Making IT Chocolate Cake

2620ce1Internet technology has become an essential part of every day life. The economic boom in the United States during the late 1990s was in part due to the expansion of websites and search engines. Over time, businesses began to utilize the technology in order to remain profitable and relevant.

Today, computer technology continues to evolve. Many companies need people who are fluent in the language of the Internet. Internet technology consultant firms play an interesting role in how companies function in the 21st century. Daniel Cohn, an IT consultant from Atlanta, Georgia who created his own firm over twenty years ago, says the purpose of his company is to provide hassle-free managed IT for other small and medium businesses.

“We talk about providing IT chocolate cake for our clients: Delivering the best experience for them without them having to worry about the ingredients. We help avoid the avoidable problems and minimize the impact of the unavoidable ones,” said Cohn.

His company, Cohn Consulting Corporation, provides services ranging from cyber security and maintenance to disaster recovery solutions for small business owners. Since the business of IT consulting depends on the state of other businesses, his consulting firm tends to mirror what the overall economy does.

“Our business is spread over multiple sectors. We are not niched, so things may be down in one sector but up in another, which keeps us in a fairly steady state.”

Cohn says the ‘infrastructure-focused’ and ‘utility-like’ nature of the IT consulting business keeps economic activity flat for most of the year. However, during the first and fourth quarters of every year, companies do their budgeting and spending, which leads to cyclical fluctuations in economic activity.

“Companies look to change their IT environment or at least spend on it while they have the money,” said Cohn.


During the recession, the company changed its business model from break/fix to management services. Instead of paying a fee for a single service, clients started paying a regular fixed amount on a monthly basis. It gave the firm an opportunity to gain new clients, dealing with higher-priced services, who were looking to control their costs.

“Even in a down economy, we tend to stay flat or grow,” said Cohn, “From 2008 through 2014, we grew revenues each year by 10 to 20 percent.”

Due to investments in new technology and the recent growth in profits, the Cohn Consulting Corporation continues to expand with an efficient system benefitting the consumers and the producers. Nevertheless, the company faced and continues to face major challenges in keeping the profitable machine functioning.

“A lot of small businesses run their business more on hope and nerve. When I first started my business, it was easy to spend money. Once things flattened out, I lost money and I didn’t even know it. I hired a business consultant. There’s all sorts of metrics you need to be looking at like individual profitability of clients. I learned how to understand numbers,” said Cohn.

Cohn also mentioned the reason some of the IT consulting firms did not survive the recession was because they did not switch their business model to match the needs of the clients.

“The financial goals of the services and the company are not in alignment,” said Cohn, “You could make a thousand bucks profit if the client has more problems. It’s now in my interest for them not to have problems.”

Folders_CloudOnce Cohn restructured his organization, part of his growth plan involved getting larger clients. This led to his firm competing against national and local IT consulting companies with larger pools of clients.

“I’ve been having strategic wins against Dynasis and Blue Wave. They are the big gorillas in Atlanta. You see them on billboards. They have brand recognition,” said Cohn.

Companies like Comcast and Dell have now entered the competition, providing their own Internet services including phone updates for customers. Cohn believes the commoditization of the IT consulting industry makes it a greater challenge to make sure his company remains a viable choice for customers.

“Everyone does management services,” said Cohn, “Suddenly you’re competing against the cable vendor. Now, the price is being driven down. But, the other companies will just throw an engineer at the problem.”

Cohn thinks many people today are now questioning the need for IT consultants as they move their information to a cloud provider. He argues clients need people like him to help them pick the right Internet option for their business.

“The question remains whether you want to be Godiva or Hershey’s chocolate,” said Cohn, “How do you be the Godiva? When there are people that can safely say you are more worth it than these other guys. If you own the relationship with the customer, you will be successful. You want them coming to you. You want to be the trusted advisor. You are the indispensible option.”

Over a Cup of Tea

15 years ago, Nitin Ashar backed his entrepreneurial skills to start his own company in the service sector. Now he is the CEO of Truevalue Marketing Services, a private company engaged in the commerce of ready to drink beverages and vending machines. Currently his business caters to the corporate sector on a local and national level.

Under Mr. Ashar, Truevalue has expanded its horizon in terms of competitiveness, quality and growth. He has carefully monitored movements in the sector to take advantage of changing customer needs to expand his business. For example a major secular shift in the sector would be a transition from premixes (powdered tea and coffee) to fresh milk, which is now widely consumed. Additionally, cyclical booms in the economy have also benefitted the company. Increasing growth within all companies has led to even small local offices demand for machines. As a result there are more customers to provide to. However, following growth there is dip, which hurts expansion. For example during the 2008 financial crisis, the company suffered with reduced demand and loss of existing customers. In on case, Infosys, a major tech company, closed down its contract leading to removal of 480 machines (leased) from their offices. Mr. Ashar also complained that several customers made late payments, which led to cost cutting within the company. Consequently, workers had to be laid off. However, being knowledgeable about the downturns of the economy, Mr. Ashar adapted. He spotted shifting consumer demands to make changes for the survival of his company. During a tough phase from 2008-2011, Mr. Ashar improved on his distribution channels, so that he could target small clients as well. Additionally, he was also willing to consolidate with large clients who would provide him a contract on a pan India basis. Lastly, ever since, Mr. Ashar believes in diversifying to minimize risk. This strategy helped his growth, as expanding into different cities would provide cash inflow when one channel would fail.

Truevalue - MMM 469

Given the importance of the two crops, tea and coffee, raw material prices have a major impact on business operations. An increase in prices of dairy products would lead to increase in business cost. Given that the firm cannot proportionately prices to remain competitive, the company would suffer from losses. “Despite the current raw material prices in India falling, the company must offer discounted prices to customers to remain in the market”, Mr. Ashar. Additionally, infrastructure also has a significant role in the business. Given governments investment in infrastructure, it is estimated that there will be an increase in the number of companies in the coming years, which would provide more customers to cater to. Summing up, high inflation and increase in infrastructure would both serve to reduce unemployment, thereby more mouths to feed, which would promote growth for the business.

By operating in the service sector, the major challenge faced by the company is manpower. This includes technical and operational activities. Besides, there is a great demand for customisation to satisfy customer demands. For example companies such as Vodafone and Cap Gemini had requested to obtain customised machines to suit the demands of their employees. Lastly Mr. Ashar complained about the unpredictable weather being an important challenge. He said, “The presence of drought in New Zealand couple of years ago had raised the prices.” Given certain varieties of tea and coffee are imported from New Zealand, an unpredictable change in weather affected his business negatively.

It seems that the previously mentioned factors were not the only challenge Mr. Ashar faced. An important component of the business was access to capital. Although interest rates played minimal role, capital dictated the operation of his business. He said that given the recent boom in the economy there is more access to capital which makes it easier to have more machines available for customers. However, on tracking back to 2011, where the economy was still recovering minimal capital access meant that Mr. Ashar could not execute orders from major companies such as Wipro and Deloitte for 500+ machines.

An hour into the interview with my uncle, I asked him about the competition existing in the segment. He mentioned that even though his company was one the top 10 companies operating in the western region of India, there was increased competition from local firms operating in each city. Major competitors included Nestle and Cafe Coffee Day. In terms of the competitive landscape, more companies are offering fresh milk, which is the preferred option over premxes. Given that it is the “healthier and fresher” option, there is increasing pressure on companies to provide high quality fresh milk. An increase in competition has hence led to the company providing reduced prices to maintain its competitive adavantage. Additioanlly, the company provides discount on larger volumes. For example, last year the compan secured a contract with Vodafone on an pan India level leading to reduction in the prices charged.

After having completed my interview I believe that I have gained enough knowledge about the company as well the industry. In order to gain more knowledge about the market it make sense to talk to customers since they set the trend. Knowing their perspective can help me understand what the future holds for this segment. Also speaking to competitors would also give me a better understanding their operations and outlook. However, my uncle being their competitor I doubt I will get a few minutes of their time. Lastly there is one macroeconomic data that I have observed. For example there has been an increase in demand for tea and coffee over aerated drinks. This goes back to argument of switching towards a healthier living. Hence demand for tea and coffee is definitely on the rise opening up great potential for this segment to grow with my uncle ready to take advantage of it.