VARs Get Closer To Customers While Maintaining Control

1NSERVICE IS ONE OF THE MOST ESTABLISHED SOLUTION PROVIDER PARTNER NETWORKS IN EXISTENCE, SHARING BEST PRACTICES ON EVERYTHING FROM HIRING TO MARKETING. EDITOR HEATHER CLANCY LED A TWO-PART DISCUSSION AT THE GROUP'S LATEST NATIONAL MEETING. EXCERPTS FOLLOW.

MAKING THE RIGHT HIRES
Two of the biggest collective concerns for roundtable participants as business improves are finding the right employee prospects to help fill gaps and keeping existing staff motivated.

MOGAVERO, DATA SYSTEMS WORLDWIDE:
Employee retention is going to become a bigger issue going forward again. What we did about five years ago, we made a conscious decision to say project-based work was going to be secondary. It was not going to be primarily what we were going to do. We're a consulting company. We're going to move toward longer-term engagements. We're going to make sure that we're strategic with our customers. And the net result is our people tend to be on customer sites full-time, four days a week, five days a week. The problem, when you do that, when you have one, two, many people out there, obviously they start getting influenced by the customer, not your own culture. So the challenge for us now is to make sure that we're not putting those guys out there five days a week, because the culture starts to go away and their attachment to our company starts to go away.

So we're starting to bring them back, a half a day a week, raising our rates a little bit to offset that and making sure that we can keep the culture consistent. We have contracts with our customers where if they hire our people, they have to pay a year's worth of salary. And we've actually executed on a couple of those contracts.

HELMUTH, ROCKEFELLER GROUP:
We've been in the managed service business for 20-plus years now, and one of the changes we're trying to drive is instead of having folks out at customer sites, you're still going to have dispatch, but with the new IT infrastructure capabilities, you can do things more centralized. Now your service delivery platform is more centralized. You use the power of the IT infrastructure to deliver that service, you do the proactive monitoring, the reporting capability from a network operation center. You don't have to have somebody there all the time. There are still certain customers that will want somebody that they can grab, but you cut down, perhaps, on that staffing approach by delivering things through centralized capabilities.

VENDOR CONSOLIDATION
As the pace of mergers and acquisitions among equipment suppliers and software developers quickens, especially in the security space, 1NService members are hedging their bets by emphasizing a bigger-is-better approach.

HEBERT, ATRION NETWORKING:
First of all, we respect and value our relationships with the vendors out there. However, we base our model on what we can control. I can't control who's going to be buying, who's going to be in business, who's going to be out of business, how to change your channel program. So, the focus of our business is going to be on how I can be profitable. How can I create a solution for my client? And how can that be somewhat independent of what the vendor solution really is? What that forces us to do when we start looking at manufacturers we can bring on, we are very, very selective. We look at the right mix. We also look for the investment it's going to take, what the market's going to look like. So maybe five or six years ago, I may have signed five or six different [vendors] in a year. Today, they wouldn't even make it past that first round, because I could sell maybe a couple hundred thousand dollars worth of product in a year and be pretty successful in their channel model. But for Atrion [Networking], it's probably around $1 million per year that we really have [to see in sales in order] to make an investment.

GOBEILLE, NCA:
For us, we're looking at relationships with larger companies. It's better to have a relationship with the company that is acquiring.

GRILLO, ATRION COMMUNICATIONS
(no relation to Atrion Networking): The $1 million number is one that most of us work with, a year in sales for the vendor. But it's a combination not only of the number of sales we're going to do, but what services we can wrap around it. It's a whole process. I could go out and sell $1 million of a company's product and make no money or make very small margins. So if it's not a complete package, I'm not interested either as 1NService or for Atrion Communications.

MOGAVERO, DATA SYSTEMS WORLDWIDE:
In our region, we've got it down to kind of a mathematical equation. I think everyone has to look at what their SG&A is, what their depreciation is, and if you become more consultative, that percentage grows. In our case, it's about 20 percent SG&A plus depreciation. So, any vendor that comes knocking on our door, I ask them to explain to me how I'm going to make a 25 percent or greater margin in the relationship. The math is really simple if the service blend is 30 percent and the product blend is 70 percent. If you make 40 percent on service, times [that] 30 percent, that's 12 percent. If you make 15 percent on products, 70 percent times [that] 15 percent gives you 10.5 [percent]. That gives you a 22.5 percent blend. So it's got to be somewhere north of that—around 35 percent of that relationship has to be services. And if they can't explain to me how the relationship is going to generate 35 percent in services, then to me it's not a good relationship.

DEMAND CREATION
As it seeks to create broader solution messages, 1NService is developing a collective set of best practices that will be rolled up into a document that individual members can use with clients—and vendors.

GOBEILLE, NCA:
We find often in the vendor community that they have people in charge of [demand-creation] programs or who hold those funds that really don't know what works. They've never been in our shoes. They don't know how to create demand. They listen to other people. They've been in high-technology for seven years, and what used to work is what they're trying to do now. And everybody's programs are different. We as a [solution provider] have watched history repeat itself so many different times, and we're very protective of our customer base. Because we don't want them to get their eyes pecked out by manufacturers as well [or] wear them out with lunch-and-learns. The more time you spend in the sales process just because you're friends—you don't want to sell them anything but you want to fill a room—that's wasted time and money. We know what works for us in terms of demand creation. We can appreciate all the vendors in a lot of cases are competitors, so they don't talk [to each other] and are trying to come up with their own thing.

What we're doing, we haven't done it yet but we're really close, is creating another kind of document that we're going to share with our member companies. We're creating our own demand-creation [methodology. The vendors] are going to come in for a marketing meeting, fly somebody in and talk to us about how they're going to come in and create demand and what their programs are. And we're going to say [to the vendors], 'You don't understand, here's our program. Pick one and check a box, because these are the things that we know work for us.'

CONTROLLING CONVERGENCE
Although many solution providers are leery of overinvesting, converged networks represent a great opportunity for them to get closer to customers.

BREAKEY, UNIS LUMIN:
With converged technology, you've got so much interdependence on different layers of the OSI model. We're seeing that with security. SecurIty is touching across all these things, so that I can't afford not to do security, but I can't do security just as a firewall. I've got to do it at the application layer. I've got to do it in the phone SIP. I've got to do it at the access point of the network as well. The Ciscos can't do it. The Junipers can't do it. The Microsofts can't do it. The only people who can do it are integrators. So what that forces us to do, first of all, [is] it gives us the power with the customer. The customer comes to us, and then we decide what technologies we're going to roll out because we understand how to integrate and put all these pieces together. The same with support. [The client] can't just get [vendor] support, because you don't know if it's the software, you don't know if it's the database, you don't know if it's the phone. All those things give us the power.

The obligation we have, the responsibility we have, is to be able to provide a broader stack of solutions that work from the application on down through all the middle layers all the way down, in some ways, even to the physical layer of the cable. Because cable is associated with telecom systems. That's the most fundamental shift that's going on.