A Prototype New-Age Partner?

Yates and Shannon-Garvey, vice president of professional services and CEO of Seattle-based Washington Technical, respectively, brought their company to fore amid what was arguably the depth of the IT recession and quite possibly the worst time ever to start a new IT business. Ever.

But start one they did. Despite corporate downsizing, collapsing dot coms and a growing belief that Y2K was a boondoggle that led Corporate America to stockpile IT goods, these two industry veterans still thought the time was right to launch a new solution-provider company. The reason was simple: Despite the fact that no one was buying IT products, Yates and Shannon-Garvey saw significant investments in IT going underutilized or improperly deployed. As former managers with local Inacom and Vanstar offices, they knew where customers in the Seattle area were, what they had invested in and what their needs were. So Washington Technical was born.

To make sure their fledgling company would succeed, Yates and Shannon-Garvey made some crucial decisions that, in retrospect, sealed their fate. In short, the company's founders addressed up-front nearly all of the critical questions that young VAR business owners need to face head-on.

For example, Yates and Shannon-Garvey first decided which types of customer they wanted to target. That was a critical factor in determining their long-term success. Although larger corporate entities looked awfully attractive due to their permanent IT budgets, Yates and Shannon-Garvey figured their best bet was to serve as a de facto outsourced IT department for companies with between 25 and 250 employees. Anything larger would mean haggling with or even competing against inside IT staffers, while anything smaller meant too much work for too little pay.

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Then the co-founders determined what they would do and what they wouldn't do. For example, the company today bills itself as an expert solution provider that can dovetail its capabilities directly to meet the needs of customers. Yates and Shannon-Garvey decided that sophisticated, albeit uncomplicated, technology provided the best return on investment. So they gravitated toward Voice-over-IP (VoIP) and other emerging technologies that are showing promise. Although they looked at VoIP gear from others, they ultimately decided to represent another manufacturer, Zultys. That decision helped Washington Technical distinguish itself and avoid a cutthroat VoIP marketplace. So, what doesn't Washington Technical pursue? One-off desktop support deals.

"Others can try to scratch out a living for $40 an hour, but they'll never end up recovering their costs," Yates says.

They also decided not to accept investment from outside investors. Granted, doing so put an enormous financial strain on them temporarily, but it meant not having to carry leverage on their books. And doing so enabled them to turn profits almost from the start, which they have maintained to this day. Profits, of course, have helped secure better terms when dealing with suppliers and other entities.

Finally, Washington Technical has pursued a path contemplated by many but taken by few: developing a healthy annuity business. Rather than try to squeeze customers on one-off project deals, Washington Technical has tried its best to sign customers to service contracts. For a flat fee--in some cases, for as little as $300 per month--the company promises to be a single point of contact for all IT needs, which it parses out to third parties where appropriate. Wherever possible, Washington Technical remotely monitors firewalls and routers and performs fixes without having to go on-site. Of the dozens of companies that have been offered such a deal, two-thirds have taken the company up on its offer.

Of course, that has put a burden on the company to deliver on its promises. To prepare itself for any surprises, the company maintains a 1-3 ratio of technicians to customers. Because of its tight focus on customers of a certain size, the formula seems to be working.

Let me know if you see cracks in the business model: [email protected].