GECITS expands in services sphere

European managing director of GE Capital IT Solutions, Hans-Dieter Koch, talked with Wale Azeez about UK plans.

PC Dealer: Briefly summarise the last year for GECITS.

s-Dieter Koch, talked with Wale Azeez about UK plans. Hans-Dieter Koch: We have moved from being a PC reseller to becoming an IT factory. We've had services growth, much stronger than in products and in line with the industry as a whole. We used to be compared with Computacenter, now we're compared with Debis (Daimler-Benz Inter-Services).

Going back two-and-a-half years to when we launched in Europe, we used a platform in Germany (Compunet, Germany's largest reseller) that had a large service component. We effectively bought the company's sales power.

Our entry was via the product. Later, we built in services that introduced high profitability to our customers.

In the UK, we have a satisfactory services share.

How much?

More than Computacenter and lower than in Germany.

Meaning?

This industry has a disadvantage in that it is so cautious. Close to 20 per cent, but a little less.

Let's discuss GECITS' strategy of employing more than one managing director per subsidiary. Isn't that overkill?

Not at all. We have one focused on products and one on services. It helps to have one focused on services, who can address infrastructure and the other on rollout. Sometimes we have three managing directors in branches with more than 500 staff. The industry is fast moving - you can't run it with a dictator at the top.

What unique problems did you face in regenerating and integrating Ista?

Ista, basically, was bankrupt when we bought it about a year ago. We brought in Michel Madec, an ex-Hewlett Packard services manager, as chief executive. It was profitable within the first year and is now number two in France.

The company had about 50 agencies dotted around France. What have you done with them?

The French agencies were consolidated to about 15. Offices with only one or two staff were closed.

Let's talk about business and economic trends. Do you think there is a recession on the horizon?

I don't see a recession in this industry or in Europe at all. But competition within the industry will increase because Dell and Fujitsu are forcing the industry to work on lower margins. Dell delivers cheaper than IBM and Compaq, which, in turn, forces them to lower margins. There is even less margin for the PC channel and that's forcing the industry to go into services. The Compaq-Digital acquisition changed the landscape. What will the strategy be for resellers that have built their businesses on selling PCs? The vendors won't go away, they'll just earn less from PC sales.

The reseller partners then get into competition with their vendors on services.

What can be done?

The world of networking products is a world of its own. No Dell, Siemens, Compaq, perhaps a bit of IBM. That's why we believe a systems integrator has a better position. Vendors cannot deliver the whole product and service range. When vendors were able to dominate it was much more difficult.

This leads to the question of the threat of the hybrid channel. How is GECITS going to address that?

Hybrid channel strategies won't make a big difference to us. We are used to seeing vendors as partners and competitors. The difference is that Compaq is a new competitor. The only reason we get to the customer is because we have the services strategy. Compaq is just one more competitor and it needs us. It need us because of our customer base and we need it to supply the products our customers want.

So you generate your own leads?

Certainly. Vendors only come to us because we have the customer access, otherwise they'd go direct. If we depend on them we will not survive.

If the vendors had interesting leads, they would keep them to themselves.

What do you think of the ICG (International Global Alliance)?

The ICG is a strong marketing tool, but it has no connection with customers.

You have to be sure that customers are connected in Europe and connection cannot be by fax.

What is GECITS' game plan?

We will focus on two things. The bread and butter stuff - Compaq, HP, Siemens, Toshiba, PCs and small servers - and the internet. In terms of the internet, it will be PCs, all area networks - Cisco, 3Com and Bay - and larger servers - Sun, HP, IBM and Compaq Digital. With these three areas, you have covered the internet market. We're interested in the 'bigger' internet; that is business-to-business, bank transactions, etc - the companies that deliver the technical availability are the strong ones.

Any acquisitions in the pipeline?

Our focus is to enter the Eastern European market a little bit this year for a foothold because our customers are going there. We will follow them.