Faletra: It's About The Solution -- Not The Price!

O.J. Simpson didn't shop based on price when he was looking for an attorney to defend himself. And you don't shop on price when you're looking for a doctor to perform Lasik surgery. Those were just two examples that Everything Channel CEO Robert Faletra used during his "On The Record" keynote session at the XChange '08 conference in Dallas, Texas as he urged several hundred solution providers Tuesday to implement an organizational structure along with processes aimed at increasing profit margins rather than falling into the perennial low-priced commodity product trap.

"Over time everything becomes a commodity," said Faletra. "If you're really selling a solution your price will go up over time. It's not about the products you sell. It's about the problems you solve. It's easy to shop for products (based on price). It's not easy to shop for solutions (based on price)."

"If I was hauled out of the office one day in handcuffs, when I went to hire a criminal defense lawyer I am not going to shop them on price," Faletra said. "O.J. didn't go to Johnnie Cochran because he was cheap. He did it because he was good."

"The other great example is lasik surgery," he said. "You don't shop that on price. Would you want to find the cheapest guy you can to get a laser and drill it into your eyeballs?"

"If you position yourself in the market properly you will get premium prices," he told solution providers. "Being able to define a business solution is where the profit lies." Successful solution providers are structured around practice areas that can be either technology based such as virtualization and storage, or vertical markets such as healthcare or financial, said Faletra. Faletra said vendors are going to be looking closely over the next several years at maximizing sales capacity through solution providers. "It's all about your capacity to grow and what you need to do in order to grow," Faletra said. "It really becomes an issue of, 'Are you structured right?'"

Faletra said it is critical that solution provider sales and services are aligned properly. "If every time you make a significant sale you have to reinvent the wheel to deliver on it you are probably not very scalable or optimized." He urged solution providers to track their sales and services processes over several sales to determine if they have suitable processes in place.

Faletra said solution providers complaining about Hewlett Packard's decision to co-fund 110 HP only salespeople at perennial low-priced product provider CDW are missing the mark. "I think it's much ado about nothing," said Faletra. "CDW was smart enough to ask for it. At some point you have to stop worrying about what CDW does. That is certainly no way to compete. You have to do the best job you can and get as much as you can out of the vendor to achieve your business model."

Faletra said he believes CDW may not be doing as well as some people think. He predicted consolidation in the direct marketer segment of the market. "CDW can't be that critical defense lawyer or Lasik surgeon," said Faletra. "You can be. CDW is all about driving commodities. They want to be the low-cost supplier."

Robert Swanson, president of Delta Max, a Corona del Mar, Calif. based solution provider, said Faletra's comments were right on target. "Solution providers are not spending enough time thinking about how they are organized to drive profits," he said. "When they think of their organizations they still see themselves in the client-server model of the 1980s and 1990s. If you build it they will come. Technology is so last decade."

Prashanth Vemuganti, president of Pantheon Solutions, an Iselin, N.J.-based solution provider, said he is taking Faletra's advice to heart and moving up the percentage of his vertical market business from 60 percent to more than 90 percent. "You shouldn't market based on the price point," he said. "You should market your talents as a solution provider and be a problem solver."

That said, Vemuganti said he is concerned about the HP-CDW alliance. He said he was bidding for a medium-sized product deal in March for $150,000 and ended up losing the deal to low-priced bid from CDW.

"I want to offer more solutions rather than selling hardware where everyone is competing for a dollar or a dime," he said. "I would rather package the hardware with the solution."