Customising your customers
Convergence can often lead to confusion, especially for customers in the small business sector who are unsure what the term entails. Nick Booth examines how resellers can successfully target the SME sector in the first of our five-part series
Convergence is a word that has been cheapened by over-use. In the communications industry, it was always taken to mean the union of voice and data over the same network. But ask an IT reseller what convergence means and they might understand it as something to do with the merging of printers, faxes and copiers. Consultants have been known to use the word convergence to describe the consolidation process that is currently happening in the business-intelligence market.
So the first rule of selling convergence, especially when selling to the small business market, is define your terms. VARs must make it clear whether their service is about bringing voice, data and video together, or whether they want to bundle that with a layer of security. Or, as companies such as Alcatel understand it, convergence is about bringing communications and applications together into a single cohesive unit.
It is ironic that convergence, which is ostensibly about simplifying the business process, is causing so much confusion to both buyers and sellers. Instead of rationalising all of its elements into one manageable platform, the IT industry seems to be conspiring to send our collective imaginations scampering off in different directions.
SMEs are notoriously difficult to sell to. Typically, they are far too busy fighting security issues or clearing unwanted material off the company servers to have a conversation about integrating voice, video and data,let alone trying to install these solutions.
As this How To Sell series will show, the understanding of convergence changes dramatically as you move between SMEs, corporates, enterprises and the public sector.
Everyone defines SMEs differently. For example, IBM defines an SME as being any company with less than 1,000 employees. It is no surprise then that IBM did not enjoy the success it had predicted in selling convergence technology to SMEs.
The key requirement for a reseller that wants to sell to SMEs is to find a vendor that has a realistic idea of what an SME actually is. Only then will a VAR get a workable package they can take to market, and perhaps even make some money from.
But it will not be easy, warns Ann Guest, director of training services at 5i, a Cisco partner in convergence. Guest trains resellers on selling into various sectors.
“With SMEs, you have to make sure that the cost of sale doesn’t get out of hand,” Guest says.
In general, small businesses do not trust technology. No one does when they are spending their own money. If the owner of the company is not making the buying decisions, they will be the one who signs off the purchase. In most other sectors you at least have the luxury of risking someone else’s cash.
The good thing about SMEs is that they could, potentially, give a reseller a quick decision. This is because there are rarely more than one or two people in the business involved in buying technology. Once they have made their mind up, the reseller should be in. Sadly though, things rarely go so smoothly. This is especially true when convergence technology is involved, because it is such an unknown quantity. Also, the conflicting messages that come from competing vendors do not help confused buyers see the picture any clearer.
“You need to balance the advantages of lowering the cost of sale with the amount of reassurances and hand-holding that an SME end-user needs,” Guest says.
This is the reseller’s job, and it is going to be difficult. If it was easy selling to SMEs, most vendors would do it themselves. That said, vendors still need to make it easy for the channel to make money, or nobody would bother.
So how do you spot a vendor that has the right channel strategy to hit the SME sector with its convergence technology? The answer is to find one that has simplified the sale. This way it is a straightforward purchase and the delivery is painless, according to Bob Tarzey, service director at research firm Quocirca.
“On the SME front, especially at the low end, convergence is more about flogging hosted services,” he says. “There are hosted IP-PBX facilities now, so VARs can leverage the benefits of hosted delivery. There are no upfront charges. Instead there is a monthly service charge per line.”
Naturally this requires the SME to have an IP network and connection to the outside world that can handle this and other IP-based applications. The VAR might need more than just voice over IP (VoIP) to justify the benefit, as Tarzey points out. And of course, upgrading the network and connection is an additional source of revenue.
“Resellers might need to look at their portfolio and set up some partnerships with hosted providers of various services to build an effective and attractive set of offerings,” Tarzey adds. “But once they are actually selling hosted offerings, VARs will benefit from a regular revenue stream for that service.”
Lee Perkins, director at distributor Azlan UK, agrees. “SMEs will buy convergence only as a managed service,” he says. “But that is good for resellers because they can get an easy package to resell.”
Selling to SMEs should never be a technical sale, according to Guest, because they tend to trust only proven technology. SMEs want to see a case study on a company similar to theirs that has already achieved a successful installation. In addition, they tend to trust only brand names and technology that is practically a commodity. The only convergence solution that fits this description is converged voice and data. So that means IP Centrex services. IP Centrex is a phone service where the IP-PBX is based in the phone company’s facilities, and connects over the LAN rather than telephone wires.
That is easier said than done. Some managed service providers that sell IP Centrex solutions are already running into financial difficulties. Choosing the wrong supplier could be fatal. Even if a reseller does manage to partner with one of the more financially stable suppliers, successfully selling IP Centrex services is not always as easy as people might lead you to believe.
As a VAR moves up the value chain, the margins should get easier. Corporates usually have an IT specialist, so getting the message across is easier. However, they are also likely to have a telecoms manager of some description. Selling convergence is like walking across a political minefield: are you looking to put someone out of a job?
Don’t worry about that, says Guest, because a reseller needs to engage management anyway, no matter what size of company. “Selling convergence solutions to corporates is not about selling technology; it is about changing the way they do business,” she says. “You need to win the hearts and minds of the company strategists, and spell out in easy steps how they can get there by convergence.”
This sounds easy enough. All VARs would like a crack at this, if the margins are that easy to attain. But it is not that easy, according to Tom Sloan, managing director of WiredRed, which sells convergence conferencing services to corporations.
The problem is, the further up the corporation you go, the more likely it is is that a big vendor is already entrenched there. The IT manager is probably already going to Kempton Park with the account manager from Cisco every month, and enjoying golf days and seminars in exotic locations. They are not going to give those freebies up readily.
However, medium-sized corporates offer a glimpse of an opportunity for a VAR more used to selling to the smaller business.
“There is much more of a departmental opportunity in terms of convergence for medium-sized businesses,” Sloan says. “If, for example, their sales team can benefit from increased communication with their head office and the regional teams, they might listen to what you have to say. Or if a marketing team can liaise with internal and external contacts at a minute’s notice with important deadlines looming.”
However, he warns that there is likely to be resistance based on the argum ent: we can already do that with phones and emails. Therefore, convergence needs to be sold as a business enabler to SMEs.
“Resellers stumble here, largely because the two opposing sides – the telco resellers and the softswitch IP-PBX resellers – are fighting to replace phone systems,” Sloan says. “They should be talking about enhancing the company’s efficiency, competitiveness or time to market.”
Perseverance is paramount because there are still plenty of people with their feet under the table who are selling convergence badly. They will soon be ousted, which should provide new opportunities, according to James Ferguson, managing director of Zyxel.
“There is more to convergence than lower call costs,” he says. “But many resellers focus on this topic because they believe this is a selling point. However, customers are as interested in the extra services that convergence gets them as they are the price. Once again this is evidence of how important education is in the channel.”
But if SME customers want hand-holding, how is this different to the larger companies? One company that is aggressively focusing the enterprise sector is Alcatel, following its merger with Lucent.
On the assumption that it must have all of the latest intelligence on how to sell to this sector, there is probably no one better informed about selling to enterprises.
Peter Tebbutt, UK marketing director for the enterprise solutions division at Alcatel, says: “Large companies already have a good understanding of the benefits of convergence. It is widely accepted in this space. Historically, convergence was about reducing cost. But increasingly it is being adopted to aid and improve business processes through the adoption of collaboration, fixed-mobile convergence and mobility.”
It is this access to anyone, any information, any time, that is a selling point for SMEs. Web-based collaboration tools are now creating demand by allowing employees to gain quicker access to critical information and colleagues. It does not matter where they are, they can get the same infor mation. The time and money this saves SMEs is a consequence of reduced call costs and less telephone tagging. This results in quicker decisions being made and projects being concluded faster. But is it easy to demonstrate this rise in productivity?
Yes, says Tebbutt, if your first project is well planned and identifies a specific bottleneck situation that can be resolved.
“Resellers that sell into large enterprises must ensure that they are selling convergence technologies that are tailored specifically to meet the requirements of each individual company,” Tebbutt says. “A one-size-fits-all approach will not work the way it does in the SME sector.”
But beware: resellers can come unstuck if they become too ambitious.
“The management issues of information and communications technology can often be highly complex in large, multi-site organisations,” Tebbutt adds. “As a result, it is vital that solutions are easily integrated.”
VARs might have more chance of getting a foot in the door if they approach companies with a niche product, claims Geoff Seabrook, UK managing director of Visual Nexus.
For all businesses, the prospect of moving to VoIP includes the issue of incorporating new applications. The actual switch to VoIP itself can almost never be justified on a simple return-on-investment basis.
“Sometimes, implementing VoIP within an SME will reveal unknown network problems,” Seabrook says. “At best this will lead to initial teething troubles and frustrations. At worse it will lead to significant delays and cost increases. There has to be some real benefit in the long term.”
One key new application that is enabled by VoIP is video telephony. This can range from simple video phones – or soft phones on the desktop with a video capability – to sophisticated video media servers plugged into the IP-PBX. These allow multi-point video calls and calls from desktop video systems to work on existing video conferencing room systems. Visual Nexus and OKI recently announced such a system.
Despite being well suited to convergence, SMEs are sometimes reluctant to install such systems. Resellers need to be more convincing of its benefits and encourage companies to embrace new technology.
Sam Sandercock, head of channel sales for Orange, said: “The fundamental driver is understanding what the requirements of the customer actually are, and not just being concerned with trying to sell the technology.”
The SME sector is the market with the potential to gain the most benefits from convergence technology, and ironically is also the one that this is least apparent to. Most SMEs don’t need, and cannot afford, a complete network upgrade. Smaller companies are more suited to a gradual approach that can grow with the business – a convergence solution that evolves an existing infrastructure.
Convergence means different things to different organisations. Some small businesses see the term as synonymous with multi-channel communications, giving them more choice over how and when they can make contact. Other SMEs think of the ‘single network’, or of making cheap calls from their PCs.
“It is important that vendors and resellers understand there is confusion in the SME sector, and that they focus on what customers really want: a viable business solution that benefits their bottom line,” says Isabel Montesdeoca, marketing director at Aspect Software.
Convergence is a term that describes a technology trend, not a business solution. It is really down to the skill of each individual reseller to determine how appropriate convergence is to each unique small business customer situation, and at what speed it should be undertaken.