Distribution Central may seem yet another distributor chasing the high-end technology vendors and their resellers, but this one is headed up by a duo well-known to the channel.
Scott Frew and Nick Verykios bought Firewall Systems in 2004 from its founder John Labza who had built the distributor up over the past 12 years to become Watchguard's most successful partner.
Distribution Central is the pair's second bite at the channel cherry. It took them 10 years to found, build and sell distributor Lan Systems in 2000, which netted enough money for Frew to temporarily "retire to Belgium" and boat around the Mediterranean.
The lure of the channel drew him back into the game, and this time Frew is doing it for other reasons than the desire to retire a second time, as he claims.
Distribution Central's goal is to find problems in distribution, overcome them and make a heap of money while doing it. So far it looks like Frew's formula is working.
The meeting rooms in the St Leonard headquarters are named after his favourite Mediterranean ports, Monaco, St Tropez, Cannes, Antibes and Portofino.
Verykios laughs at the Europhile pretensions. "They could call it Port Macquarie for all I care," he says.
But why choose ports in Europe?
Frew's office is modest enough; the most unusual aspect is a string of framed $50 or $100 notes.
Each represents a bet that Frew has won against colleagues and friends.
Some wagers were for hitting high targets or signing unlikely vendors; others were more private.
"And this one . . . I can't tell you what this one was for," he grins.
The warehouse is modestly sized and far from full on the day CRN was there. Many vendors today subscribe to the zero-stock principle and ship on demand. A line of pallets along one wall represents the stock for DC's Advanced Hardware Replacement program, which Frew says was missing for vendors of high-technology products.
When a critical part of infrastructure, say a $10,000 firewall, fails, resellers can't expect their customers to wait until another ships from the vendor's US warehouses. However, distributors have been reluctant to hold stock that isn't for sale, says Frew.
"The main reason distributors don't do [hardware replacement] is because they don't have pre-sales to know whether the box can just be plugged in," says Frew. However, it makes more sense for distribution to handle replacement stock because they are in the business of moving boxes, he adds.
Frew initially outsourced warranty replacements to a third party but brought it in-house as a value-added service that was not only cheaper but which he could guarantee service levels.
And it was another point of difference for Distribution Central which it could post as evidence of its full-service approach for vendors.
At least one vendor has signed on because of the Advanced Hardware Replacement service, says Frew.
Frew is clearly a guy who doesn't like to deal with a problem more than once. The distributor has several hallmark ideas that show an inventiveness for reducing daily chores.
For example, Frew found test products were never returned in good shape. So he had airline-quality, foam-packed metal cases made with an inventory pasted inside the lid listing every cable and dongle in the case - along with the replacement price for each one.
Each case is checked on return and resellers billed for missing or damaged parts.
Rean on for more...
During his time in Europe Frew became worried about climate change and environmental pollution.
In January 2008 Distribution Central launched a "Buy one get one tree" green campaign which planted a tree for every invoice through the not-for-profit organisation, Carbon Neutral.
"I'm absolutely, desperately concerned for the kids" when it comes to the environmental future of the planet, says Frew.
A year later Frew launched the CarbonControl carbon offset program which automatically calculates the carbon emissions of every product (during its manufacture and operational lifetime) sold by the distributor.
Most customers are happy to pay for the carbon credits, says Frew.
However, Distribution Central's standout inventions are in its custom software.
There is a configurator that Frew claims can pull together systems in seconds, auto-populating fields with real-time information from the distributor's and its partners' databases.
It has a "MyEvals" module that tracks and traces products for resellers.
The jewel in the distributor's crown, however, is the centrepiece of its Annuity Systems business.
Annuities are a common scenario in software and favoured for bringing in regular income beyond the initial sale. However, the same model is rarer in hardware despite the fact that maintenance contracts can form a similar model.
The reason is that sales staff are usually rewarded on the sale of the product but have no incentive to attach the maintenance contract. When faced with the choice of winning a renewal or a new sale, the salesman will always go for the greater reward.
That means many vendors and resellers go to a lot of effort to make a sale but then ignore existing customers in the hunt for new ones.
"When NetApp came to me, I asked the CEO what his renewal rate was and he said, 'I don't know'. We've taken it from 'I don't know' to over 90 percent month on month," says Frew. "There is all this money being left on the table and all [vendors] have the same problems."
Frew saw the opportunity to lift profitability by simply improving renewal rates, and poured his efforts into creating an online tracking system for IT products sold through his company.
Frew took a web engine and built "configurators" for every manufacturer on his books, which automatically lifted the initial attachment rate from 60 percent to 100 percent.
The reseller is taken through a step-by-step process which asks the level of maintenance required at the point of sale, rather than leaving it optional. The program will then remind the reseller at set intervals leading up to the expiry of a maintenance contract, list all expired contracts and list products which have reached end-of-life.
It uses Google Maps to show where each product is located and records remote management details for servicing. "It destroys all this 'we don't know about that box or serial number'," says Frew.
Resellers then have a list of sales targets to follow up, with details of the previous contract saved to each product, as well as information like licence codes and firmware upgrades.
"Now I've got a fully configured appliance with all the software options and maintenance and carbon credits and all the things that we do," says Frew. He then launched an annuities division at
Distribution Central which tracks every asset installed since he bought Firewall Systems five years ago.
The software, called iAsset, is a big step up from the Excel-spreadsheet approach used by the few resellers who bother to track maintenance contracts, says Frew.
NetApp signed up after seeing a demonstration, which Frew says was a "big shock". The distributor formed its storage division, SAN Systems, on the back of the deal. Clearswift also joined the distributor due to iAsset, claims Frew. "It's the killer app."
Frew intends to turn the software into an online service for companies to keep track of their assets themselves. The service is free to use; Frew takes a cut every time a contract is sold or renewed.
Frew demonstrated iAsset's ability with a global company in the resources sector. The program zoomed out to show a map of the world with glowing lights representing the locations of all the customer's networking boxes.
The program is used exclusively by Distribution Central in Australia, although Frew's resellers have entered in assets sold by other distributors."They are paying to have the systems team in Australia manage their RSA tokens and all these things we don't sell," says Frew.
The entrepreneur has been approached by US utilities hoping to use the program to track their electrical distribution assets. Frew incorporated a company in the US to pursue these opportunities.
The program has already expanded to monitor certifications for vendors. Using the Google Maps interface, iAsset can show where every certified engineer is based around the country, as well as how long they have been certified and when they need to retrain.
A vendor can track its resellers to see whether they have fallen below the minimum certifications to qualify for their partner status. The program can overlay a map of engineers over assets to see
who is closer to a product that needs replacing.
Frew's plans don't stop there. He bought a certification training company called ASK Learning which he intends to plug into iAsset and sell globally accessible training modules to vendors.
Of course, iAsset will deliver a ready-made market of engineers who have just come up for certification, says Frew.
-1.jpg&w=100&c=1&s=0)
.png&w=100&c=1&s=0)
