The number of resellers and companies who provide value-add services is steadily increasing and competition for business is becoming fiercer.
In such a climate, differentiation is crucial. It is something that all employees as well as principals should be thinking about, because differentiation invariably comes down to people and skills. If you have a talent which could make your employer's business a bit special, and it has not been noticed, then you should be pointing it out.
For the managers of a reseller or service firm, the screws are tightening.
Not only do they have to take advantage of everything which could separate them from the crowd, they are finding themselves in competition with large vendors who are moving into the services business.
The first step in setting your business apart is finding out what the competition offers. A clandestine SWOT (Strengths Weaknesses Opportunities Threats) exercise on your competition can prove just as useful as one carried out on your own company.
Tim Hall, marketing manager of Simmons Magee, says that if you carry out a survey of other resellers and integrators in your geographic vicinity and in your focus vertical markets you will probably find that they are all much the same. "Unless they are working on their differential there is a tendency for all resellers to be similar, except for the people.
That is the main difference, and it can be a strength or a weakness," he says. One reason for the similarity is that many resellers buy from the same vendors and distributors and have the same sales collateral material.
"Unless you are buying from a vendor who is thinking very laterally and is able to provide the reseller with distinct differences which can be passed on to the customer, they will inevitably be very similar."
One vendor which has addressed this problem is Unisys, not known for its reseller or third party partnerships but now working hard to recruit good Vars. "It will be difficult for us to enter relationships which are dominated by IBM and Compaq and other hardware vendors, but in many ways we are content to be accepted as the second or third provider at this stage. We believe that when resellers and Vars realise what we have to offer they will switch to selling more of our products," says Fred Ruessli, vice president of Unisys' computer systems Europe group.
Vendors have as much of a challenge as resellers to establish a differential between themselves and their competitors. Unisys is seeking to provide a better service to its third parties by smoothing the path to securing deals. Martin Sexton, European marketing director of Unisys says: "We are undertaking several initiatives which we believe are unique, one of which is helping Vars and integrators at the sales proposal stage. They can take advantage of our resources to make a proposal which is slick, professional and puts across all their strengths in the best possible way." Sexton adds that Unisys makes all its marketing and technical executives available to third parties. "They only have to ask," he says.
It is this attitude of bending over backwards to meet customers' demands which often separates the highly successful Vars, integrators and resellers from the rest. "The service culture is one which used to be stronger in the US than in the UK," says Unisys' Sexton, "but that is changing now."
It is sometimes necessary for one company to provide different marketing to meet the specific needs of different segments or vertical markets.
The skill of differentiated marketing is to bring about as perfect a match as possible between the reseller and its different target markets, which may be quite varied. The telecoms market, for example, has an emphasis on Internet skills and cabling, while the manufacturing market will be looking for EDI skills and for software which streamlines the manufacturing process. One reseller can provide all these, but has to wrap them up and present them differently for each customer.
Stephen Allott, director of Micromuse, points out that the emphasis of marketing differentials should vary depending on which stage the technology is at in its life cycle. He says: "At the beginning when it is the innovators who take up a new product they are not really looking for technical skills because they will have those themselves. But as a product moves along and enters the commodity market then you will need to provide more technical support because the customers are less technically competent." Allott says that marketing differential has definite stages to match the product life cycle. He says: "Early adopters will take risks but once you are in the volume business and are out to develop long-term loyalty your priorities about the services you provide should be different."
As Simmons Magee's Hall points out, depending on people can be risky.
"A business which markets itself as a specialist in one field or another is depending almost entirely on people and their individual knowledge and skills, so it is crucial that staff turnover is reduced to a minimum."
Nick Earle, European marketing and channels director for Hewlett Packard says: "When staff change employers two things happen. First the experience they acquired at your expense will walk out of the door with them, and second their replacement will have to be inducted into the company and the job."
Conventional wisdom today has it that a stream of new faces in a Var firm can be a positive indication that the company is growing and can be a stimulus for business rather than any indication that the culture is unhappy. But continual job movement undoubtedly has an insiduous effect on productivity and competitiveness. Most computer industry companies are themselves young, and few staff have been in the same job for more than ten years. If your business can offer any longevity, either in the business itself or the individuals within it, that should certainly be exploited.
Companies generally build their success by adding one experience to another, and when there is high staff turnover this experience is often lost. Incoming staff are rarely able to replace their predecessors to the degree of offering the same experiences unless selection is careful, lucky or both. So by aiming to reduce staff changes by ensuring that the incumbents are happy is extremely important.
The role of the choice of companies which the Var buys from cannot be underestimated in the process of establishing differential. As Simmons Magee's Hall says: "Resellers are not in the business of taking products to market and they have to rely on the vendors to raise market awareness.
If they have hitched their wagon to a vendor which is promoting well and has good products, and passes plenty of leads back through to the channel for fulfilment, then the Vars are going to benefit. There is little point in reselling kit which no-one has heard of, even if it is dirt cheap.
They may as well be assembling components themselves."
Vendors also need to be easy to do business with, says Hall: "What is the point of a Var reselling kit which is hard to get hold of and is badly supported? Obviously, the Var has to be adding value to kit which is reliable and which does not have supply problems," he says. "If the reseller is not careful there can be costs to the process of adding value. The Var has to look at which source of product is going to benefit them most and allow them to differentiate themselves, not just join the herd, but you don't want a product line which is so unusual that customers are wary of it."
Jenny Searle, business development manager of services at Oracle, agrees that establishing a differential depends upon an understanding of what makes a customer buy. She says: "Those firms which have a clear understanding of the pressures and restraints of the specific vertical markets will have more success in doing business with them." It is also important to take advantage of previous knowledge with your company, she says. "Some kind of knowledge database which can record all previous encounters and experiences is invaluable," she adds. There are methodologies which resellers and Vars can use to ensure consistency, so that it does not matter if there are staff changes or temporary shortages. "It is crucial to maintain the confidence of your customers," says Searle, "because these are competitive times and there is always a competitor ready to step in."
Searle says that although vendors have a role to play in helping resellers establish differential, it is not an obligation. "Third parties should not rely on Oracle to do their work for them, but there is much that we can help with." Searle says that Oracle offers to share its marketing platforms with its third parties, which can bring mutual benefits.
Peter Turner, marketing director at Oki says that the trick in achieving differentiation is to be the same but different. He explains: "People want standards and they want to feel safe, but you also have to offer them something over and above the basic product and service offering." He adds: "Sometimes the differential can be cosmetic, such as sponsorship." Oki sponsors yachts which race around the world, and Turner believes that the exposure that such activity brings make it stick in people's minds.
"The ability to customise basic products and deliver something tailored and unique is something that many customers are looking for," he says.
Offering tailored products and services allows resellers and Vars the best opportunity for retained margins, says Turner. "But there also has to be a service culture and an attitude which makes it clear that the customer is the most important part of the picture."
Ken Baynton, managing director of BTN which specialises in WAN solutions and mass access teleworking, agrees that the key differentiator is always people. "We invest in training people so that they are not only able to sell and support our products and provide long-term support to our customers, but are also able to understand their businesses too. Selling IT these days requires an investment in the pre-sales process and you have to provide a level of consultancy which is free in order to establish credibility and competence. It is the only way to gain the confidence of a new customer, and the customers respect it," he says.
Baynton is unconvinced that accreditation and certification from vendors are worthwhile. "There may have been a time when customers would look for a badge, but with one or two exceptions they are not particularly useful any more. Some of the best Vars, because they only buy small amounts of products, have to source through distribution, while some of those who are allowed to carry accreditation badges are often volume resellers and do not offer the services and consultation skills that customers are looking for," he explains.
The smaller organisations are often the most responsive and able to provide the quality and type of service that customers are looking for, perhaps because they are local, but they do not have the high level accreditation badges which were in vogue at one time. "Post-sales contracts for support and training are the jewel in the crown as far as resellers and Vars are concerned"' says Baynton, and should be what every Var sales person is aiming at. "Price is certainly not the most important issue and any Var which tries to be the cheapest is not going to get very far," he adds.
The philosophy of competitive prices which do not make margins too narrow and staff which are highly skilled has been working for BTN, which finds itself growing at 50 per cent per annum. "We have some big customers," says Baynton, "and I would say that the only differential which counts is to have staff which are committed and experienced."
Dell Partnerships Mark McCarthy, sales manager for Dell's Partnerships division says that although perceived wisdom has it that no-one makes any money out of selling hardware, he has evidence that there is still plenty of mileage in the hardware market. "It is certainly very competitive," he admits, "but for software houses and systems integration businesses where there is plenty of value add to the basic product, hardware sales are extremely buoyant."
Dell is of course the firm which brought us the off-the-page sales model, but it is broadening its market to include server products and more conventional corporate sales teams. It is also extremely committed to the indirect channel, although managing director Philip Van Houtte maintains that the company will compete with everyone and there are no areas of the market which are out-of-bounds. This refreshingly frank view is taken pragmatically by Dell's resellers. One said: "Well it's better than some of the other vendors who claim not to compete with the channel but then do. At least you know where you stand with Dell, and although it is obviously extremely disappointing when they try to sell cheaper than you can because they can ultimately offer lower prices, you just have to stick to your unique software or services to provide differentiation." This reseller, who asked not to be named, said: "At least Dell's products are well known, are well regarded for reliability and are quite innovative, and you just have to hope that your customers are not going to try and source direct from them.
Although, to be frank, I don't mind if they do. It is one less thing we have to worry about."
Responding to market demands for reliable service can be a good enough differential, according to Nicola Donaldson, finance manager with Head to Head, a start-up reseller business based in the West Country. She says: "We find that many customers come to us after buying off-the-page and finding that they need post-sales support and service. So providing those services is a good differential for us."
The shape of the business can be defined by the particular demands of the customer base, according to Donaldson: "It's all about knowledge, and when users start wanting to set up networks they quickly realise that the extent of their knowledge is not enough."
It is also important to be local, she says: "Many of the large service companies or the large product vendors do not have a local presence, and customers want to have someone in the vicinity that they can easily call out if they need to."
Head to Head offers its customers a straightforward two-price option - without support at a competitive volume box-shifting price, or with contract support which ensures that there is technical and software support whenever they need it. "Most customers take the latter," says Donaldson.
Differentials have to deliver what customers want. It is no good putting fresh flower displays in your offices every week and seeing that as a differential between yourself and another Var based in the same area.
Martin Sexton of Unisys says: "Customers are looking for certain fundamentals and Var's differentials should meet those needs."
He says: "They need to feel secure and to know that their IT is going to be reliable and give them competitive advantage. They don't want to have to worry about a system crash or investing in a system which is not able to be updated.
"Second they want to be recognised. They don't just want to be another customer and have to wait for attention, they all want to feel special.
This is why smaller local resellers have such an advantage over the big vendors, who may have the name and reputation but that means nothing on a local level.
"Third they want convenience. They want one supplier to take responsibility for their IT and to feel confident that their supplier takes the initiative to keep them informed of the latest innovations.
"And last they want a competitive rate. Although many corporates understand that they have to pay more for service and attention they are still concerned about budgets and will have to explain if the charges are out of line with industry standards. But you can make a rate more competitive by presenting it in terms of the value it offers, perhaps in savings made elsewhere."
Sexton adds: "It is also worth bearing in mind that all your customers will have certain imperatives which your services should aim to help.
The first is profit and you should be helping them achieve greater profitability, and the second is growth. The IT you put in should not just be useful now but there should be a clear route for the next ten years for the IT to grow and change as the customer's business grows and changes. Another is cost control - every business principal is concerned about cost control and you should demonstrate that you are aware of that." It is only by a service demonstrating an understanding of their customers, says Sexton, that a true long term relationship can be built which will withstand the test of new technology and competition.
BTN 01734 774646
Dell 01344 860456
Head to Head 01872 223100
Hewlett Packard 01344 360000
Micromuse 0181 875 9500
Oki 01753 819878
Oracle 01892 400000
Simmons Magee 0181 490 4012
Unisys 0181 453 564.
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