The solution is to explore options like alternative solutions
Darren Beasant, managed services director, Bell Integration (pictured) and Mark Nicholas, sales director, Bell Integration
Vendor CEOs have been vocal about the need to raise prices and have advised channel partners to do the same. Looking at both the products and services you offer, how critical is the situation for your business?
Costs for both labour and products are increasing, especially with the shortage of hardware due to Far East chip supply issues. For Bell and other resellers, there is increasing additional pressure from customers needing to drive down their own IT spend. This leaves the service provider/reseller squeezed in the middle.
The solution must be to work closely with the customer, and explore options like alternative solutions, renting or finance solutions, re-manufactured hardware, automation, right shoring and being honest with everyone in the supply chain about the impact of the current macroeconomic situation.
We therefore should be constantly looking to collaborate in this way with customers and trying to leverage such options to create efficiency and value. The real difference here is they become a "must do" mitigation to the (currently significant) challenge of cost pressure as opposed to an opportunity to grow/enhance margin or provide additional value to customers.
To what extent do you expect to absorb recent/ongoing cost increases around headcount and hardware/software prices, at least in the short term?
While absorbing the cost is an option in the short term, longer term this cannot be a sustainable solution. Indeed, as a reseller we are normally in control of a very small percentage of the overall cost relating to hardware and software, and therefore there is little ability on our part to control and absorb. Helping our customers by ensuring they are getting the exact fit solution is key, their businesses are all under cost pressure, so this is the time to examine their requirements and usage and make sure it fits the needs of their business today. Offering alternative innovative solutions is of much more value in the medium to long term, than trying to absorb cost increases.
From a services perspective we do not believe that many, if any, organisations are operating with margins which would allow them to absorb the current cost inflationary pressure for anything but a very short period - eight per cent pa compound cost increase are just not manageable in multi-year contracts. Significant investment in a combination of right shoring, automation and other efficiency initiatives will be needed for most organisations unless they have the luxury of index linked pricing or the ability to pass these costs on to customers.
When dealing with big increases in your overheads and the price of the products you carry, what's your top tip for protecting margins while - at the same time - keeping customers happy?
Working with the customer and being honest about the cost of delivering products and services, providing advice and guidance around the best solution to meet the current business needs, and using new innovation to drive out costs. An "open book" transparent dialogue on the customers' requirements, solutions, cost drivers and a commitment to work together to find mutually beneficial solutions is the only way this can happen.
Once businesses have eliminated any excess spend any reduction from that point will impact risk, capability or capacity and those type of decisions we believe need to be made in a collaborative way if they are going to be both fully understood and successful.
Energy costs in the datacentre, labour costs in delivering services must all be examined to make sure we are not simply a fulfilment channel, but rather we act as a truly vendor independent adviser to the customer around the best way to reduce their overall costs, while delivering the services actually needed by the business today.
Read Sapphire Systems' CSO Chris Gabriel's hot take on price rises on the following page...