CompuCom Not Leaving Business On The Table12:00 AM EST Mon. Mar. 19, 2007
Don't chase new accounts; just go after the business you're leaving on the table.
That's what CompuCom Systems CEO Jim Dixon told the company's salespeople at the solution provider's annual sales conference last month in Palm Springs, Calif. "Of our top 100 product accounts, 61 percent are not buying software [from CompuCom]," he said. "In our top 100 software accounts, 49 percent are buying no services or products. We will be paying bonuses this year for cross-selling."
Dixon's plan to generate more demand in 2007 hinges on getting the disparate business units cross-selling products and services to existing customers, primarily Fortune 500 accounts.
The Dallas-based solution provider is one of the last corporate resellers that came to prominence in the '90s by selling and managing PCs in large corporate accounts. But a trend by PC vendors to sell direct into those accounts contributed to the demise of once household names in the channel.
"The vendors have tried to get the whole channel to move to medium and small business because they are trying to take the large accounts direct," Dixon said. "CompuCom never moved."
As a result, CompuCom now finds itself well-positioned to take advantage of a business model that leverages high-value services at lower costs than tier-one vendors, as well as a renewed focus on enterprise rather than PC hardware.
Last year, CompuCom's revenue totaled $1.5 billion, $735 million of which came from hardware and hardware-related configuration services, he said. While revenue was down slightly from 2005, due primarily to a decline in hardware revenues, gross margins surged, Dixon said. Across the CompuCom business units, outsourcing service margins grew 19 percent year over year, application services jumped 16 percent, software grew 11 percent, professional services margins were up 3 percent and hardware increased .2 percent. While the increase in hardware margins was scant, the growth marked the end of a long slide and prompted Dixon to gush, "Hardware is hot again."
Bill Barry, CompuCom's senior vice president, said the solution provider's services and software relationships with enterprise accounts, along with the cross-selling push, will help build hardware revenue and margins this year.
"Ninety percent of our business is in 110 to 120 accounts," Barry said. "We have an opportunity to cross-sell, and we don't need to get out of existing market space to grow our hardware business." He attributed the growth in hardware margins to a renewed emphasis on enterprise products over commodity PCs. He recently redeployed about 25 engineers so they no longer have to be concerned about billable hours but instead focus on presales technical support.
Conversely, CompuCom is building a telesales group to sell commodity hardware products into its account base. "The majority of our sales reps get most of their business in their top three or four accounts," Barry said. "Then they have another 10 or so where they do very little business. I'm going to take those 10 accounts and give them to another group of salespeople [who] will call on them every day and try to get the commodity-type business from them."
Barry pointed out that the strategy is essentially the opposite of one of CompuCom's biggest hardware competitors, CDW. "Our competitor is going out and hiring outbound reps and buying Berbee, and we are coming at it from the reverse. Higher margins are available if you focus on project-driven enterprise sales," he said. "If you win the enterprise project business, you can drive both hardware and services."