phrase is heading your way. And, without question, someone will soon try and bamboozle you with it.

This is because not all clouds are equal. And some have simply replaced one techie term for another less techie one. Software as a Service, or SaaS, has been mentioned here before. Well this is a kind of junior partner in the world of clouds. More senior (and more complicated) are Platform as a Service and Infrastructure as a Service - PaaS and IaaS respectively. You can see why the more fluffy and friendly word ‘cloud’ has been adopted as an umbrella term for them all.

The tragedy is that great swathes of people in the IT world are now able to bandy ‘cloud’ around in the same way that they bandied ‘Web 2.0′ a couple of years ago. Your job as a buyer/user of IT systems and services is to keep asking what this stuff means, what improvements are going to be delivered to the bottom line and how they’re to be delivered. Don’t let the folk in metaphorical white coats intimidate you.

If the service on offer sits apart from your day to day applications, then a bit of cloud computing might do you some good. It means someone else is able to take care of all the awkward bits - buying equipment, installing software, maintaining both, dealing with peak demands and so on. Salesforce.com has been particularly successful with its SaaS offering. 41,000 companies use its service for customer relationship and sales tracking. Its success hinges on the fact that it can be run quite independently of other applications. It also has a PaaS offering in its AppExchange which allows other companies to add extra functionality to the underlying salesforce.com platform.

Other cloud computing companies, such as IaaS and SaaS provider Joyent, provide somewhere to run your applications so that they scale to meet whatever demands are placed upon them. Its own Collaboration Suite is another example of a SaaS application which runs independently of your other software. IBM, HP, Microsoft and hordes of other companies are talking cloud computing. John Willis has produced a list of 47 cloud offerings on his IT Management and Cloud blog. If this sort of thing interests you, you might also like to read Kent Langley’s take on the whole subject.

The good things about cloud computing are that they remove complexity and provisioning from the customer and they keep capital and staffing costs low. In theory, at least, they should keep operational costs low too. But I’d be worried about being locked into a service provider that gives no escape route should they decide to raise prices unreasonably.

If you’re thinking of doing anything that involves applications working together, then be very careful and make sure you have good independent advice, or rock solid guarantees from your cloud provider.

Mobile communications - bind or benefit for business owners? I believe it’s a double-edged sword. Yes, being able to stay in touch with the office while out and about is now crucial to businesses, however being contactable all the time means there truly is nowhere to hide! And as this mobility is now a necessity for businesses, the current market for telecommunications is an increasingly noisy place.

So how can the big telco brands compete in such a saturated marketplace? What do they need to know to keep their businesses relevant in the digital age? And most importantly do they really know what makes the SME market tick?

(First off) I’m a business owner, hello. I’ve got a Blackberry and it goes everywhere with me – yes that’s right my name’s Simon and I’m a ‘Crackberry’ addict. Thinking back to when I made that step into the world of mobile communications, I wasn’t approached by a service provider, oh no, I was the one that went running around researching the best deals. Where were the service providers when my business was at the stage to make the commitment? There is a dearth of relevant mobile business offerings, which explains why I am now a “Crackberry” addict as this brand is the exception.

My decision wasn’t based on price of course, it was also dependent upon my experiences with my personal mobile service provider, and the history I’ve had with a handset manufacturer. For example I wouldn’t have gone with a business comms provider if I had poor reception at home, it just wouldn’t have made any sense. Likewise if I have had a bad experience with a certain manufacturer of handsets, I wouldn’t decide to sign up with that brand again, simply because the speed and ease of using a handset is all important to me. 

So to all those telco brands out there who want to tap into the lucrative, but under-serviced, SME sector here is your check list; know what makes us tick, don’t call us during the day (as that’s when we’re most busy), consider our personal experiences and demonstrate to us that you know our businesses and our business needs. There is nothing more frustrating than speaking to a salesperson that clearly has no idea about your business while expecting you to be bowled over by them. 

In recent weeks, given the remit of covering business money, I’ve said quite a lot about the state of the economy. I’m going to give it a break this week; either confidence will return or it won’t (and I still believe a lot of the problem has been about either confidence or more likely overconfidence when it comes to, say, valuing a house and the bank valuing its assets on the value of the mortgage) and that’s pretty much that.

What’s more disturbing is the report today that we’re increasingly victims of Internet Fraud. Granted, this week is the week of the Infosec show in London so there will be a lot of people talking up security stories out there but it remains a concern that official figures are underestimating how many people are losing money by so much.

The usual caveats apply and the calls for a Cybercrime unit make a lot of sense. In the meantime this is going to hit customer confidence very hard indeed - it was getting a lot of coverage on the Today programme, for example. Businesses that have downsized to take account of non-face-to-face trading could be in for an unpleasant reality check (elsewhere the BBC has reported - shock horror - that people are increasingly resorting to cash they actually have to fund their purchases).

It’s just what we didn’t need, and makes it a good time for Internet traders to look at and upgrade their security - this afternoon would be a good time.