It's Not Easy Being Big12:00 AM EST Mon. May. 19, 2008
You have to find qualified candidates, train them to fit the needs of your solution portfolio and then incent them to actually stick around. Many solution providers say it's one of the most challenging facets of trying to grow their business.
Now imagine trying to find 80 of them. That's the situation large solution providers like Dimension Data find themselves in, striving for growth at the same time their needs often far outweigh available resources. Yet, somehow, they continue to grow. It's not an easy accomplishment, said executives at some $1 billion-plus solution providers.
"Our No. 1 challenge--this is trite, but it's really finding people, particularly technical talent. Not just here in the U.S. The same kind of challenges also exist in Mexico and Brazil," said Jere Brown, CEO of Dimension Data Americas. Dimension Data, with U.S. headquarters in New York, is No. 24 on the 2008 VARBusiness 500 list with $3.77 billion in sales for 2007.
To help recruit talent, Dimension Data put together a 12-week program that includes classroom and field training. The solution provider recently put 80 engineers through an IP telephony session, Brown said.
"As you're looking at recruiting, there are advantages a small company has and advantages a big company has. As a big company, we have the ability to get scalability of programs," he said. "We give [the 80 engineers] the base skills and the training to grow and develop them. It makes them more valuable to us, but it also makes them more valuable in the marketplace too."
Insight Enterprises Inc. also has to invest heavily in training and skills development programs, said Rich Fennessy, CEO of the Tempe, Ariz.-based solution provider. Insight has an eight- to 10-month training program designed to help employees become true trusted advisers to clients, he said.
"We aggressively recruit on college campuses, but in addition, you have to retain talent you have. Give them new capabilities, new opportunities for growth, so you can see that expansion of the share of wallet [with customers]."
Jim Kavanaugh, CEO of World Wide Technology Inc. (VARBusiness 500 No. 36), agrees that finding enough technical talent to grow a 10-digit-dollar company isn't easy.
"Whether it's billable engineers or presales engineers, account reps and sales managers, across the board there's a lot of demand for those individuals. There are not enough qualified, experienced individuals for those specific positions," Kavanaugh said.
Next: Choosing The Right Solution
Another challenge large solution providers face is trying to choose the right solutions to offer customers, Kavanaugh said. For example, a smaller solution provider can more quickly gain a reputation as an expert in vertical markets or certain technology areas, but a big company typically needs to be more diversified, while appearing specialized. World Wide Technology has built specific practices around unified communications, data centers, security and wireless, Kavanaugh said.
"We are fortunate because our [customer base] is diversified too. We are one-third in the federal space, one-third in the commercial space and one-third in the telecom/service providers space. We feel that that's helping," Kavanaugh said.
World Wide Technology, St. Louis, has been growing at roughly 25 percent year over year for the past several years, he said. "We decided to focus more on technology [vendor] partners that we selected several years ago, and go deeper and broader within those programs."
Ingenix Inc., a $1.3 billion solution provider (VARBusiness 500 No. 58), found its niche as a specialist in health care. The Eden Prairie, Minn.-based company focuses on solutions for hospitals down to private practicioners because the health-care industry is more recession-proof than other markets, said A.R. Weiler, vice president of sales.
"Twenty percent of health-care dollars are spent on inefficient processes and overhead. A lot of our business is going to help them operate more efficiently and better serve their customers," Weiler said.
For Insight, the top focus for growing the business is increasing the solution provider's share of market with existing customers. That means trying to win more business, but it also means giving those customers more products and services to buy, said Fennessy.
"When you look at a company's IT spend, how much are they spending on networking, infrastructure, data center? Traditionally, our strategy has always been in the client space: notebooks, desktops," Fennessy said. "But that's only a portion of the IT budget. Growth becomes relevant in other areas of IT spend. For example, networking. That's one of the reasons we bought Calence [a Cisco Systems Inc. solution provider]. You love us for desktops, servers, why not consider us for networking too? As we think of growth, it expands share of wallet with each client. If I'm not getting all the IT spend, how do you do that? You move into other areas, where it becomes a skills discussion. Am I credible? Have I earned the right to have that type of discussion?"
As an example, if a customer defers a desktop upgrade because of tough economic times, the client might still spend on network infrastructure or services, Fennessy said. "You have to keep adding capabilities to get in deep [with customers]," he said.
Of course, deciding to offer a new technology and obtaining that capability are two different things. Like any solution provider, Insight must decide if it should acquire those skills or try to build them organically. Large companies often have the financial means to buy into the market. The best approach is a combination of both, Fennessy said.
"We have to grow organic and be smart about acquisitions. You do it underneath the strategy of becoming more meaningful to each IT client," he added.
Next: Finding Opportunities For Growth
Ingenix also finds that growth needs to come from a combination of acquisitions and internal additions, as well as latching onto a vertical market where spending is increasing.
"The [customer] base is just so large and so lightly penetrated. [Health care] is one of the lower automated vertical markets]. If the financial and manufacturing [verticals] are leaders, medical tends to have adopted computer-type automation at a lower scale and later than other industries. So it's a tremendous opportunity," Weiler said.
Expanding globally is instrumental as well, large solution providers say.
Insight has doubled its revenue to roughly $3.3 billion since 2004 when Fennessy joined the company. Its payroll has increased to about 5,000 employees, from approximately 3,700, so production, measured by sales per employee, has increased significantly. Insight has also expanded from three countries to 22. Insight's sales outside North America accounted for 30 percent of the total last year, up from 19 percent in 2004.
"The reality is how we get to that revenue growth on that [lower] employee growth is a good combination of acquisitions, such as Software Spectrum and Calence, which closed April 1," Fennessy said.
Insight has more solutions to offer customers than it did four years ago, Fennessy said. "Leveraging some markets that are clearly growing faster than the U.S. makes sense from a capabilities perspective. As we get into Germany, France, Asia, we only sell software now. We see significant opportunities there to sell hardware, services to those software clients. That's a key growth opportunity."
Within the last year, Dimension Data started a Canada business from scratch and acquired a company in Brazil.
As more customers require global solutions, companies that can service those needs will be at a tremendous advantage.
"A couple of years ago, only big enterprises had global requirements. Now, the medium- and even small-enterprise clients have the same multinational requirements that the big guys had a few years ago," Brown said. "We have been able to take market share because of our skills in certain market areas and having a focused plan around that. Market conditions around consolidation also allow us to gain market share."
Having a global presence is especially helpful as international markets tend to grow faster than the U.S., he said.
"In the U.S., you're competing for short gains, but in Latin America countries, the infrastructure is still being built out," Brown said. "One way to move into a new market is to take a mature product, one where you already have scalability and efficiency, and take that as an entrée into a new market."
"That's how we opened up in the West [United States] a few years ago. Four years ago, we did not have an office west of Atlanta. What started out smaller in the U.S. grew as clients requested us to expand to Canada, Mexico [and] Brazil. That's fueled growth globally. We go to where customers need us."