FACE TO FACE - HANDY ANDY

Andy Palmer, UK managing director of 3Com, ended up applying for his first IT job on a whim while dodging a downpour. But he later proved to be quite a useful chap to have around the place.

If it hadn't been for a freak rain storm in 1976, life could havehis first IT job on a whim while dodging a downpour. But he later proved to be quite a useful chap to have around the place. turned out very differently for Andy Palmer, UK managing director of 3Com.

The man responsible for selling 3Com's convergence strategy in the UK didn't always want to be involved in the hi-tech world of networking.

Palmer had been toying with the idea of putting his BSc in chemistry and mathematics to use by working as a research chemist, and already had a job offer. But while the football-mad lad was on his way to collect the local paper - to find out whether his goals from last week's match had been reported - he unwittingly made his first steps into the world of IT.

'I was cycling to the local newsagents, past what used to be Hewlett Packard's place. As I went by it started to throw it down with rain, so I dived into the reception at HP and said: "I want a job. Can you give me an application form?". It was as simple as that.'

A week later, HP offered Palmer a job. 'It started me off as a trainee salesman on the principle that I would have to stick with HP for two or three years before I'd get a full sales job,' Palmer recounts.

He started working in the calculator division, learning his trade by selling door-to-door. His progression from there was quick - he became one of the vendor's youngest managers at the tender age of 25. He took responsibility for HP's field selling business and later went on to launch the first laser printer.

After HP, Palmer worked his way through a number of jobs at networking vendor Spider Systems and remote management specialist Axon. It was through 3Com's acquisition of Axon that he made his way into the company, where he became UK managing director last year.

Palmer is not scared to admit that 3Com has had its problems. He identifies the integration of the US Robotics staff into the merged company, following its buyout of USR in 1997, as one of the biggest issues he faced when he took over. 'When companies make acquisitions, they generally make them for technology. Or, as in the case of 3Com's acquisition of Chipcom, they are motivated half by technology and half by the desire to take out a competitor. The great thing about 3Com is that every time it has made an acquisition, not only has it been able to maximise the technology, but it's been able to keep on most of the people. And that is key.'

While this might sound like hollow management talk, Palmer says it with conviction, obviously believing that just as he came to 3Com via the acquisition route and managed to make it, other newcomers should be given a chance.

Unfortunately, he sounds less convincing when talking about 3Com's overall strategy. Convergence is the word that 3Com is trying to ram down everyone's throats. The merged company is obviously still trying to come to terms with a portfolio that includes a diverse range of technologies which are aimed at very different customers.

The consumer side, on the other hand, includes the highly successful PalmPilot digital organiser. Yet Palmer appears to be more at ease discussing the business side of the portfolio than the consumer side it inherited from USR.

'As an organisation, 3Com thinks of certain markets. There's the enterprise, where we're trying to address a set of customers with similar characteristics; there's the SME market, which again has very different characteristics; there's the carrier space; and in the future, there's the consumer and home networking market. We're also starting to get much more involved with large systems integrators, such as Bull, IBM and Siemens.

'The channel ranges from high-volume distribution - network cards and modems - to large systems integration partners and those that address SMEs. We have about 8,000 networking partners or systems partners. Whether they just add extra value to a PC, or wrap the whole thing around it and sell it as a complete system, we have programmes to address their needs.'

But while convergence sounds all well and good in theory, in practice it is likely to create trouble between the different sections of 3Com's partners. Surely there must be crossover between the telcos and the enterprise market, conflict between those targeting small enterprises and those looking at SMEs, and misunderstandings over retailers targeting SMEs?

'I think that as a company, we need to make sure we use our resources to understand the customers we're addressing. I think that determines the product set - it determines how you wrap service around the products,' Palmer says.

The vendor is trying to work closely with the channel, to help improve understanding of its products and increase awareness among buyers of the value the channel can add. As part of this, it has set up the Networking Partners Programme (NPP).

NPP splits channel partners into categories based on the type of services they offer. At the top are the advanced systems partners - typically systems integrators focused on networking. The next tier down is systems partners, which may not be full systems integrators but do add value in some form.

After this come the networking partners, resellers that supply more limited networking expertise.

3Com is also trying to help the channel with one of its biggest problems - a lack of skilled engineers for post-sales work. To this end, it introduced the Master of Network Science (MNS) programme last October for individuals working within accredited channel partners.

'A problem for some of our competitors is that one half of their partners might train up half a dozen engineers. Those engineers then leave - because there is a market for them - so the channel is without those skills,' Palmer explains. 'But at 3Com, we don't do that. We accredit the company and give it time to get a replacement engineer.'

The vendor also runs 3Com University, which trains its channel in everything from the latest campus switches to its future convergence strategy. Three sessions have already run - the last was in Paris at the end of April - and Palmer says they are doubling in size each time.

'Some of our channel partners are sending five people, while some of our big partners are sending as many as 20. It's a real commitment because they're giving up two days at a time.'

Another change that will end up benefiting the channel is the recent revision of 3Com's worldwide channel inventory management process. This came about mainly as a result of the merger with US Robotics. After the merger, the Securities and Exchange Commission in the US raised some questions about the way 3Com was evaluating its inventories within the figures it was reporting.

It is easy for US companies to stuff the channel before they report quarterly figures. This results in figures that suggest the company is performing better than it actually is, and leaves the channel with a lot of products it can't sell.

The inventory management rejig is designed to stop channel stuffing and 3Com has been praised by analysts for its tough stance and forward-looking approach. It is something most companies will have to do in the future, so in this respect 3Com is ahead of the game.

Palmer says: 'We're basically making sure our inventories match our business profile. Because at the end of the day, if you can fudge the whole inventory, you can always fudge the numbers. It could be a case of, "We need to make good numbers this quarter so we'll stuff the channel with lots of kit".

It makes a mockery of the way you manage the business.

'So we said we will declare what we believe to be reasonable levels of inventory against the run rates at which we sell the products - and they're different for every product.'

As part of the process, 3Com has moved to SAP. According to Palmer, the implementation is the biggest ever undertaken on a worldwide basis. 'It started last November and is now complete. It brings everything together and gives us a platform to capitalise on the supply chain.'

He believes the system will have a positive effect on the channel: 'We're linking in systems that allow our partners to be part of the value chain, through the Web, EDI or whatever else. At the end of the day, if you can give visibility of product quickly to a partner, the partner can make the decisions about how much inventory it needs. And what's more, it's guaranteed because it's all part of a consistent supply chain.'

While 3Com appears to be getting its house in order in terms of the channel and its supply chain management, one thing it hasn't managed to control is the slide in its share price. Nor has it reached expectations for its last quarter.

Palmer is defensive about the performance. 'We didn't meet some of the expectations but we made sure people knew that very quickly. We took the risks that go with it. That's a measure of an open, honest company rather than one that disguises it by messing around with inventory.'

To be fair, most of the sales shortfall was the result of a slowdown in switching-related products in the Americas. Palmer claims the international side of the company actually made record gains for the quarter. He is bullish about what was achieved: 'We signed a joint venture with Siemens and we've recently concluded a worldwide system integration agreement with it, which is going to make it one of our biggest partners.'

The agreement sparked rumours that Siemens was interested in 3Com's carrier division. Since then, further rumours have circulated that Ericsson could try to acquire 3Com's networking side. The speculation is mostly due to 3Com's low share price, which has plummeted by 70 per cent over the past two years. 'There is speculation, but most of it is driven by the fact that the stock price is so low. Internally, we know we're in healthy shape,' claims Palmer.

So what is the way forward for those in the channel who want to be first on the crest of the next wave? No surprises - Palmer thinks it's all about convergence. 'Eric Benhamou, chief executive of 3Com, called everyone together 18 months ago to put together a vision. I think it's happening faster than anyone expected and we're seeing people who seriously want to talk to us about convergence.

'Voice has come to data networks. It's not about the two technologies coming together, it's about the data network, and if you put voice over it you make superb efficiencies and cost savings.'

Just to emphasise the importance to 3Com of a forward-looking channel, Palmer says: 'Traditional data companies clearly have to understand voice skills - call centres, call forwarding and other voice-related things.

But for the voice companies, it's pretty hard to understand Ethernet, with its collision domains and virtual private networks. If ever there was an opportunity, it's there for the channel that understands data networking. It will have significant opportunities to capitalise on convergence.'

Palmer is obviously pushing his own agenda, but you have to remember one thing: this is the man who turned up in HP's calculator division just before it turned into HP's PC business.

DIRECT OR INDIRECT?

When it comes to the channel, 3Com has plenty on its plate, mixing distributors, integrators, resellers and retail. However, there is one thing of which Palmer is sure - he's not ready to pursue a direct strategy, at least not yet. 'It's not our plan to take away from our channel, because it does a very efficient job for us and owns the customer in many ways. We're very clearly the manufacturer.

'The question is, as you look at the value chain, do you take a leadership position in some of these spaces or just wait and see? That's a dilemma for every manufacturer.'

Palmer argues there is no need for 3Com to go direct. He does, however, add: 'Should going direct be the appropriate way to respond, or if it were the right leadership decision, the great thing is that we have such a breadth of products, our partners and our channel should continue to make a profit on them.'

HE'S FOOTBALL CRAZY

Palmer is vice president and a fanatical supporter of Reading Football Club. His passion was fuelled at the age of 10, when his father began dragging him along to matches.

He played through all the local leagues and in the senior leagues at the age of 14. At university he played for Reading University XI, before going on to play for Wokingham Town.

'I find ways to get to watch the Reading team,' he says. 'Then I dash home on a Monday night to see the two minutes of goals shown on Meridian TV, even though I was at the match.

'I'm delighted that one of my nephews has just been selected for the club's academy, which is part of the Football Association. Being a footballer, I've been trying to teach him a few tricks over the years.'

Palmer still finds time to play a bit of footie himself. 'I'm hoping to play at the Reading stadium in a month's time, when 3Com has a side in an inter-company tournament. The team has big problems deciding if it dare drop me!'

NEW KID ON THE BLOCK

Andy Palmer

UK managing director of 3Com

Who do you admire and why?

The Beatles, especially Lennon and McCartney for their song-writing ability.

They helped to influence and shape a generation.

If you could have one wish what would it be?

To see my children, Anna, 2, and Rachael, born last week, grow up. I hope they are able to live to work not work to live, unlike many of my generation.

What did you want to be when you grew up?

A footballer - as long as I was a centre-forward.

In your absence, will England qualify for the next European Championship?

Yes, if Keegan is able to field his strongest team.

What are the chances of England winning the next World Cup?

Very high! But if England do win it I want them to do so in style.

So what would be your dream team?

One with five centre-forwards.

If you weren't at 3Com, what would you most like to do?

Travel around the world with my family and friends at a leisurely pace, perhaps on a yacht. If not, I'd like to start my own lifestyle business.

What are you planning to do for the millennium celebrations?

Work permitting, I'd like to spend it with my family.

Who was your first crush on?

When I was 13 I had a crush on Mrs Brierley, my school chemistry teacher.

Tell me a joke.

What's the difference between a salesperson and a pig? A pig doesn't go around behaving like a salesperson when he's drunk. And what's the difference between a marketing person and a dog?

A dog knows a lead when he sees one.