Taking a broad view of small business
CRN invited a group of SME-focused resellers to participate in a special Advisory Council meeting to offer their insights on some of the key issues that are affecting the future of the small-business VAR. Simon Meredith reports
For many years, vendors have been looking to build their sales in the SME market and recently we have even seen large corporate resellers such as Computacenter express a desire to extend their customer base into the mid-market. But can large resellers seriously hope to address the needs of small businesses?
As the corporate market becomes harder to grow, more pressure may be placed on the rich pickings in the SME market, compelling small resellers to focus instead on the micro market, in direct competition with the retailers, mail-order and online resellers.
But resellers on CRN’s SME Advisory Council do not seem overly worried. “It’s only a concern if it diverts the vendor’s attention. With SME deals you are selling to non-technical staff. The decision cycles are longer and these are natural barriers to the market,” said Ian Brooks, managing director of ibbd.
“As SMEs don’t have the skills, it’s about relationships and large resellers like Computacenter frankly can’t afford it,” said Philip Mitchell, managing director of Intraland.
Kate Hembury, sales director at WStore, said some SMEs can work with companies that simply provide a ‘transactional’ model. “The likes of Computacenter and SCC could do well in mail order if they can handle those transactions efficiently,” said Hembury, adding that they would need good systems and logistics.
Giles Gibson, managing director of Original Thinking Group, claimed that web-based procurement is unlikely to threaten most SME-facing resellers. “We are happy to give our customers a shopping list and for them to buy from the web merchants. We charge that to them as part of the project. We just don’t bother with the box shifting,” he said.
Taking a broad view of small business
CRN invited a group of SME-focused resellers to participate in a special Advisory Council meeting to offer their insights on some of the key issues that are affecting the future of the small-business VAR. Simon Meredith reports
Sue Richards, managing director of EBM, said: “We have our own on-line store and we just push them in that direction. It is the servicing and support that we do a lot of work on.”
If larger resellers started to try to sell services, this might constitute a threat but, again, the Council did not feel they are likely to succeed. “I suppose it depends on whether they follow that up and try to sell more services-related business,” said Nigel Wright, managing director of Abtech.
“It depends on what they put together and what the customer is prepared to pay for it. The likes of Computacenter and SCC will charge quite a high ticket for their services, and companies in the SME sector may not be prepared to pay for that.”
In Northern Ireland, large resellers have already tried to address the SME market and withdrawn, said Nigel Mulholland, managing director of Nitec Solutions in Belfast.
“They couldn’t keep clients happy because they tried to treat them like a corporate, or just ignored them completely, so they left. But corporate VARs do need to expand their market somewhere,” he said.
Setting up chains – whether they are retail or in a more ‘traditional’ reseller vein – may be one way in which large organisations can address the SME market. The strategy being pursued by TSG seems to be moving in this direction.
Maitland Grey, Scottish regional director of TSG, said that providing a consistent service to SMEs up and down the country is what the strategy is aiming to do. TSG is still acquiring companies, and nationwide coverage – with a local attachment – is the ultimate objective. “The difference between us and Computacenter is that we are buying an existing customer base. If you don’t talk in the right accent, in the right area, it just doesn’t work,” said Grey.
There have been rumours – discussed at the Advisory Council – that some large resellers are looking to buy up small firms. The concern here, said Mulholland, is that these large, powerful resellers will attract customers initially, only to disillusion them later and, in the process, weaken the strong local reseller businesses.
Taking a broad view of small business
CRN invited a group of SME-focused resellers to participate in a special Advisory Council meeting to offer their insights on some of the key issues that are affecting the future of the small-business VAR. Simon Meredith reports
“That’s a pessimistic view, but I’m not convinced they are going to fail in the short term,” he said.
While the interlopers may well target the large mid-sized businesses rather than the sub-10-seat local businesses, this will bring them into competition with some of the best performing localised resellers.
“We’ve found that as our reputation in Northern Ireland has grown, we are getting the 100-, 200- and 300- seat business, even though we’re not looking for it. And we’re finding that it’s not that different a sell or solution. That market might disappear and we might end up shrinking back into our core market,” said Mulholland.
Nitec safeguards itself from the temptation some customers might have to procure equipment from the web or direct suppliers by making it a condition that the customer takes the whole solution from the firm.
“We charge them for defining the project and we make a small margin on the hardware. What we say is: ‘Buy Hewlett-Packard [HP] and Microsoft products from us. We are experts in those technologies and you’ll get value for money,’ and that’s working. We have clients that check [by comparing prices online], but that’s all they do,” Mulholland told the Council.
“You will always get people who want to order online and buy purely on price,” said Richards. “But a lot of customers want to know they are dealing with your company and that it has real people and real infrastructure behind it, that if they phone they will get the same guy they spoke to last week. They want to know that there is some continuity.”
All these factors work in favour of small resellers and against large organisations that will inevitably be dragged back into talking to the really big customers. This will leave the mid-sized companies that have very little IT expertise, looking to the ‘traditional’ SME providers again. Often, according to Mulholland, it is the mid-sized firms that need the most help. “With large customers, it’s often chaos because they have been sold three or four solutions that are just not connected. A lot of it is project-driven and not serving the client very well. They may have got great value, but the solutions they have often don’t work.”
Part of the problem, in Gibson’s opinion, is that a lot of customers and a lot of propositions are still product-led. It is a matter of educating customers so they focus on the business issue and, subsequently, on what kind of service and support they will need.
“On our proposals, we focus entirely on the business proposition. Only at the end might we mention a manufacturer. At the end of the day, most customers could open a server room door and wouldn’t know what the hell was in there. They want to get on with their business,” said Gibson.
With market consolidation paring the number of really significant vendors down to just a handful in each sector of the market, and SME resellers generating more profitable income from consultancy and services than from product sales, some resellers are questioning whether it matters which vendors they work with and which accreditations they hold. CRN’s Advisory Council members had mixed views on the subject.
Mulholland said most SMEs put their trust in the reseller, not the vendor. “Customers trust us to make the right judgment; however, by being faithful to one vendor – and we have a rule that unless there is a better product out there we will not change – we are a big fish in Northern Ireland and are terrifically well supported by both HP and Microsoft. We are looked after and have benefited from their marketing. They have the kind of marketing muscle that we don’t have.”
Brooks said: “If you can see that there is a value to the brand, you will leverage that. If you see it does not fit with the business value, you won’t.”
Gibson agreed, noting that you have to be careful not to push too hard with product. “What you don’t do is put the vendor’s logo on the front page. The crucial thing is that we are selling our company. The vendor is not what they are buying.”
But it is also dangerous, said Wright. “If you lead by saying ‘we’re an HP partner, come and buy from us’, that model is going to get hit. If you say, ‘we provide this solution and, by the way, we are an HP partner’, then you have more credibility.”
Taking a broad view of small business
CRN invited a group of SME-focused resellers to participate in a special Advisory Council meeting to offer their insights on some of the key issues that are affecting the future of the small-business VAR. Simon Meredith reports
There seems to be a broad agreement now that the actual brand and accreditation you have matters only as supporting evidence of your credibility as a reseller, but there are very different views on whether having close engagement with vendors is productive. Richards argued that there is plenty of value in what the vendors provide for resellers, but that resellers have to make the effort to understand how to use what’s there.
“The problem is that a lot of partners just don’t understand what’s available to them, and I just wonder how spoon-fed these people have to be,” she said.
“If I were HP, I’d think, ‘look, 50 per cent of you are getting up and using the tools we are providing, so that’s where I am going to focus my resources’. I can tell you that my marketing money is coming through. I have had no problem with that in the past six months. I have no complaints, but it takes a lot of effort and you have to know how to play the game.”
Mulholland was also of the opinion that considerable effort is required, but that it would pay off in the end. “It does take a lot of time, reading and engagement, but it definitely rewards you. You just have to make the time,” he said.
Hembury said: “You’ve got to produce the growth and show that you are pushing the vendor’s product.”
Brooks, however, said he does not expect to be spoon-fed. “But I do expect the vendor to communicate with me. Perhaps it’s just us, but whenever I try to access anything like special bid pricing, it either goes horribly wrong or it takes forever,” he added.
There is little doubt that resellers on the Advisory Council who were doing large volumes of business and demonstrating that they are growing their business with a vendor have had a better experience with that vendor. The small resellers simply do not benefit from the same level of engagement or support.
It’s impossible to say how much of this is down to the reseller not pushing the right buttons or a lack of perseverance, and how much is down to vendor programmes not working the way they should, or vendors simply focusing more of their resources on the volume and growth resellers.
Mitchell doubted, for example, that his company is big enough for the major vendors to really pay attention to it. Gibson, meanwhile, said that one big problem is how resellers that act as influencers and support the development of vendor sales can get appropriate recognition.
“Our customers will buy HP kit because we recommend it, but they may buy from a company such as Insight because they already have an established relationship. So, who gets the credit for that sale?
“We are more than happy to recommend HP and customers are free to buy from anywhere, but HP has no way of measuring who is bringing value to its business. And I’d like recognition of that.”
Hembury acknowledged that a significant amount of business is placed, even on WStore, as the direct result of recommendations from third-party consultants. “It is not about measuring it, but about realising that there is a need for someone to have a further line of communication,” she said.
The vendors need to take account of this, said Mulholland, because it’s likely that more SME-focused resellers will be compelled to move away from supplying hardware and pointing customers in the direction of low-cost fulfilment suppliers. “I heard recently that Microsoft was thinking seriously about this, with licensing being so complex,” he said.
“A lot of resellers in the corporate market, especially, are losing sales because there is a central agreement or a LAR [large account reseller] out there doing the work, and they are listening hard to this idea of there being a referral point into it, where that deal is owned by a reseller of some kind.”
Taking a broad view of small business
CRN invited a group of SME-focused resellers to participate in a special Advisory Council meeting to offer their insights on some of the key issues that are affecting the future of the small-business VAR. Simon Meredith reports
Vendor sites that offer products direct and at low prices, such as the HP Store, which was referred to in the Council meeting, are adding to the pressure. “One day we might all be like that [operating a service-only model] and be forced to use fulfilment houses because we can’t make it anymore,” said Mulholland.
“It’s a costly part of our operation – bringing all the kit in, de-boxing it, testing it, building it and getting it all sorted out. We make good money on that, but if one day we didn’t and we could do away with the workshop part of the business, I will want to be measured. I will want HP to take me as seriously as it does now because I am generating that amount of business for the company,” he said.
Richards said that having a web-based presence may be part of the answer. Her company now does two-thirds of its business online, but still maintains the customer touch-points. This reduces the cost, but keeps the customers dealing with the business. She does not believe that customers drift away because they are going to the web to buy.
Some customers will be loyal, others will not, said Grey. “You have your penny-pinchers who will go online to get the best deal or the people who will come to you because you have the best solution. There is change all the time, and if a new IT manager comes in and then decides to go somewhere else, there’s nothing you can do about it. You just have to pack up your tent and move on.”
Gibson suggested that the problem may be that resellers have not accepted that the dynamics of the market have changed.
“Perhaps we have this feeling left over from years ago that this is the way we have always done it, and psychologically we are incapable of letting go of it,” he said.
One way or another, it seems, the nature of the relationship between vendors and partners, and the way in which the whole channel works for the SME reseller, is going to look very different in the future.