"The main concern for any Var is to be as near to your customer as you can, especially if your business is heavily service-based," says Mike Briercliffe, director of Leeds-based reseller Graham Technology, "But it has to be within reason because there are problems with opening offices all over the place."
A reseller that Briercliffe previously worked for went what he calls "regional office barmy" opening a string of satellite offices everywhere that it found new business in a desire to reassure the large accounts that it was a serious player with massive geographical coverage. The result was a logistical nightmare. "In the UK distance is not a great issue for customers," he says. "In the US they actually have nationwide resellers with fewer branch offices than UK resellers have."
Although it can be argued that these US resellers have a wider market on their own doorstep, it also confirms that the UK channel is fixated with having regional offices covering the whole country. "The resellers that have the most need for regional or satellite offices," says Briercliffe, "are either the large volume people like Computacenter and SCC so they can make more sales, or maintenance and support companies that need to be on the customer's doorstep."
The one group, he says, that do not need regional offices are niche Vars that specialise in a particular vertical market. The argument goes that there are two ways that you can show a customer that you understand the needs of their business, the first is by being in the same location and having a reassuring physical presence, and the second is to be able to supply a tailored product that does exactly what the customer needs to be able to run their business efficiently. It is the latter that Vars can provide, and without the expense of having to open satellite offices.
Although there may not be compelling geographic reasons for opening regional offices or extending the business - the UK is not large and has pretty good communications and infrastructure - there may well be cultural reasons why some resellers need nationwide coverage. That is caused by the way that the UK breaks down into a north/south divide with both wildly differing cultures and history and a regionalism that encourages businesses to buy locally. But this regionalism is starting to change, even in areas that have strong traditions of local purchasing. Sandy McNeil, MD of Glasgow-based reseller Dunedin System, says that most of his company's business is in Scotland, but that the number of purely Scottish-based Vars is diminishing, as UK resellers buy up Vars and foreign businesses buy up local customers.
"Customers here used to have a strong preference for local suppliers," he says "But companies are internationalising - being bought by international companies - and the same thing is happening to the resellers that supply them." Again Scotland has suffered disproportionately from this, with indigenous businesses being bought to become merely sales outposts for far-flung businesses. Although staff at the customer site keep their jobs, and the business may even expand, purchasing decisions tend to be taken away from the site, at the distant head office. This breaks the connections between local employers and local suppliers.
This is not always the case of course, and many international companies (particularly) US ones do try and use local suppliers. But it is an increasingly common problem. Smaller Scottish resellers have also been hit to some extent by the massive shake-up in local government over the last couple of years, which has seen the move from a large number of two-tier councils, spreading services between them, to a smaller number of single tier 'super-councils'. These new councils are far larger, have bigger budgets and are more likely to look for suppliers that can offer volume deals which makes it harder for small Vars that have built up local contacts with councils over the years to keep contracts. But McNeil says that small Vars can still work with the councils and larger suppliers to fulfil and support orders. "That way both sides get the benefit," he says.
Another cultural issue, when it comes to the difference between selling PCs in the north versus the south, is that (according to the 1995 Banner Survey) a far higher proportion of PC users in the south are networked and also run Unix systems. In London 15 per cent of all companies have networked PCs, compared to just 4 per cent in Scotland. These figures can be read a couple of ways, showing both that Scottish resellers have not sold as well as English ones, but also that there is a good opportunity for Scottish networking resellers as the businesses will eventually catch up.
Overall in the UK, 48 per cent of all businesses with between 20 and 49 employees have still not networked their computers. One reseller that has benefited heavily from the policy of large multinationals to use local suppliers is Aberdeen-based Abtex, the largest reseller in Scotland.
Fuelled by the North Sea oil boom, Abtex has become the supplier of choice to BP, Shell and Royal Bank of Scotland since starting in 1979. Whilst Abtex clearly has that part of the market sewn up, it realises that it has to expand outwards if it is to keep the momentum going and increase volume.
Abtex MD Jim O'Hagen said that it wanted an 'Abtex-type' partner in England to boost its corporate sales. He said that until 1988/89 90 per cent of its business had been in Aberdeen, and since then it had moved to Edinburgh, competing with corporate resellers like SCC and Computacenter. O'Hagen says that the large resellers had been able to get a foothold in Scotland because of their size, but that they had not necessarily found it an easy market. "They didn't understand the local economy and lost market share because of this," he said. In 1995, for example, Computacenter shut down its Livingston-based logistics centre. But it is the big resellers that have broken down the north/south divide.
Birmingham-based Specialist Computer Holdings (SCH), the parent company for reseller SCC, the Byte superstore chain and distributor ETC, was one of the first to 'go national'. In 1995 it consolidated its position north of the border when it paid an undisclosed sum for long-established Scots reseller Scotbyte. Scotbyte, which had offices in Glasgow and Edinburgh and a turnover of u8 million was merged with SCC. The deal also included Scotbyte Supplies 25,000 square foot premises in Livingston.
Although SCH could have opened its own site in Scotland (as it has done with a Byte retail store near Edinburgh) it realised that the best way to break into a new market is by leveraging long-established contacts.
SCH now has around 100 staff working in Scotland. SCH group chairman and MD Peter Rigby says that it intends to build a major operation in Scotland.
"Over 10 years trading in the country has given us a substantial presence and we are now establishing a stronger local identity," he says.
Paul Simkin, MD of distributor arm ETC, says that Scottish businesses will buy PCs from Scottish dealers first and foremost. "It used to be the same in the rest of the UK," he says, "but that has changed."
As more and more companies buy each other, and distributors too spread their reach, the important thing is not where a business is located - but the logistics of supplying PCs to them quickly.
Many southern distributors have warehousing facilities in the north, where it is cheaper. As long as they are near a motorway it does not really matter where the distribution centre is.
SCH does have an advantage over some though, because it has a unified warehouse for all of its divisions, in Birmingham, allowing all parts of the group access to a wide range of products. Simkin says customers in Scotland should get the same next-day delivery that any other area gets, even though it is further away from the SCH warehouse. SCH has a lorry going up to the Byte store near Edinburgh every day, and this also supplies the kit for SCC and ETC.
Michael Kianfar, MD of Brighton-based Systems International, reckons that the reseller need for regional offices is one of psychology rather than actuality. "The perception is that resellers have to be everywhere," he says "But that is not necessarily true." Kianfar says that some of the large corporate resellers that have opened offices everywhere (SCC has 15 sites for example) perhaps wish that they had not. "It's very hard to manage so many sites efficiently," he says. "It can be untidy and you get duplication. But it does depend on what the customer wants."
Some customers want what Kianfar calls the "high touch" approach of a reassuring physical presence and an office next door. Other customers want the 'high-tech' approach of remote contact through communication technology. Systems International has clients all over the world, says Kianfar, happy to deal with it using a high-tech approach. There is one exception to this, he says - selling to the City of London. Because of the way that business is done there it is essential to have a physical presence. "You need to be in the square mile," says Kianfar: "Things there happen very quickly and people like dropping in for meetings." He also agrees that Scotland is a tough nut for English resellers to crack. The only real success there has been Abtex," he says "Their customers want to show a commitment to the region and use suppliers that employ local people. It's not just a question of an English reseller opening up there and expecting to do loads of business."
Kianfar says that most parts of the country that can support large Vars already have them. "The only areas without large Vars are the West Country and Kent," he says "Because there is not the business there."
Case Study: CROFT COMPUTERS
There are two ways for a reseller to expand its geographic coverage.
The first approach, favoured by the large-volume merchants, is to buy up regional resellers. The second approach, for small and medium-sized Vars, is an incremental approach. Newcastle-based Var Croft Computers is both a local networking Var and a nationwide service and maintenance supplier. The nature of Croft's support business means that it needs a presence in the south of England where much of its business is, whilst at the same time not diluting its presence in the north east where it has all the benefits of being a long-established local reseller. Croft has a southern service office near Bedford, which houses part of its team of 35 field service engineers (the rest are home-based and cover other regions like the South West).Croft also has a regional sales office in Leeds which, says sales director David Anderson, it plans to relocate to Manchester. Anderson says that the move to Manchester is the first part of an incremental scheme which will see it opening branch offices down the west of England, eventually getting as far as the Thames Valley.
"Our attitude is based on northern arrogance," says Anderson. "We want to cover the UK but from the north down rather than the way it is normally done." Anderson says that the Leeds area is already covered by the Newcastle office, and that opening in Manchester - a city that is attracting much inward investment - gives Croft a stepping stone to Liverpool and Birmingham.
Both areas in which it would like to boost sales. Anderson admits that it is hard for a reseller to set up a regional office, unless they have the clout of the large corporate resellers and can afford to buy one - and at the same time buy the loyalty of the existing customer base. Although it has aspirations to become a nationwide Var, Croft (which has 90 staff and a turnover of u5 million) says there are some places in the UK that it is unlikely to have a presence: "We would like an office in the M4 corridor, because Bedford is not the best place for direct sales. There are no areas in the country that are underepresented though, and we know that it is hard for English Vars to break into Scotland," he says. "We Geordies are very parochial and it gets harder the further north that you get. If you are not part of the local fiefdom that you can forget it!" Anderson says that the driving force in the future for Vars will be the ability to supply not just nationwide, but pan-European deals, and that regional offices - not just in the UK will be a sign of how outward looking a reseller is.
Case Study Two: FIBERNET
Aldermaston-based networking Var Fibernet has three satellite offices for sales and support, in Leeds, Glasgow and Dublin. The reason, says MD Charles Mcgregor, is that Fibernet customers tend to be large companies with more than one office, and its the kind of company that they like to deal with. "If we did not have the regional offices it would rule us out of many of our contracts" he says. The offices do not have to be large - Dublin for instance is a 15,000 square foot office with three technical staff and a receptionist. It is not too expensive either. What is important, says Mcgregor, is to have a presence. This provides both reassurance to nervous customers, and shows some commitment to the area by the Var. Fibernet also faces its own logistical problems, as it rolls out its Tanet network of high speed private networks. Fibernet has just floated on the Stock Exchange (raising u11.3 million) to fund its ambitious plan to link customer sites across the country with high speed data networks (the logical next step for a reseller that has much experience of setting up and maintaining networks within company sites).Tanet, says Mcgregor, will allow customers to transfer data on private networks at half the cost of BT. Fibernet sends the data along leased fibre networks and electricity pylons, and then cables it into customer sites. Building up the fibre network is an expensive business, and has to be done in areas where there is enough demand to make it cost-effective. Fibernet is starting by running the network through major population areas, and expects to have another four or five regional offices within the next couple of years. The paradox though is that much of the fibre optic cabling will be done in the regions that already have the majority of UK business, and not in developing (initially at least) new market. Scotland and the north is likely to be underepresented in all this. "Our customers are mainly in the south" says Mcgregor, "75 per cent of UK business is in the south east." Mcgregor says that Fibernet does have customers in the Scotland, and Wales, but there are no plans to open sales offices there. "Any office that we open would have to be commensurate with the size of the market."
Graham Technology 0113 2245700
Croft Computers 0191 268 4602
Fibernet 01734 819122
Dunedin Systems 0141 221 7717
Abtex 01224 647074 SCH/SCC/ETC 0121 766 7000
Systems International 01273 766766.
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