CRN What sort of things were you looking for in the business?
Andrew McHenry Something that didn’t duplicate what we already had, but also didn’t have a separate core entity. Infrastructure is all about data: you have to store it somewhere, you have to manage it, you have to put it on the network and you have to secure it. So it’s pretty simple. We just keep a very simple business model, and that’s really the reason we added that [acquisition].
Ian Poole Something overlooked sometimes is the cultural fit – the people. You start looking at things like strategic fit, solution sets, growing geographically and is it fundable. All of these are great things from a shareholder perspective, but then you think, “Are the people going to work?”
I work very hard with the management and people of the organisation we are buying to ensure they’re comfortable. If you want to buy them to strip them out, that might be a strategy, but it’s certainly not my strategy. We identify who the key people are, we give them share options, we give performance rights, and all the sort of things that are going to engage them a lot more.
Chris Young, UberGlobal
We are actually going through an integration at the moment. We purchased the main hosting business from MYOB. It’s a very different culture from ours. I’m the CFO of UberGlobal, the bean counter, so I know the numbers backwards, but what has been very clear in the past three months is that the culture is the most important thing.
There is good and bad in that. Obviously, there are cultural clashes. But if you make a good acquisition, you gain something from the organisation.
I tell my colleagues all the time, the numbers are the most important thing. But in fact, culture is. They’re going to be a fantastic addition to our company because of that. And the numbers as well of course.
Jamie Warner The elephant in the room is that in any professional services industry, generally there are technicians running businesses. They’re great at what they do, but their entire focus is on, “How we can deliver this technical solution amazingly well” as opposed to spending energy on the business.
If the whole industry is going to improve, the entrepreneur running the business must seek learning and growth in their own business and I often feel they don’t.
I’ll give you an example. We direct debit our customers for managed services. I think we’re probably one of five percent who do that. Why don’t others do things like that? Why aren’t they looking at all the different systems and processes?
I think that’s will affect the success of M&As, because you want to buy businesses that have operational excellence.
Gary Marshall, Bulletproof
We have actually have a metric now on how many customers are on direct debit, because it’s such a basic thing. You’re right: many people don’t do it.
CRN There have been some comments here around vendor relationships. Mark, how do vendors know the best way to help resellers do business?
Mark Rook, Huawei
We are trying to work this out, as a behemoth of a vendor, but very new in the channel. We are an extremely large organisation with a breadth of portfolio, but we wanted to find a way to address the needs of the Australian reseller channel.
What I’m hearing is it’s not necessarily all about growth, but looking for opportunities to be different and for looking for opportunities to put the profitability back in.
It’s about not dictating to your partner. It’s about collaboration and communication. I’m here to listen to the entrepreneurs who have built these successful businesses and find out what we can do as a vendor.
CRN Craig, what do you hear from your channel partners in terms of helping them be successful?
Craig Nielsen, McAfee
It’s clear that for us to be successful, we have got to pay a lot of attention to the ‘services attach’ our partners are able to generate through working with us and selling our products. We are working very hard on that. I think vendors who get that right will have long-term success with their channel and if you don’t get it right, it’s a brutal market out there in terms of relying on resale margins.
Some of our resellers are successful in making that transition to managed services and cloud and some are struggling. From a vendor point of view, some of the challenges are things like how we compensate our own sales teams. We are used to two-, three- and four-year sales cycles and we are actually transitioning to annuity business models.
Craig Somerville A lot of what we sell is software-based. We can virtualise everything. So while hardware vendors have virtualised their product, I’ve got to buy a perpetual licence. I’ve got to buy one, three or five years of maintenance with that, and that’s not what the world is asking us to do, they’re asking us for something completely different.
How does my rep get a client onto a monthly annuity-based deal? A few vendors are getting it. In the past six months, I’ve had vendors come through the door – it’s refreshing to have a discussion when they get it. It’s a completely different model than we’ve ever had before.
Ian Poole I see there being a major conflict in the channel from what the vendors are telling us to do and what our customers want and what we need to do as businesses.
Look at how we’re rebated. How we get money is all wrong. The vendors are rebating us on selling product, but they’re saying, “No, no you don’t want to sell the product, we want you to sell the service, the solutions and the business outcomes”. That is what we want to do but the cost of sale is massive.
I’ve got 28 salespeople and 35 solution architects – non-billable. That’s $15, $20, $30 million of expense yet you know the vendors will say, “We’re going to rebate you on how much hardware and software you sell.”
There’s nothing to do with how much I’m investing in my solutions architecture to get an outcome.
Craig Somerville Channel conflict has become one of our biggest challenges. We used to have five named vendors that all had a discipline, which suited our business model beautifully. But now every vendor sells everything. So now I have conflict at my vendor level. I go into a customer and three vendors I represent do everything.
Nick Verykios Let’s not lose sight of the true purpose of conflict. Conflict is an opportunity for correction. Vendors create the most incredible technology that they possibly can, otherwise they would never survive. They also have to sell truckloads of it that. So there’s a notion of a commodity sell on a highly complex technology.
We all started as resellers or distributors because there was an opportunity to translate a technology from a commodity sell to a highly considered buy. We didn’t need leads, we knew our customers. The most successful businesses I’ve seen in this industry are the ones who never lost sight of that.
They started as a $1 million business and they might be a half a billion dollar business today, but they never lost sight of the fact that they don’t need the leads and they don’t need the vendors to tell them what to do.
The best advice you could give a reseller is that if it was given to you as a lead or by someone else, it’s not your customer. It’s your customer if you have a contractual or transactional rela-tion-ship with based on something other than technology.
Craig Somerville The bigger the customers get, suddenly every vendor is in there anyway, so it’s very rare that you get a bigger customer that can really commit a lot of long-term annuity and revenue streams. That is a challenge as you bigger. There are more players in there attacking us.
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