Reeling Them In

Despite ongoing debate over the value of indirect vs. direct sales models, the fact remains that high-tech vendors need solution providers to generate demand for their products and technologies in a significant subset of the IT market. That basic tenet is borne out in new CMP Media Channel Group research.

An exclusive survey examining the dynamics of IT decision-making among business and IT executives at end-user organizations shows longstanding relationships are by far solution providers&' most effective form of sales demand and revenue generation. What&'s more, companies are far more likely to turn to their solution provider than to a product vendor for advice. That&'s because the customer is more often than not looking for a complete solution rather than a specific product, the research shows.

“We have a 20-year history in the IT industry, and we are continuing to grow,” said Rich Tear, CEO of CSCI, a solution provider in San Diego. “It comes down to reputation, word-of-mouth and trust.”

The survey, conducted earlier this year, included close to 700 end-user organizations representing small, midsize and enterprise accounts. All respondents were identified as being involved in the IT decision-making process for their company, but no predetermination was made as to whether or not these individuals were using a solution provider.

Still, 90 percent of the organizations reported that they were, in fact, allied with a VAR or systems integrator. Of these, 55.4 percent categorized that relationship as “high value,” and 48.5 percent of the respondents said at least some of these relationships were longstanding unions. When it came to getting ideas and projects kick-started, 54 percent of the end-user organizations reported that solution providers were instrumental. Moving into the active phase of implementations, 67 percent said solution providers have added products and technology recommendations to the initial specification for a project, while approximately 61 percent reported that their solution providers added to the solution during the course of an implementation.

Longstanding relationships are at the core of CSCI&'s growth and have helped it expand beyond its San Diego roots, Tear said. When an IT professional working for an account with which his company has built a relationship moves to another job, that executive often transfers the CSCI relationship, he said. “One of the guys we worked with at a law firm in San Diego left to work with a large law firm in New York,” said Tear. “He hated the vendors he was working with at the new firm and called us up and asked if he could work with us the same way he used to when he was three miles from us in San Diego. We said, ‘Yes,&' and that&'s grown to become one of our biggest accounts.”

Tear&'s experience certainly isn&'t unique. The CMP research underscored the fact that solution providers influence more than half of the IT budgets specified by these end-user customers: The respondents reported that their trusted IT advisers were responsible for an average of 52.4 percent of their IT budgets. Product brands were specified by the solution provider in 75.7 percent of the implementations, the data shows. Overall, solution providers drive an additional 15 percent in unbudgeted, incremental spending each year, the respondents reported.

THE RIGHT LURE
While trust and word-of-mouth play a huge role, solution providers&' kit of demand-generation tools is seemingly endless. The bottom line, they say, is that their demand-generation activities must be as creative as the solutions they provide.

While customer-education seminars are commonplace, Don Richie, CEO of Sequel Data Systems, an enterprise VAR in Austin, Texas, has come up with a twist that he says is literally his most successful demand-generation vehicle to date: a semi-truck capable of handling traveling road shows that is packed with demo equipment from Hewlett-Packard, Microsoft and VMware, among others.

Richie says the truck not only allows him to visit rural prospects that might otherwise be neglected—offering them proofs of technology concept on the spot—but it provides visibility for his company, as the outside is covered with logos.

At close to $500,000 for the truck plus the special power supplies, racks, wiring and environmental equipment—not to mention the technology housed within—this was not an insignificant investment. “The stuff that we had to use for insulation was $22,000 itself,” he said. Richie especially credits HP with supporting his efforts: The interior includes $250,000 worth of HP hardware and software alone, including AlphaServer for VMS, HP-UX, new blade servers and two complete SAN solutions, equipment that is swapped out about every 90 days as part of HP&'s demo trade-in program. Microsoft, meanwhile, contributed hundreds of dollars worth of software, he said.

The truck has been on the road since February, and Richie plans to have another one outfitted by January. “Very few [solution providers] will find out what the companies are looking for and take the full platform to the customer,” he said.

KEEP IT LOCAL
Other solution providers, such as Champion Networks General Manager Ted Hunter, say some of their best demand-generation activities involve building their brand through community events not necessarily related to the IT market.

Hunter, for example, thinks demand-generation activities are a real “drag.” Drag racing, to be precise. He dedicates around 5 percent of annual sales to local advertising activities around Brunswick, Maine, most notably in the form of signage on his company-sponsored race car, which he drives at events near his New England home. “If anyone wants to promote a product, then the highest loyalty rates are based around the automotive arena,” Hunter said.

Hunter&'s car is emblazoned with the logos of his preferred vendors. He believes this visibility was instrumental in cementing the Premio hardware brand in the New England region, making it easier for him to recommend its products. Just as important, the vendor participation helps reduce his costs.

Other venues that have been effective for Champion Networks: banners behind the goal posts at local sports arenas, scoreboard displays on golf courses, signage at the local YMCA and a column in a regional magazine. “It&'s cheap, repetitive and brings a significant audience,” Hunter said.

AN OFFER THEY CAN'T REFUSE
Elsewhere, some solution providers have borrowed a tried-and-true retail practice: If the customer isn&'t satisfied, give them their money back. That&'s the strategy at Stormwood, a four-year-old Atlanta-based VAR that is breaking ground in the VoIP arena with vendors including ShoreTel and Enterasys Networks.

Stormwood CEO Nate Griffin said his company tests products extensively before agreeing to represent them, one reason he feels confident enough to make the money-back offer, which covers his installation fees as well as the actual equipment.

This strategy is especially important when you&'re trying to convince a prospect to invest in an unknown solution or a vendor that may not be well-known. There is no statute of limitations on the money-back offer, something Griffin learned from his father. “I let the customer determine what reasonable is. All of my customers are honest folks; they just want what they paid for. And, they&'re no worse off than when they started,” he said.

By the way, as of this interview, no one had requested his or her money back, Griffin said.

POSTIVE REINFORCEMENT
Other solution providers say precisely targeted direct-mail campaigns have worked well as demand generators. Pete Busam, president and COO of Decisive Business Systems, a Pennsauken, N.J.-based solution provider who has prospered by focusing on insurance agencies, said he has generated deals from three new clients as a direct result of a mail piece featuring a case study published in CRN about Decisive Business&' engagement with Bollinger Insurance. The piece was sent to about 400 insurance executives. Busam said he has also been successful generating demand with direct mail, phone calls and by targeting industry events around the insurance market. “It is not any one thing,” he said. “It is a combination of all those things.” Decisive Business does insurance industry seminars and sends follow-up letters. “We go out to generate the demand,” he said. “In the two years we have focused on insurance companies, we have gotten [business with] over 22 insurance companies in the state of New Jersey including No. 11 in the country, which is Bollinger.”

A HELPING HAND
Other solution providers say they stoke demand by striking alliances with organizations outside the IT industry. Bill Haas, a consultant for the Computer Backup Group, Boston, said he has generated business through an alliance with the Greater Boston Concierge Association (GBCA). That alliance has paid off in a number of service calls for guests who are having trouble with their laptop, said Haas. “We just had a customer who was staying at a hotel and called us at 10 p.m. because they needed a new mouse, and we got there within an hour,” he said. The GBCA alliance has resulted in profitable business because the prospects aren&'t price-comparison-shopping with retail stores. “It&'s about how quickly can you get it there, and how quickly can you help them,” he said. What&'s more, sometimes hotel guests that Computer Backup has assisted end up being loyal longtime customers, said Haas.

KEEP IT SIMPLE
As creative as demand-generation activities can be, some solution providers say it&'s sometimes OK just to do lunch.

Oli Thordarson, CEO of Alvaka Networks, a Huntington Beach, Calif., solution provider, said his company hosts lunch-and-learns and educational events aimed at helping solve the problems that top executives face in dealing with information technology. “We try to give an expos of what the problems are and how they can be addressed,” he said.

When educational sessions result in “warm leads,” Alvaka invites the company&'s top executives for a tour of the Alvaka facilities to illustrate in action how Alvaka solves IT issues for other clients, said Thordarson.

One of the most popular lunch-and-learn sessions is an ongoing network security seminar series featuring a live hacking demonstration, he said. “We show them how quickly a hack can occur and how easily information can be compromised with the hacker covering up his tracks when they leave.”

Other popular Alvaka sessions include ones on antivirus solutions and how to bring IT into the boardroom to be “treated more strategically as an asset,” said Thordarson. “For a lot of companies, IT is the single biggest capital expenditure they are making each year, and it is supercritical to their business operations. But it is one of the few areas of the company where they don&'t have representation of a key area of the company in the boardroom,” said Thordarson.

ZERO IN ON CONFERENCES
Some solution providers have grabbed a page from vendors by hosting their own technology conferences. But instead of emulating the seemingly shotgun approach of larger vendor trade shows, these solution providers say small, customer-focused events work best as demand generators.

Rich Baldwin, president and CEO of Nth Generation Computing, an HP enterprise storage solution provider in San Diego, says his latest conference in July featured 32 vendor exhibitors, 25 breakout sessions and six keynote speakers. “I do one or two of these large conferences every six months, then I do about another eight to 12 smaller ones each year with 30 to 100 end-user customers showing up,” he said. “The comment I get from vendors who attend is that you have more end users and better-quality customers than one of the big storage conferences.”

More important, the tightly focused conferences attract local CIOs and other top executives. “Forty percent of the attendees at my latest conference were first-time customer contacts,” he said. “We generated a lot of new opportunities that we are following up on now.”

ALL FOR ONE
As varied as the demand-generation techniques that solution providers deploy, some say the most important strategy is to get all employees, including technical staff, focused on revenue generation.

Sequel Data&'s Richie said solution providers need to ensure that every single employee is focused on developing customer prospects and revenue, which is one reason he put in place a sales commission system for Sequel&'s technical team long ago.

On a typical deal, the sales commission is approximately 15 percent of the gross profit generated. For the first order in an account where a technical employee was instrumental in generating demand, however, Richie will tack on another 5 percent. He then splits the resulting 20 percent between the technical representative and sales representative. “I see zero downside to this approach and have used it for years without problems,” Richie said. “My sales guys love it because the technical folks are bringing them incremental opportunities. The technical guys love it because they feel they are being rewarded for helping drive business.”

Likewise, Richie rewards the entire company for reaching its goals, taking both sales and technical personnel along on trips or excursions. “We&'re all one family, we&'re all one business,” Richie said.

STEVEN BURKE and CRAIG ZARLEY contributed to this story.