A shifting process landscape

Eroding margins can be countered by looking more closely at manual processes, says Mike Risley

Continued margin erosion, nervous customers and shrinking opportunities for differentiation are placing unprecedented pressure on IT resellers. Business failures are multiplying; 'business as usual' is no longer sustainable.

Companies may believe they have cut costs to the bone. However, there remain inherent inefficiencies in the IT supply chain – such as time-consuming product price and availability searches, as well as manual sales order and purchase order processes.

There is no option but to change business practice in some way. I believe that, irrespective of the economic situation, the current operating model is simply not profitable, unless you have niche expertise that requires less margin to make a profit.

Practices have got to change. Issues to consider include the amount of time the sales team actually dedicates to winning and keeping business. Is it around 50 to 60 per cent of the time?

How much time is spent by the sales team sourcing the best price for customers from a number of distributors, and then checking the product is still available once the customer has confirmed the order? Then they have to enter the details of sales and purchase orders, and fax or otherwise send in the orders to the distributor.

Manual processes are inefficient, time consuming and I believe they are far from the best way to exploit expensive personnel.

For any organisation operating on the typical three or four per cent margin, manual processes will not only erode profitability within hours, but distract talented sales staff at a time when their expertise is most required.

Of course, there have been some attempts to streamline these processes in recent years, with a shift towards electronic product pricing and ordering driven by the distributors. But these services do not streamline reseller processes.

Individuals still need to check the pricing and availability of products with each distributor. That may require verifying information from up to 20 different sources. Furthermore, each time the distributor amends its electronic service, the reseller is required to do some technical development to change XML formats and transaction templates.

Systems must be made compatible and data-sharing facilitated. Electronic processing, to date, has added little value and demanded ongoing investment.

I believe that there is, therefore, growing interest in SaaS offerings that consolidate and co-ordinate information from a number of distributors. Such services can provide a single-screen view of product availability and pricing, saving time in assessing the customer's options.

It is also possible to place an order via such services, with a purchase order being automatically created and sent to the relevant distributor or distributors.

However, the reseller's sales team still needs to enter the relevant information into the ERP system if the subscription SaaS is offered as a standalone service. How much more efficient would it be to integrate it with the ERP system?

With this approach, you can use a single system to check pricing and availability, make the purchasing decision and create a sales order automatically, which is linked to one or several purchase orders for the relevant distributor.

This makes transactions cheaper, improving profits even when product margins remain extraordinarily low. Sales staff can then be otherwise employed, dedicating more time to winning business and supporting customers.

I think that removing the manual processes involved in pricing and availability searches can grow sales activity by 50 per cent or more.

And in any low-margin business, volume is essential. I believe that the vast majority of IT resellers have struggled to scale up in the past, constrained by the administrative overheads. There was simply no economy of scale.

Mike Risley is commercial director of Nolan Business Solutions