If resellers are not providing services by now, then they are eithertrying to convince the customer that they need to pay more for it. on the way to going bust, or just aren't tuned into the way the market is heading.
Everybody knows the score by now, there's no money to be made from hardware, which means profit has to be made from the support and other services - whether that's software development, system design, installation, training or maintenance, or whatever else is on offer - providing, of course, the customer is willing to pay for it.
Graeme Smee, managing director of distributor Data Connectivity, says: 'Service and support are both the biggest opportunity and biggest threat for resellers today. An unpredictable industry, combined with the unpredictability of users, makes it one of the biggest issues and challenges we face.'
Although getting customers to pay anything for service always used to be a problem, that is changing now, according to Seamus King, sales and marketing director at Greengage Computers.
King says it is getting easier to sell service and support to the user and that the support business is beginning to split off from the hardware sale: 'It is getting better. There is an inclination for users to source hardware and software at the cheapest price which normally - being totally honest - is not from the reseller. They then struggle to get it to work.
When they call us they know we didn't supply the goods and know they'll have to pay.
'In fact, sometimes it is better to say, "Look, get the software or hardware from whoever you want - this is what you need and we will charge you X to install it." We're then seen to work in its best interest - what we always want to do,' says King. 'For example, we can supply a printer at £200 and we make between £20 and£40 on it. The customer then expects us to install or help install it. Which we do. If they go elsewhere to buy the hardware and then come to us, we charge a half-day rate of £250. What would you rather pay?'
But Chris Preece, managing director of Telford reseller Honeyframe Computer Services, says that's not always possible. 'What the customer wants is a package and for the service level agreement (SLA) to meet its requirements.
Do people expect support to come as part of the deal? Yes, and it is a problem, but you have to make sure that the thing is sold properly. You are always up against people's perceptions of what they're going to get and the reality of what you can deliver.'
Another SME reseller suggested that what resellers might have to do is pin customers down to written contracts and draw clear lines about what's included and what's not. 'I think users are now more educated and prepared to pay for support. But one difficulty we have is defining exactly what is covered in a contract and what is extra. It's very important for resellers to define their contracts precisely and to ensure that users are clear about the service they're getting.
'In the future, resellers will have to be upfront with their customers about margins and agree some sort of standard on the cost of hardware and software and agree a fair labour rate for the job with no so-called freebies,' he adds.
The term service is all too often thrown into the negotiation, pre-faced with impressive pronouns that can be left open to interpretation. The customer's idea of what he is getting may be very different to what is provided. But it is always tempting to sell high in order to get the business and this is a prevailing problem for resellers. 'You have got to be careful.
You don't want to put people off the sale - it is a tricky balance,' says Preece.
Customers always look for a good deal but, at the same time, want good service and support. Resellers can very easily undersell themselves by offering the moon and the stars at a low price - just to get the business.
But they can just as easily over-sell and end up putting off budget-strapped SMEs because the price is too high.
It's a problem that Neil Sibson, technical director at reseller Pipeline, understands well. 'I was previously involved in a business that focused on hardware sales as well as service and support and it became clear to me that there was a lot of pressure building up. People are reluctant to give up the volume,' he says. To escape from the hardware margins trap, Sibson and his partners subsequently set up a business in Burton-on-Trent which specialises in providing internet-based systems and services.
Dealers must avoid robbing Peter to pay Paul, says Smee. 'Resellers tend to be small-minded about this issue and fall into the trap of trying to make no margin to get the sale when it's really the lifetime operating cost of the system that matters.'
That may be true but some disputes about service, especially with novice users, may be unavoidable. Ian Brooks, managing director of the South Wales SME dealer, IB Business Developments, holds this view: 'SMEs are different. They have higher perceptions than IT managers because they don't know about the technology. You always lose customers in the baptism of fire that is the IT market.'
It is common for the dealer to be summoned into the customer's office a few weeks after installation to explain why the system has not delivered the benefits they perceived it would deliver at the outset. And those expectations, despite the reseller's best efforts, are often totally unrealistic. 'Because they're IT literate, we don't always survive that meeting - but it's all for the wrong reasons,' says Brooks.
'Some users - even the smaller ones - do understand this and will listen to the arguments,' says King. Return on investment is a useful tool for selling services. 'When a small business knows that by purchasing a service for £1,000 it will save £4,000 in three months, it likes the option,' he adds.
For example, a fax server costing £2,500 - including the installation and training - might deliver a gross profit of £1,000. If the customer has 30 users all sending four two-page faxes a day, 240 pages a day could be saved on paper and printing costs alone. It saves time as well - cutting out the need for the user to go to the printer, collect the output, then go to the fax machine, key in the numbers and collect the fax once it has been sent. If these five minutes are added up, 10 hours every day are saved. If staff costs are £10 per hour, £100 a day could be added onto the profit - resulting in a massive £2,000 per month saved.
But this example does rely on a piece of kit going in - and it is only one project. What resellers need is more regular income from on-going services. Support and maintenance are the main areas of potential here.
But getting them to buy into this idea is not always easy, says Sibson: 'Customers are quite happy to pay for a project but don't always see the value of ongoing support. We try to do a good job and deliver above customer expectations. People often have a lot of pent up needs and if you can keep working with them you can perhaps get to a point where you can have a conversation about whether it should be covered by a maintenance contract or not.'
It's only after the initial project is completed that SMEs in particular start to see the value of services, says Sibson. Without the regular contact, the technology becomes a little harder to manage and problems aren't solved as quickly. If SMEs have become reliant on their IT they can be persuaded to pay for a support or maintenance contract after trying to fend for themselves for a few weeks.
Support is already integral to many reseller businesses and, if it is clear that it is a service, can be sold separately, according to Andrew Bryson, technical director of CQ Technology: 'Support revenue is the main constant in our cash flow and it helps us build a healthy balance each month. We offer a specialist service and our customers almost expect us to support them.' But it's not the selling of service and support that's the problem, it's getting the job done cost effectively.
'Service and support is easy to sell for the small boys like us. The difficulties lie in the delivery. As most of our customers are also small they expect us to think that they are our only customers and that we should drop everything to sort them out. But it could be argued that this is more of a management issue from our end and that we build too high an expectation,' says Bryson.
Smee admits that this is a problem and is the reason why dealers should work with distributors that are willing to help them. 'Instead of trying to charge for services retrospectively, resellers should be looking to collaborate and getting to the point where they can set up their own service infrastructure,' he says. 'They should outsource some of the service functions until they have a certain amount of business and can build up their skills.'
Resellers will have heard this argument before but it rarely works in practical terms. 'If resellers, don't add value in the first place what are they offering? asks Preece. 'It's all very well for distributors to offer help but there is always going to be the suspicion that they want all of the business.'
It's not just dealers such as P&I Data Services that have had to pull out of PC sales. Many distributors are also having serious problems with margins on hardware at the moment. No one, it seems, is immune from margin erosion and distributors are now turning to services themselves.
Chip distributor Memory Plus for example, recently launched a managed services scheme called AUDIT.mem, covering everything from the initial specification and procurement of kit, the installation and support, down to the buy-back of kit.
David Flack, marketing manager at Memory Plus, says: 'We have realised that dealers have smaller or non-existent margins on hardware and have to add value where possible. We've decided to offer a free service to the dealer that they can then offer to the user.'
Smee believes that distributors should provide the skills and service resources needed to support users until the dealer has strength to do it on its own. The trouble is that it's been heard before and with margins under pressure, are distributors really in any position to provide adequate support?
Geoff Goddard, marketing manager at Network Alliance, says that all of the resellers' value add is really the service and support it provides anyway and putting a complete package together is part of the deal.
'We bundle them together with the product to complete a package for our clients. 'There are two good reasons for doing this,' says Goddard. 'Firstly, there's a definite skills shortage. We pass our skills on to the client as part of the package we offer, wrapped in the service and support. Network managers are under such strong business pressures, that it is in our interest, if we are seen as the source of knowledge for new technology, to make their lives easier. Secondly, we want to keep our customers, making it unnecessary for them to look elsewhere. This is how we will ultimately grow,' he adds.
Customers can still be scared off by the complexity as much as the cost of the service, says Goddard. But this can also create further service opportunities. 'We often find that clients want the product or service but don't understand how it works or why,' he adds. 'We then run the risk of losing a sale from the fear factor unless we provide training, which then becomes our higher level of service and support. It helps us if we educate as many people as possible in our field.
Resellers may have to go beyond the concept of selling a service because the implication is, and distributor schemes tend to highlight this, that the service becomes a package. But levels of expectation of for services are always going to be higher and harder to define - at least with a piece of software it either performs or it doesn't. Services are never like that and consequently they are expensive to resource and difficult to manage.
In the end it comes down to the time of the skilled and experienced individual that the dealer makes available to the customer. What every reseller is selling is not just service, but time. Getting smaller businesses to pay for it will never be easy but until they are prepared to pay, they may not get the services that they really need.
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