How To Sell IT In Tough Times

There's plenty of opportunity out there, say solution providers that are thriving in today's business climate. In fact, some VARs say a sagging economic climate can actually spur IT sales, especially if you can prove a quick return on investment or increase operational efficiencies for customers.

The IT industry is relatively sheltered from larger economic troubles because technology can still help businesses operate more efficiently and drive their value proposition out to the marketplace, said Greg Paetow, director of Mid-Atlantic business development at Melillo Consulting Inc., Somerset, N.J.

Moving away from a products-based model, increasing your focus on managed services, diversifying your portfolio and customer base, and offering the latest technology are great ways to keep your revenue pipeline flowing through turbulent times, solution providers said.

Added Paetow, if your customers aren't buying now, it's up to you to show them how IT can help them be more productive, more efficient and ahead of their competition.

Several Melillo Consulting clients are now in "a holding pattern," said Paetow, yet he said he is still working with them regularly to build the relationship. "It is still very important to at least stay in front of customers in these tough times," he said.

Melillo Consulting offers assessments and other road-mapping tools to get customers to think of the big picture, Melillo said. To help in the new and emerging technology educational process, Melillo Consulting does 40-minute Webinars for customers or invites them into its New Jersey data center to test-drive the latest products.

The live demos have proven "very beneficial" in drumming up new business, Paetow said, and the close rate on the Webinars is about 70 percent.

That kind of proactive approach for Melillo Consulting, and other other solution providers, is the difference between surviving and thriving when a down economy hits customers hard.

SERVICES, NOT PRODUCTS
Solution providers have long heard the mantra, "Don't sell products, sell solutions." That probably rings more true now, when the economy is slumping, than at any other time. Customers aren't going to buy new technology for its own sake. They simply can't afford to. It's up to VARs to package products with the appropriate services to make customers feel that they're getting a good bang for their buck.

Simply put, a services focus is more recession-proof than a products-based model, said Ken Lamneck, president of the Americas at Tech Data, the Clearwater, Fla.-based distributor.

"Once you get that services entanglement, you become a little more in control of the spend and you can really show the customers the true value of technology," he said.

The more focus on productivity gains that offset costs, the more likely that customer is not going to delay IT spending, Lamneck added. Technologies such as virtualization and VoIP are ripe for that conversation, he said.

"In tough economies, end-user customers are focused on return on investment. If you can show a tangible decrease in their SG&A costs because of this implementation, those [solutions] have a much greater likelihood of going to the front of the priority list," he said.

Every end user has some applications that are so mission-critical that their implementation simply cannot be put off, Lamneck said. Smart solution providers focus on those technologies, especially security and storage.

"You've got to look at product segments that are difficult to delay. The more you can focus on those areas that are difficult for customers to put on the back burner, the better off you're going to be," Lamneck said.

Next: Managed Services MANAGED SERVICES
Taking services a step further, many VARs find that it often makes economic sense for customers if the solution provider becomes their outsourced IT department. Say hello to managed services. By remotely managing and monitoring your customers' PCs, networks, storage, printers and more, you provide yourself with a recurring revenue stream and end users with a fixed IT budget. Everybody wins.

Greg Starr, COO of IT Works, a Houston-based solution provider, said his managed services business is doing so well it's hard for him to even admit times are tough.

"Are the sizes of projects smaller? We're seeing some of that. But overall we're seeing a lot coming through," he said. Longtime VARs have survived enough economic rollercoaster rides to know that quick turns are tough on everyone involved. The ability to strap in and hang on tightly by quickly adjusting to economic slides is all part of maintaining a successful business.

For IT Works, having a managed services practice gets Starr's company more ingrained with the customer, which helps insulate both parties against a depressed economy. Managed services brings IT Works a steady revenue base, while also helping customers reduce their own IT costs, he said.

"If you're busy with managed services, you're not waiting for the phone to ring in that environment," he said.

DIVERSIFICATION
Wall Street fortunes have been made through keeping diverse stock portfolios, and the same can be said for solution providers. Although it's true that many VARs find success with niche markets or technologies, that model can be more risky over the long term, especially if you're new to the game. Sometimes the key to selling in a tough economy is to keep all your options open.

Global Technology Resources Inc., a Denver-based solution provider, has grown to $180 million in part because it serves six or seven different markets instead of two or three, said Glenn Smith, executive vice president of operations and co-founder of GTRI.

If one vertical market isn't buying, there's a good chance one of the others is, Smith said. The cyclical nature of many markets allows the solution provider to get through times that prove tougher for competitors.

"We've been able to diversify across so many different market segments," he said. For example, a new customer base for the company is oil and gas companies. "Our eyes have opened in new places, not only where to take wireless, but other practices as well."

Another factor for success that solution providers should take advantage of are policy changes. For example, the federal government's recent approval of wireless connectivity should lead to a bounty of opportunities, said Charlie Franco, whose company Anyware Network Solutions Inc., a wireless specialist, was recently purchased in August by GTRI.

With the new approval, the wireless opportunity "will be huge," Franco said.

Next: Latest Trends In Technology LATEST TRENDS IN TECHNOLOGY
In many cases, solution providers have been selling "green" for years, through server consolidation, virtualization, etc., but highlighting the environmental aspect of a solution helps the marketability of a solution, VARs said.

"We see the movement largely starts in the data center. It's all about real estate and floor space, air conditioning, cooling, power consumption," said GTRI's Smith. "A lot of what we see going on [with] green initiatives are rack-oriented, server-oriented. We incorporate that into our data center practice."

The solution provider held an open house for customers earlier this summer. GTRI invited a few vendors to showcase their technologies and talk about how they address environmental issues. The event generated some great leads that will keep the company busy into the fall, said Sam Anderson, manager for marketing programs for GTRI.

"It's something our customers have been talking about and they were interested in what we were doing from a solutions perspective," Anderson said.

Melillo Consulting also works closely with major manufacturers to generate proof-of-concept solutions around new technologies on behalf of its customers. For example, the solution provider may drop a blade enclosure into a test environment and do a proof-of-concept demo to drive home the long-term value in infrastructure consolidation, Paetow said. Other new technologies the solution provider showcases include management consolidation, storage strategies for archiving, backup and recovery, disaster recovery and business continuity.

"You don't need to implement immediately," Paetow said. "Now is the time to do the planning, to get customers and their IT departments educated on new technology."

Melillo Consulting provides customers with a road map to appropriately budget and implement a cost-effective solution, Paetow said. Taking that approach will benefit solution providers when the wallets do open up again, he said.

If customers already understand what they need, it translates into a quicker sale and a more loyal customer.

Next: To Do Well In A Shaky Economy, Look Within TO DO WELL IN A SHAKY ECONOMY, LOOK WITHIN

Learning to sell in a tough economy is only one side of the story. Another way to thrive when IT spending is in flux is to focus on becoming more efficient within your own organization.

That's what Mike Novotny, president and CEO of InterTech Computer Products Inc., has done. While the Phoenix-based solution provider's sales force and technicians of course look to bring new solutions to new customers, the company has made more money this year by looking for improvements within.

"We have much better utilization from the resources we have," Novotny said.

InterTech started enticing its technical staff to hit new utilization goals through managed services. If they hit them, they get compensated for that.

For example, if InterTech plans 200 billable hours to complete a project, and the technician completes the project in 180 hours, he gets credit for 200 billable hours and can use the other 20 hours to earn more money.

"I have people billing in excess of 120 percent billing utilization," he said.

The strategy has had a dramatic effect on profitability. Novotny expects revenue to be up 12 percent to 15 percent this year, but net income should increase about 30 percent, he said.

"And for every 1 percent growth in our services dollar revenue, we can put 3 percent growth net income to the bottom line. It's part of our evolving business model," he said.

InterTech also builds that model into its managed services contracts. The solution provider includes prescheduled on-site visits for customers. Technicians are so busy now, the company has stopped responding to many inbound service calls from nonmanaged service customers.

"We won't interrupt our service delivery resources to take care of something like a one-time touch," Novotny said. "Before, if someone called to say their server was down, we'd jump through hoops to take care of it. Now we scrutinize our reactive service utilization much more carefully."

--Scott Campbell