Don't believe the hype

Resellers that ignore the messages of economic doom will be able to grab the sales opportunities through the downturn and beyond, says Fleur Doidge

Financial meltdown: Global indices have been in near-freefall this month but are we really all as doomed as the national press would have us to believe?

The People’s Temple in Guyana saw more than 900 people escape from what they saw as the evils of US capitalism only to commit mass suicide in 1978 by drinking a cyanide-laced version of Kool-Aid at the request of their charismatic socialist leader Jim Jones.

Jones secured compliance with this horrifying scheme by gradually convincing his disciples that their way of life was under threat of imminent destruction by the US.

Resellers are in a similar ­ albeit hopefully less serious ­ position. The hype is all around us. Daily we are bombarded with warnings of recession and disaster ­ even the collapse of Western-style economies and the free market.

But opportunities are still out there. Those who stay away from the Kool-Aid, even when doom seems inescapable, may indeed live to fight another day.

Resellers agree. Robert May, managing director of Surrey-based IT solutions consultancy Ramsac, believes overseas opportunities will still exist through the downturn for canny, adaptable resellers.

Ramsac has been seeing some success in places such as Germany, Abu Dhabi and Dubai over the past couple of years.
May initially expected an easy success in Germany because of the process-oriented reputation of the Germans. However, he found that the Teutonic way of doing things varies widely across industries and Ramsac’s methodology was quite new.

“It was a total shock to them. When it comes to IT and IT systems there is still a lack of discipline over there,” says May. “In the UK we have an entrepreneurial culture and we do not do glass ceilings ­ they are for going through.”

Adaptable, flexible and innovative UK solution providers could do very well on the Continent, May believes.

Other opportunities continue in the United Arab Emirates, particularly Dubai and Abu Dhabi, both of which have ambitious
plans around infrastructure and urban development ­ as well as money to burn.

May also looks to the London Olympics in 2012 to provide plenty of opportunities for IT providers.
Technologies that should continue to provide profitable opportunities include storage, security and virtualisation. “Companies do not need to have as many servers, and when times are tough those potential consolidation savings become even more important,” he says.

Services will be important too. While traditional resellers will continue to sell kit, especially if certified with major brands such as Dell and Microsoft, the services wraparound will only become more important, May says.

“The other thing that is very big and linked to security is the concept of remote working.”
This should also continue to increase in popularity because it saves costs.

Companies that adopt remote working policies, such as encouraging staff to work from home or offering shift work, will save on overheads such as office rental, and energy bills. All those practices require a different approach to IT that resellers are ideally placed to help businesses with, May notes.

There will be work, but it may get harder to seal those deals.
David Spate, sales director for the northern EMEA region at Overland Storage, agreed that budgets emphasising technologies such as storage will likely be fulfilled despite the downturn.
“You will still need storage. You still need infrastructure projects to get going, but you will also need to use IT in more creative ways,” he said.

Fight for your right
Spate is already seeing resellers coming to him as budgets tighten, saying they have a customer that previously never took on anyone other than HP or EMC, but is now prepared to think outside the box.

“They are asking us to come in and talk to them, because they believe our product can do that job as well and is 20 per cent
cheaper,” he says.

Resellers may find they can sell certain products and make a healthy margin in a different space. He warns resellers away from the temptation to focus on cutting large deals with hardly any margin.

Making a healthy margin is important and good margin via making lots of smaller deals will be the way to succeed in tougher times, he believes.
“That will be an interesting phenomenon. We are going to be pushing the message ­ that we can help you survive this because we are better value ­ harder with our channel,” he says.

His money is also on certain technologies such as de-duplication. Meanwhile, the downturn will put green IT back on the agenda because of the energy savings.

“If it saves money over the short to medium term to make things happen, I think it is going to be an interesting period,” says Spate.

Steve Foster, managing director of infrastructure provider Siemon, recalls the dotcom crash in 2001. Based on what he learned through the tough times following the bust, he recommends those in the IT channel look carefully at their
vendor relationships.

“Some vendors will panic and slash prices to win business, but this is a short-term strategy that has led many companies into untenable positions,” he says.
Demonstrating value to customers through the good and bad times has seen Siemon survive economic downturns ­ even the Great Depression ­ since its founding in 1903, claims Foster.

Mike Morgan, chief operating officer at partner relationship software developer Foundation Network, worked as a channel boss during the 2000/03 downturn that accompanied the bursting of the dotcom bubble.
He says there will definitely be opportunities, but only if customers do the right thing. It is too easy for boards to decide to axe discretionary spending on marketing and postpone IT spend.
“These are always the first departments to face cuts and they were during the last economic downturn. But these are precisely the budgets that should be maintained or bolstered,” said Morgan.

While competitors are cutting back, progressive companies should take this opportunity to gain competitive advantage through aggressive marketing activity, positioning investments in technology as a means of reducing costs and improving efficiency.
“This is precisely the time for companies to consider investments in technology to automate and simplify business processes, to improve productivity and reduce headcount costs,” said Morgan.
Paul Elsom, UK manager of online collaboration company Netviewer, notes that the IT industry is cyclical and follows trends in the wider economy.

“Our experience is that any downturn offers opportunities; the key is to sell products that you can clearly demonstrate will make end users’ lives easier, their processes more efficient and save them money,” says Elsom.
Resellers need to be able to prove to any buyer that their recommendation will pay for itself in days or weeks. Elsom believes online meeting tools are a good example ­ all customers can understand that remote access can eliminate the need for a trip to demonstrate a product, or travel for an entire team to have a project update.

Lyndon Knight, chief operating officer of consultancy and professional services company Bluefish, recommends chasing deals that are longer term, to see resellers through.
“You want to secure your position so that after the recession you will be there to benefit from increased revenue,” he says.
Conversely, Knight believes resellers should be prepared to take a hit on margins ­ if they have that much to work with ­ in exchange for inking multi-year deals.

“In 1992, they were perhaps slicing off five to seven per cent. Those that were not doing that were the losers,” says Knight.
Scott Nursten, managing director of West Sussex-based s2s, knows how to work through bubbles that pop. Originally hailing from Zimbabwe, Nursten came to the UK and started s2s as a one-man network security consultancy during the dotcom boom of 2000.

Learn from past lessons
That IT stall was just lifting when the world felt the aftermath of 9/11 ­ surely a particularly difficult time for any IT firm, let alone a start-up. But he says that the move was an extremely smart thing to do.

“My best practice has always been to go against the flow,” Nursten says. “When people are going out of business, they get scared and have no power to respond. They freeze up and when everybody else is standing still, you can make your move.”
Of course, nothing is as simple as that. Nursten said he runs his company with strict ideas on cashflow, and has never taken on debt.
The West Sussex consultancy has been lean from the beginning and had to be, with Nursten fuelling the venture with just £3,000 cash in his pocket, adding to that another £3,000 of his own savings a year later.

His brother put in an extra £8,000 when joining s2s later. In total, the company received a mere £19,000 in capital injections ­ everything else has been hard graft, organic growth and solid returns, according to Nursten.

“So many businesses operate on promises that are beyond their reach. We worked hard to promise and provide real services and real expertise at realistic prices,” he says. “The first, most important thing is how to generate cash.”

Cash is king and an economic downturn is time to remember that. Businesses that forget that central principle and succumbed to easy credit should change their practices now, he suggests.

On top of that, s2s made savings by avoiding owning expensive offices and, say, outsourcing the care of its office plants and kitchen. You can treat your staff well without overspending on certain luxuries, Nursten maintained.

He said other IT companies can do the same because it is nothing they should not be doing already.
s2s was bought out last year by Bailey Teswaine, and the new owners are keen to keep Nursten at the helm of this profitable venture, even asking him for help running other aspects of the organisation.

Although no two downturns are identical, heeding the right warnings while avoiding paralysis remains key. Those who drank the Kool-Aid that night in Jonestown would probably agree, for above the toxic tub was a sign. It said: “Those who do not remember the past are condemned to repeat it”.