Dealer profile: Colin Parnell: From The Horse's Mouth

Drew Cullen talks to Colin Parnell, the man behind Peg Associates, to see what lies behind the success of the Pegasus reseller that is going from strength to strength

Colin Parnell is the chairman of Peg Associates, the #1 million Leicester-based Pegasus dealership. He established the firm in 1979, following a varied career encompassing mechanical engineering, DP management, and computer sales at ICL. Cornish-born, Parnell is 53 years old and married for the third time. He has two sons in their 20s ? one is a robotics systems engineer and the other is in engineering sales.

We were one of the first companies to become a Pegasus dealer. I met Johnnie Johnson, when he was the director of software at a company called HB Computers. He showed me a little set of accounts routines he had written for the Commodore Pet, and I liked what I saw. I suggested some improvements, which Johnnie incorporated into the specification for what became Pegasus.

At the time, I owned a consulting business in Rugby with my partner Ron Gregory. We were doing a lot of general systems work with manufacturing companies ? GEC and General Foods were among our clients. 1981 was a somewhat recessionary time for the manufacturing industry, and this forced us to look very carefully at our business. Our general systems work dried up, but we were already getting a steady stream of business from Pegasus. So we concentrated on the latter.

In the early days, Pegasus software almost sold itself. The company had little marketing to speak of and most new business came through referrals. There was an emerging group of customers proficient in microcomputers who didn?t want to buy masses of support. We unbundled the software from the contracts, and we started selling Pegasus off-the-page. We were then accused of underpricing Pegasus madly ? which I suppose was true.

Through the 80s, off-the-page sales gave us completely adequate revenue and we built telephone support, then training, on the back of this. In the early days, we were also getting asked to fix these microcomputer things, so we decided to have a dabble in this market.

In 1983 we set up a subsidiary called BER to sell microcomputers. Unfortunately, it didn?t work out and we had to close the company down. But our bank manager tried to take Peg Associates at the same time through cross guarantees made by the directors. We cut back, traded our way out and paid back every penny.

After a few years, we set up banking facilities again. Then at the end of the 80s, one of our clients lodged damages against a network we supplied. The case dragged on for six years, during the course of which our solicitor dropped a goolie and failed to file papers in time, so we got a court order against us for #50,000. We got the court order set aside within a month. But in the meantime our bank tried to close us down again.

Now the bank is wooing us to lend money again, but we just use it for the service till. It makes life simpler. The case was finally settled out of court. It was a salutary lesson about the need to keep records. We could not understand how the customer had a case against us, given our contract of supply.

In 1987 we had specified a network for a maximum of six terminals. The customer had ignored our warnings, and grew the system to 16 terminals on the same network. Of course it didn?t work properly. Our client was a subsidiary of a foreign company, and the MD had failed to take the project seriously. So he needed someone to blame. It turned into a very personal vendetta against our firm.

By 1993, I was getting bored with just selling accountancy systems, so I set up a separate consultancy business to handle general systems work. From 1988, Peg Associates took a back seat. In the late 80s, Pegasus was riding high on its success. But it had grown com- placent and arrogant.

At the time, Pegasus was effectively controlled by Derek Moon, the chairman. He was very arrogant and refused to talk to the dealers ? his customers. When the recession came into the market for accountancy systems, Pegasus was left high and dry. The company had put all its eggs into the Unix market ? which seemed a reasonable bet at the time. Unfortunately, Bill Gates had other plans. Pegasus IX was a disaster in terms of the launch and product reliability. Subsequently it turned into a lovely product ? but the damage had been done.

In 1990 Johnston and Chris Leak, both of whom had been kicked out in the 80s, came to see me. They had a new accounting system called Sequel, which looked promising. Sequel could do things that Pegasus Senior couldn?t. It was open-written in Foxpro, which meant developers could integrate completely with it to deliver tailored solutions. But Sequel Systems needed development money. So I rallied a lot of dealers round to put some dosh into developing the product, and subsequently I was put on the company board.

I got a lot of flak from Derek Moon, who threatened to close down our account. It was all very stupid and petty. We were definitely the number one dealer at the time. It was a very silly company ignoring the power of its dealer base. I wanted Pegasus to take over Sequel Systems to get its product, but the company would have none of that. It had been farting about looking at being bought by Exact and Saari.

Jonathan Hubbard-Ford arrived at Pegasus as CEO in July 1992. He took three looks at Sequel, before agreeing to buy in the product, which still needed a lot of development. In December 1992, there was the fiasco over Pegasus Senior version five. This was the major upgrade to cover new EC VAT accounting regulations.

Through the autumn of 1992 we were promised that version six would be ready for December. Then in the first week in January, Pegasus announced the upgrade was going to be deferred for three months. This left the dealers very exposed. We had been asked to circulate customers to get orders for the system and then we were left in the lurch.

There was absolute mayhem in the boardroom. Jonathan Hubbard-Ford was made the scapegoat and was sacked ? even though he had nothing to do with software development. Jonathan?s then sales director Jamie Minotto was 100 per cent behind him, and he canvassed a number of dealer to institutional shareholders expressing our concerns.

Within a matter of weeks we got enough support shareholders to remove Derek Moon and John Percival completely from the company, and get Jonathan reinstated. It was a victory for dealers and, for me, a major turning point in Pegasus.

I have been very critical, constructively so, over the years about Pegasus. But the company has changed very much for the better under Jonathan Hubbard-Ford. Now the firm has its most complete product range, and we are waiting expectantly for Capital Gold and the new generation Opera.

The firm is much better at meeting its launch targets these days. It was during the upgrade fiasco that 40 Pegasus dealers formed Admit. The idea was to gives us a concerted voice. In the early days, we were viewed with great suspicion by Pegasus management, who thought we were a load of whingers. But it has moved on since then. Pegasus policies take more account of dealers than ever would have under Derek Moon.

In 1993, I decided to come back to Peg Associates. I could see the company would die if it didn?t change. The off-the-page business was slowly drying up. Pegasus had succeeded in the early days because of its timing, and its good, reliable product, but it had no marketing. Then Sage came along with blanket marketing, availability and better prices and features. It cleaned up at the low-end.

I needed to give Peg Associates a lot of attention. I enjoy the challenges. That?s why I?ve come back to Peg. My consultancy business has been successful ? I did an awful lot of work for Break for the Border. But I began to realise that I was spending too much time guiding other people?s businesses and not enough time looking after my own interests.

First, I took on board a small Pegasus dealership in Leicester called Archer Microchip. This got us established with a local customer base ? before we had been more of a national reseller. We will concentrate more on local selling in the future.

Since 1993, I?ve consciously turned Peg Associates into a much broader based company. Although we continue to be Pegasus-led, we can now do other things. Our plan is to deliver software around Opera, and we are focusing on specialist systems in human resources. We have already developed with a software partner a profit-related pay system that integrates with Opera Payrolls.

There has been a lot of consolidation in the Pegasus channel, particularly in the past year. And a number of dealers have already sold up. The knowledge you need nowadays to sell accountancy software is totally different from the old days. And the growth in the accountancy systems market is not like it used to be.

Resellers in this market now have to work in a different kind of way ? they need to handle upgrades, maintenance, new solutions, and inte- gration. We expect more dropping off. Products are getting more sophisticated, and complexity is far greater. If you are going to play the Pegasus business, you have got to invest in dealer fees each year, and invest much more in your technical abilities.

I think there are possibly too many dealers in some areas ? East Anglia appears to be over-populated. But our market ? the Midlands ? appears to have enough business for dealers in the area. Peg Associates remains committed. We have 2,000-odd users, with well over 50 per cent signed into maintenance contracts.

We want to help the market to grow. The year 2000 question has been wonderful for concentrating our customers? minds. There has been a lot of scaremongering over the millennium, but we don?t have that problem with Senior 2000, and Opera is being upgraded this year.

Peg Associates has almost 20 people, and is growing quickly. We are much more customer-led than in the 80s. My objective is to make Peg a successful, fun place to work and for customers to deal with. We also need to make markets. We have never really had sales people until the past couple of years or so ? with the off-the-page business, we used to take orders.

In 1995, I took on a sales director, Janet Pearsall, who had run her own successful consultancy, and had also worked at Kewill Micross. Sadly, she was killed in a car crash at the beginning of last year. This knocked us off course for a while. Last April, George Rab joined us as our new sales director. Simon Robinson, formerly at Systemhouse, also joined on a part-time basis as deputy MD. Ron Gregory is coming back to the company, after doing contract work for Pegasus for a number of years.

Before we could grow, it was critical to get the right team in place. My plan is move the company forward through a much younger core management team. This will give me more time to play with strategies for the future. The computer industry is a young man?s business and I certainly don?t intend to be involved in day-to-day operations by the time I am 60. I have been a worker all my life, and have been in this game a long time.

The future for Peg Associates looks fantastic. We always used to believe that we were super- ior ? now we have to show that we can outclass everybody else in this sector. Our ultimate aim is to make Peg Associates the definitive Pegasus reseller.