Sea Change

You wouldn't have thought swanning about the Med would turn manypeople to dedicate their lives to reselling, but that's exactly what itdid to 2GL chairman Simon Derrick. Drew Cullen finds out why

Simon Derrick is chairman of 2GL, the #8 million Southampton corporate reseller. Derrick, 38, is married with two children. 'After graduating in business studies from Portsmouth Poly in 1980, I bought a small boat and sailed it to the Med. Why? Because my experience of the world was too narrow.

'I worked on large, luxury yachts for a year, which increased my self-reliance and gave me a wonderful view into the world of the very rich.

'When I returned to England I got a job with Thompson McClintock - now part of KPMG. But I rapidly realised accountancy was not for me. I found PCs far more interesting. This was the stage where PCs began appearing in business.

'In 1983, I joined Currys Micro C in Southampton as a field salesman selling accountancy packages. It turned out that Southampton was the only profitable branch and Currys lacked the vision to make it work. Within months of my joining, Currys closed down the operation, and I was laid off.

'I had just got married and was not happy about losing my job. But in hindsight this proved to be a classic opportunity. In the end I joined Grist, a reseller in Southampton which had just turned over #1 million for the first time. Grist had made me the lowest pay offer but gave me the best opportunity - I was promoted to sales director within a year.

I was fortunate to join the industry at a time when it was growing very rapidly.

'Between 1984 and 1988 we took Grist to #5 million sales and about 40 to 50 staff. Grist was an IBM systems centre and a 6150 centre and had built up a good corporate customer base.

'We had been successful in our territory and were keen to replicate the Grist model across the country. Venture capital was considered, but then the Quest offer came along .

'Quest was a UK firm located just up the road, which approached us with a view to buying us out. It had been successful selling products into Russia with certain modifications to comply with treaty obligations. It also had a national UK support firm that maintained some ageing wordprocessors as well as some Cad systems. It was keen to build up the dealership side.

'Quest seemed to be just the company to take us forward. At the time the merger looked like very good news. We had gone through the books and taken all the best financial advice. But we had totally underestimated the culture clash between the two companies.

'This is a classic error in our industry, which tends to ignore non-accounting issues in mergers. Everyone talks glibly about synergies, but these are extremely difficult to achieve.

'It was quite clear from the outset that the two companies were incompatible.

Some Grist people reacted to their new big company environment and started politicking. They took their eyes off the ball.

'I jumped ship after six months. Nine days after leaving Quest I set up my own firm. I found the office, got the company off the shelf, sorted out the letterhead and stationery and began discussions with some of my colleagues who were interested in joining me.

'I still had a chunk of shares in Quest and I had no desire to undermine the company in any way, nor was I in a position to do so. So I set up a small business selling account systems into the SME market, an area in which I felt there was no conflict with Quest.

'From the beginning, my aim was to develop 2GL into a business which provided customer satisfaction and job satisfaction for the employees, around a stable, consistent computer service organisation. This remains my goal today.

'2GL started off humbly with one office and four people. One of those people, Carol Evans, is still with the company. She is joint MD and has been absolutely key to the success of 2GL.

'We did not approach Quest's accounts, but it was inevitable that some people came to us, given the level of customer dissatisfaction. It was taken over by Erskine House, the photocopier company. Soon afterwards the UK arm of Quest Computers was sold to the management who renamed the company Capsa. That went bust fairly quickly - I think the management overestimated the business opportunities.

'When Capsa went down, I went to the winding up sale and I bought back the two quality awards we had won at Grist. They are still at 2GL, along with another quality award we have won on our own account. We moved fairly quickly into the corporate market - we had an affinity with this market from Grist days. And we picked up some business through the Capsa collapse.

'I set out to build a quality company with great technical skills, able to compete within our own territory. The future is bright for regional resellers - as long as they want to be key players. There will always be room for companies that are close to their customers and have strong management and technical resources.

'Being a regional player has its advantages. We have been very nimble in our reaction to changes and have moved from commodity PCs to servers very early on. Today our major focus is on complex connectivity and networking solutions and we are a top-tier reseller for Microsoft and Novell.

'All this requires a heavy level of training and resource, commitment and focus. Our original accounts business was beginning to look out of step with the rest of the company. The accountancy market is not as profitable as it once was, and we have probably outgrown that market. So this month we are transferring our accounts business and two staff to Accounting Answers, in return for a minority shareholding in the company. Accounting Answers is also on the south coast and is a specialist in its field.

'We have not turned our back on the commodity side of the market. We have an operation branded Boxstop which supplies commodity products to major corporate, education and healthcare markets.

'We offer this service because many of our customers want to buy commodity products from the same source of their networking supplies. Boxstop is manned by the junior sales staff, as part of their training.

'It is not enough just to have competent field salespeople. They need to be competent technically, and our sales team is technically proficient - the sales director was at one time IBM's youngest PC engineer, but it can take between 18 months and two years to get them fully up to speed.

'We invest heavily in training, but what is the alternative? Luckily our staff turnover is very low. We have an Employees' Trust share scheme in place which is designed to reward our staff's achievement.

'2GL has been profitable since day one. In our first year, our turnover was #800,000 and we made #14,000 net profit. We have steadily grown over the years to #8 million and 65 staff. We are also on track to make five per cent net profit this year.

'Four years ago, I was approached by one of my customers in the health services sector, Dave Marriner, who had grown tired of all the changes going on within that industry. We set up 2GL Healthcare to sell into that sector. And last year we set up 2GL Training. We were fortunate to have Kim Moore, former business development manager at Computacenter, join us to run the company. We have a training centre in Southampton which is full most of the time.

'A couple of months ago we set up 2GL Systems Interactive as a separate company. The team has an immense amount of experience in the design of intranets and in delivering complete Web solutions. This is introducing us to major multinational customers that 2GL could not have addressed before - we just would not have had the credibility.

'I am now working four days a week at 2GL. I spend the fifth day on other projects - I am a school governor and I am a trustee of a charity. I think it is important to balance your working life with other roles.

'Lottery syndrome is common in this industry. So many people dream of working hard to start up a business, until someone comes along and buys them out. Then they can go swanning about in their yachts, but I don't think this is a real panacea.

'My objective is not to sell 2GL, nor is it to make vast amounts of money.

I saw excessive wealth in my time on the Med - far greater than I will ever achieve, and far greater than I ever want.