CONSULTANCY - The honorary consult

Let's face it - resellers turned consultants aren't going to go away as user demand for cheap and cheerful services rises.

The profession is ridiculed and reviled. In the affections of theway as user demand for cheap and cheerful services rises. average citizen, its practitioners rank somewhere between estate agents and tabloid journalists. Most, it is widely believed, have gone into it because they were no good at anything else. So who would be an IT consultant?

Apparently, any reseller that is desperate to generate some decent margin and can persuade its clients to stump up a few bob without having to supply them with products. And who can blame them?

Not Clive Longbottom, strategy consultant at analyst firm CSL. 'It's a survival strategy,' he says. 'Resellers are looking at such small margins on shifting products that they've got to get into something where margins are high. If they don't do it, they have to shift an awful lot of boxes.'

Nor Nick Melvin, former marketing director of Skillsgroup and now - his voice drops to a whisper - a freelance consultant to the company: 'It's a more mature market than it used to be. You've got to get into services because of the margin and added value implications.'

Those at the bottom of the supply chain are starting to climb into the reseller space. Manufacturers increasingly offer build-to-order and configure-to-order services and distributors are expected to follow suit. As a result, resellers are having to climb higher too, offering anything from buying advice and server sizing, to implementation and launch services, training and year 2000 compliance.

The growing complexity of technologies, such as NT 5, and the fad among businesses for outsourcing their IT and focusing on 'core not chore' activities, increases demand for services that are not directly related to sales.

And resellers are queuing up to provide them.

Whether these services count as consultancy in the strictest sense of the word is open to debate. If we define a consultant as someone who begins by analysing a business problem and recommending solutions and only gets into the nitty-gritty of products afterwards - if at all - then many resellers may not qualify. But this does not mean they are doing anything wrong.

Ashim Pal, senior analyst at Meta Group, says: 'I would hesitate to use the word consultancy in connection with some of these people because often it's product-related. It's not consultancy in the way KPMG would understand it, but it's good business for these firms.

Longbottom adds: 'An SME can not afford an Arthur Andersen, but it can afford a reseller with a better value proposition. Resellers are unable to support the same skills and cost structures as an outsourcing supplier, such as Andersen or EDS, so it's going to be far more cheap and cheerful.

But given the audience they're aiming at, which needs a set of more basic skills, that doesn't matter.'

It has been traditional for the channel to re-invent or rebrand itself periodically as dealers became resellers and resellers became Vars. Perhaps it's just time for another shift. 'Var has become an abused term,' says Longbottom. 'Someone who's just dealing with SMEs is not offering the same level of service as a multinational player.'

Mark Byatt, marketing director of Morse Group, whose enterprise server business has always involved a measure of consultancy, says: 'You can spend a lot of time getting hung up about the label that's attached to you. In the end, it's all about the services you provide to the customer.

Depending on the nature of these services, the terms reseller, Var and consultant could all be applied to Morse Group.'

But channel players believe the term reseller has a whiff of the Arthur Daleys about it. Neville Davis, chairman and chief executive of Compel, which has 75 consultants among its 1,000-strong staff, says: 'We think of Compel as a services organisation and one of those services is the provision of equipment. We prefer not to use the name reseller because it has negative connotations.'

CSF, which earns between 25 per cent and 30 per cent of its revenue from non-product services, has also ditched the reseller badge. Mike Cohen, group sales and marketing director at CSF, believes: 'It's an aged term and probably not the right definition. A reseller implies minimal added value in the middle. The term we prefer is value-added systems integrator.'

He adds: 'We don't regard ourselves as a consultancy practice per se.

It's part of the bigger picture of services we offer. We are an IT infrastructure organisation.'

Computacenter employs approximately 150 consultants and 120 project managers among a staff of about 3,700. It expects to recruit another 150 next year. But the company is happier with its reseller heritage.

'It will be a long time before we can get away from the term reseller, even if we wanted to,' says Mark Stephens, national consultancy manager at Computacenter. 'We see ourselves as an IT services company. Some of that involves selling boxes in a fast and efficient way and it also involves selling systems.'

Ask a reseller-turned-consultancy how it went about effecting the change and the watchword will be caution. As Byatt says: 'You need to be clear on the proposition you are taking to market, what your competencies are and who your competitors are. You're not marketing consultancy - that's a vague term that can be applied to anything. We find there's real value in stating what we can and can't do.'

CSF says it took six months to take the plunge and offer even a limited range of services, while the mighty Computacenter's approach is equally cautious. 'One of our main aims is not to start any services without extensive risk analysis and planning,' Stephens reveals. 'We've grown from around our home territory but have no real plans to expand from it. There would be little point in saying we'll suddenly become another Andersen Consulting.'

Pal warns of the risks of biting off more than you can chew: 'Resellers that stray too far out of their core competence are going to get burnt.

They need to be careful how they position their consultancy - it should be as an added value on top of what they already do.' He adds that in management-speak, the pitfalls are called 'di-worse-ification' - diversification that backfires and damages all facets of the business.

Successful consultancies need a presence in the market, appropriate skills and visibility. Not surprisingly, most reseller-consultants begin by selling consultancy to their existing customers. Many - including Computacenter and CSF - started supplying consultancy largely because their customers wanted for it. CSF says only now, after two-and-a-half years of selling consultancy, is it starting to win services business from companies to which it has never sold any product, while Computacenter claims most of its consultancy customers have bought boxes in the past.

Significant time and investment is required. 'You can't just start doing it,' Melvin states. 'You need a lot of in-house skills and processes.

Customers won't believe you if you do it overnight.' Stephens agrees: 'It's not easy to do on a small budget and it's risky if you don't put in enough investment.'

Recruitment is the main challenge, especially with the skills shortage.

'You need to go from staff who can spell the name of the product, to those that have an in-depth knowledge of it,' Pal says.

Although some existing staff can be retrained into consultancy, most resellers find they have to recruit extra expertise, from design specialists and project managers, to implementation and support personnel. Then the newcomers have to be integrated into the organisation.

Existing business relationships must also be safeguarded. The most delicate are those with established consulting firms, where the reseller has been providing product logistics, while the consultancy did the higher value work. There will inevitably be conflicts of interest as corporate resellers do more consultancy work and the big consultancies extend their services to the mushrooming SME market.

But most reseller-consultants don't see this as a problem. 'We try to offer a complementary set of services to those offered by our partners, so it tends to dovetail,' says Byatt. Computacenter is happy to find itself sometimes in partnership and sometimes in competition with the large consultancies.

Compel reveals it is doing more partnering these days, while CSF has a contract to support managed services for one of the 'big six'.

Manufacturers and distributors tend to take a positive view of resellers' efforts to move up-market - not least because the manufacturers are attempting to do the same. CSF has found Digital to be supportive and Compel tells the same story of Compaq and Microsoft, especially since they hoped it would increase product sales.

By and large, customers are in favour of their resellers adding an extra string to their bow. SMEs in particular may see resellers as a source of more affordable consultancy. 'As long as is doesn't degrade the reseller's core business, moving into consultancy will be viewed positively,' says Pal. 'But I wouldn't expect customers to go open-armed to these people - they have to prove themselves first.'

The most difficult thing to prove is that the person in the sharp suit is not just a salesman in consultant's clothing. Some channel companies are ambivalent about the prospect. Stephens says the consultancy side of Computacenter is 'quite tightly integrated' with its reseller business and that its regular account managers bring in most of the consultancy work. But his consultants try to remain independent. He adds that quite a bit of Computacenter's consultancy work does not include product sales, but he does not put a figure on this.

Davis says Compel's consultancy activities are separate from its product arm, but a single customer relationship manager handles each customer.

Two-thirds of its consultancy business does not result in product sales.

Computacenter and Compel argue that reselling a wide range of product brands makes them more impartial anyway.

But Davis believes selling products can be an advantage: 'There is still an element of customer jaundice about consultants that give theoretical advice without being prepared to put it into practice.'

Customers are likely to have plenty of choice. As the margin drops out of the straight reselling market, more resellers will have to take the plunge and branch out into services and consultancy.

But it won't be easy. 'It's a massive risk,' says Longbottom. 'The level of knowledge of what all this means is fairly minimal among Vars. For those who get it even marginally wrong, it will be make or break.'

THE ROAD TO CONSULTANCY

Resellers may appear to be turning into a homogeneous group of services and consultancy vendors, but their experiences en route have been very different.

Computacenter is often cited as the archetypal reseller moving into consultancy.

It has employed branch consultants for a decade, but four or five years ago, it made a strategic decision to move into services, maintenance and consultancy, reinforced by the demands of its customers. But it wanted to build on its existing strengths of logistics and product supply by adding value to provide an all-round package. Hence Computacenter does not necessarily mind still being referred to as a reseller, since this remains a large part of what it wishes to be known for.

CSF was also encouraged into services by its customers, beginning in mid-1996. It now markets itself as a 'value-added systems integrator' whose services include project management, training, support and consultancy.

The services side of its business is doubling year on year and now accounts for more than a quarter of turnover.

But it is unlikely ever to exceed 50 per cent and CSF expects product sales to account for more than half.

Compel began moving into consultancy five years ago off its own bat rather than because of customer demand. Growth has been rapid in the past two years and the company expects consultancy to grow faster than the rest of the business. It began by building on its traditional PC competencies but is now pushing out into newer areas. Although it still resells products, Compel no longer bids for pure product business, preferring services-related contracts for providing a managed desktop system.

A more dramatic change has taken place at Skillsgroup, which has abandoned its reseller roots altogether. Skillsgroup's move into services was a long-term strategy, first planned in 1993 when the group was still reseller P&P. It grew the Acuma business from within the company and in 1994 bought QA Training, which included a consultancy division. In May 1997, the group of companies was renamed Skillsgroup, ostensibly because the P&P name no longer reflected the full range of its activities.

But at the start of this year, the lower margin P&P business was sold to GE Capital, leaving Skillsgroup without a conventional reselling business.

The reason, says Nick Melvin, the group's then marketing director, was that 'we wanted to be around higher value, knowledge and expertise-based products. We wanted to move up the value chain'.