How Services Help Regan Speed Up Growth

#26 CRN's Fast Growth 100 VARBusiness 500 (#365) data center storage virtualization

Regan's revenue showed impressive growth in 2006. To what do you owe that growth?

Fred Bedard: Two things, I think. First, we have been working with a certain level of customer for long time. We've gotten to the point that we are seeing a lot more purchasing with our company. We built their trust. The second thing was building the services piece, stressing products such as VMware [virtualization software] and Opsware. That, coupled with the great relationships, saw our revenue grow. More than 500 percent of our incremental growth was with existing customers. That's great! And we have a lot of runway left to grow with them.

Regan has a solid history in hardware. How did you make the transition to more services?

Bedard: We took a look at our strengths. We looked at products and technology coming out, and asked ourselves, 'How does that map with where customers want to go?' First, we dropped products. We culled our product line. We were offering too many products; that was confusing to customers. We picked products to emphasize our core: pieces that make the enterprise run. We then made an aggressive play with VMware. We knew that offering solutions -- not product -- would take us to the next level. The last 12 months was pivotal for the switch.

Sounds like some employees need a new outlook also.

Bedard: We are replacing a lot of sales people. It's hard to teach an old dog new tricks. And I have extremely successful sales people. They bring in millions of dollars in sales revenue. But they don't have the right attitude. They don't believe customers want solution sales, they don't want engineers onsite, and so on. Those reps are gone. Mindset is very important. That is hard to come to grips with. They may give you lip service upfront, but behind the scenes they're still selling hardware and not seeing the value of services. In the move to services, the traditional sales rep is not an asset. It's very difficult. We spent six months just figuring it out: Why aren't we able to get services into these customers when our competitors are? Once we realized the problem, then we have to make hard decisions. It's hard to hire but even harder to fire. But you've got to do it.

How do you differentiate Regan from the competition?

Bedard: I look for niches. Also, differentiation comes in different forms. Ours is in competency. We have 12 certified VMware engineers with an average of three years in the field.

For example, we've shown customers how to build ROI around licensing agreements, and taken the business from IBM! We ask the customer, 'What is your plan to make that ROI or exceed it?' In that case, we also won services. We have a methodology that is unique. We are instilling a sense of confidence in the customer. In a sense, we provide the customer an insurance policy of how we are going to make that ROI, so they don't get fired for spending millions without accomplishing their goal.

A lot of companies are just fulfillment people. They are unwilling to invest, to take the risk and they end up bailing out. They sell VMware [for example], but they don't really do it.

Your focus seems to be on implementing solutions for the long haul.

Bedard: Yes. For example, Opsware allows management IT automation, it takes six to eight months to implement, it costs millions to install but the ROI is huge. We got exclusivity to provide solutions around Opsware in New England. We're focusing on the Fortune 100 to 500 customers. We look for niches that are extremely difficult from the technological and sales standpoint. Not fast hitters. They require a lot of expertise. These are mission-critical apps that have enormous impact on companies, so they are willing to open their checkbooks.

Because of the length of these deals, there is a team atmosphere. We becoming that advisor, and the client looks to us to have a strong voice in the decision-making process.

What is your target for next year, and how do you aim to achieve it?

Bedard: Our fiscal year started in July, so we're already in it. We will expand into SMB; more accurately, midsize and small 'e' [enterprise]. Our customers -- 95 percent of them -- are mainly in the financial sector. We are starting now to go after second-tier banks, like People's Bank in Bridgeport. We took them off a mainframe and onto an open system with Opsware, VMware. It's not a $10 million project, it's a $3 million one. For hospitals, too, virtualization is a great place to save money. It reduces electricity usage and saves space.

We are also expanding into the N.Y. and Boston financial markets. Same solution set as the second-tier banks. We leverage our expertise at the high end in Boston and New York, and scale down for the midsize customers. But while at the large customers decision-making is 2-3 months, it can be much longer for smaller accounts! (Laughs) They don't like to spend money!

The big accounts, where you make many relationships in one firm, are handled by different personalities from the smaller ones, where a sales person handles more, maybe six, at one time. Those accounts may all come to fruition at different times.

Lastly, we are looking at intellectual property. How do we take something and build our own? We are working on putting applications together that will allow customers to purchase virtual machines online. Connect to server loaded with their apps. They can test software and use the virtual machine until they no longer need it, and pay on a monthly basis. This could also be licensed to large customers.

What IT business trends do you see in the next six to 12 months?

Bedard: Server consolidation, to save money. Also, "Green" strategies, because they reduce the cost of energy. Virtualization is great for that. We are mapping our solutions to address those needs.