Q&A: GTSI CEO Jim Leto On Company Changes

GovernmentVAR: So will you be jumping out of that commodity-product market entirely?

Leto: We'll be more selective in the products that we represent. We'd be fools to say "We're not going to honor a PC procurement on an [IT Enterprise Solutions] contract for the U.S. Army. I just couldn't do that. So there will always be some element to this business that will accommodate the customers' need. They just won't be able to provide any product known to man from GTSI.

GovernmentVAR: Has the company announced yet which vendors and products the company will keep on and which it will steer away from?

Leto: No. I mean, the vendors will know. If I don't sign them up and I don't represent their products, they will know. It's just not something we'll announce publicly.

GovernmentVAR: How will the decisions be made? Is it just a matter of demand?

Leto: We're going through all vendors right now to determine which should still be represented and which cost us money with no value. We also implemented lines of business within the company that are focused as specific practices. For example, I just had a meeting with the senior vice president at Cisco, which is in our communications and networking practice. We're working with Cisco to configure high-end solutions that we would represent on the market. So while it used to be that we represented Cisco products, going forward we will be a partner with Cisco in going after specific targeted markets.

GovernmentVAR: The focus on full solutions and services is the direction the market continues to go in, for both small and large companies.

Leto: For the past 15 or 20 years, it's all I've been doing, mostly as a systems integrator. But even as a software provider, every license carries with it a huge services component. I was always talking to analysts about services as a necessity; it's not something you can walk away from.

GovernmentVAR: Do you believe there's any opportunity left for product-only resellers?

Leto: Oh, absolutely. The CDW-Gs of the world will continue to thrive because they have a business model that allows them to accommodate large commodity kinds of sales at low cost. I just don't see them as our competitor.

GovernmentVAR: GTSI has faced some issues recently, with the botched ERP solution and then the strategy to increase the sales force that ended in layoffs. Are changes in the works that will deal with those internal issues?

Leto: The ERP implementation was stressful. And we lost probably 50 percent of our sales force during that whole process who couldn't input orders, couldn't make their quota. And this is the town that has no unemployment, so we had a pretty high attrition rate both in our purchasing department and our sales. I can directly relate that to the ERP implementation. I can also relate that to the inventory problems we ran into. So now we're downsizing our expenses to match our revenue forecast and margin forecast, and we recognize that hiring salespeople is not a linear function to both revenue and margin; there's diminishing return. Right now, we have a stable sales force, our ERP system is improving on a daily basis and a lot of that is behind us.