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As more and more vendors look for ways to reach the SMB market, our business – a small/medium VAR in the IT industry – has gone from relative obscurity to being one of the key “go-to-market” strategic partners for many of our suppliers. And while some of our vendors have worked out how to work with us and grow our business together, the majority still think SMB is just like Enterprise, only smaller.
Ask any vendor about what motivates a partner, and they will give the same (correct) answer – that we need to be able to sell the product and make money out of it. They may even go so far as to say that we don’t care about what product we sell (which certainly isn’t true for a VAR like ourselves). And yet we still have vendors coming to our office and deluge us with features about why their product is the best, without any acknowledgement that the relationship between a smaller VAR and an SMB customer is very different to that of (say) a national integrator and an enterprise customer.
When it comes to vendors working with us, one of our bookmarks is a meeting from late 2005 with a large storage vendor. Let me set the scene. North Sydney was laid out below us from the floor-to-ceiling windows of the boardroom. The catered mini muffins and cute little Danishes had been laid out. The PowerPoint had been played.
“What you need is share of wallet” was the theme of the discussion. The not-so-sub-text being of course that if we don’t bring on the vendor’s product set and sell it to our existing customers, we would be missing out on making large piles of money.
While the conversation launched perhaps our most successful vendor partnership – the vendor was EMC, and two years later the EMC portfolio is the fastest growth area for us in hardware, software and services – the idea that we (a smaller VAR/SI) need “share of wallet” strategy could not be further from reality.
The only reason that we are still open for business after the ups and downs of the last decade of IT is that we represent 30+ brands across all of the IT requirements in the client’s business. We already have the IT budget from most of our core clients. For a typical client, the network, the server room, the desktop and the branch office/SOHO were put in by us, and will probably be replaced by us when they are retired. Usually we wrote the budget. To achieve this, we became trusted advisors, perhaps before the term ever got used by our vendor’s consultants.
This has some important ramifications for the vendor. First of all, unless there is a truly new category arising in a segment – as was effectively the case with the virtualisation + SAN/NAS play in 2007 – we already have a solution to offer. Our clients usually have a solution installed.
The grand slam, the holy grail of the most ambitious Vendor CAM (Channel Account Manager) – that we will introduce them into every one of our existing clients – is really extremely unlikely to happen. Our response to EMC and the “you need better share of wallet” statement was a very predictable one … “No – we already have that. What we need are new quality clients.”
In addition, many of our clients see us as their virtual CIO. That means, in order to earn and maintain our trusted advisor status – we need to attend meetings, read whitepapers, go to seminars, scour the web, keep relevant certifications up to date, understand relevant legislation, and generally be on top of all the solutions the client needs. No small job.
So it shouldn’t come as a surprise when we say that we won’t just take on a new vendor or a new product just for the sake of it. We simply can’t afford to take this decision lightly.
Many vendors come in and bombard us with product information (speeds & feeds) or a super fast summary of a “growing segment in SMB”. That’s not what we need. What’s important for us is (a) can and should we sell this to our customers? and (b) can sell at a price that represents value to the client and profit for us? Here are some of the considerations that Nexus goes through to decide on wether we take on a new product:
Product fit: Does this product have value for our clients? Do they need it? How do we help them agree that they need it? Will they see value? How are you better than the competition? In short, if we sell this to clients, will they still respect us in the morning?
Commercial: How would this product affect our revenues, in terms of displacing an existing solution and the service attach (both install and ongoing management)? Managed services revenue effect? Does not adopting this solution leave a hole that someone else will exploit?
Sales: Can we actually sell it? Is Demo equipment/license available? If sales training / accreditation is required, how difficult is it for us to get? Does the sales team need support and how is this support being supplied? Can we manage our own presales? Do we need additional presale training?
Technical: Training costs, if required? (Course fee + opportunity cost in time = training cost). Training quality (we prefer a prometric exam)? How long to build out the scope, install, maintenance and presales templates and add to managed services practice?
Channel: Is it distributed through an existing partner (this is a big consideration – distributor relationships take as much time as vendors ones, and we can’t afford to set one up for a one-off sale)? Can we register a deal (no, we don’t want account protection, just opportunity protection against drive-by resellers. 10% is about right for registration benefit)? Do my customer service teams need training just to place an order? Have you got presales resources who are realistic about sizing?
The above is a summary of an internal document that we have to submit internally before we adopt a new brand or product. The reason that we felt it necessary to go through this is that when things goes wrong, they go horribly wrong, usually ending up with us making significant unplanned investments in equipment and writing off service time.
The worst experience was an IP Telephony solution, where we correctly judged the opportunity to sell the product, but massively underestimated the learning at presales and technical level. In that case, this was exacerbated by having to deal with a small distributor with whom we had no other business and a vendor whose technical resources were scarce at best. So while on the surface we made $500K in sales, the reality was that tens of thousands of dollars were lost in resources & time, not to mention the impact on what was until then a flawless reputation. This is sometimes forgotten by CAMs who are commissioned on revenue. As a VAR, it’s not about the revenue – profit and the cash-flow are what keep us in business.
Looking back, it’s no surprise that our best experience with EMC was accompanied by a large investment on their part in access to senior executives and sales resources, an active disti account management and presales team, ordering resources and a comprehensive – albeit quite costly (our ‘skin in the game’) – technical and presales enablement program.
We’ve been in business for 10+ years. Like many small/medium VARs, we have managed to weather the storms of the industry by providing solutions to clients that address their problems and in doing so earned their trust. We don’t need a greater share of wallet; we need more wallets. We don’t need more revenue; we need more profit. We don’t need vendors just because their product is in the Gartner Magic Quadrant; we need vendors that understand the investment necessary for us to sell their product, and are willing to genuinely put in the effort to make us successful.
Sean Murphy is a Principal of neXus IT & Communications. He can be contacted on sean.murphy@nexusnet.com.au
