After a long while there's finally something to cheer about. The Federal Government's tax breaks to business are an unmistakable trigger for resellers to start selling today, not tomorrow.
Now is the time to give customers a call about the projects that had been shelved by the global financial crisis, and put them back on the table.
The great thing about these tax breaks is that they are, as the saying goes, for a limited time only.
The bad news is the tax breaks apply to more than just IT, which means competition not just from the channel but from commercial suppliers of all stripes: car yards, office equipment stores, manufacturers.
Resellers need to get two messages out there. First, that the tax breaks are available but, just as important, that the allowances are best invested in technology that will help their businesses perform better.
Keep in mind, there are two deadlines resellers need to be aware of. The most urgent is 30 June, when the 30 percent investment allowance ends for companies with a turnover of above $2 million.
The second deadline is for the 50 percent investment allowance for businesses with a turnover below $2 million, which finishes at the end of the calendar year.
Resellers need to put their sales teams to the grindstone to make the most of these next seven months. For some this period will make up for a lacklustre start to 2009 and could revive cash flow.
CRN talked to a number of resellers, vendors and distributors about what they were doing to take advantage of one of the best opportunities in the past 12 months.
Lending relief
"We believe this is one of the biggest initiatives that the Federal Government has done for SMBs for some time," says Grant Cleary, HP's personal systems group marketing manager.
"We didn't know they were going to introduce a 50 percent investment allowance. We know there are lots of small business that see this as really, really positive."
The tax breaks are a welcome relief to one of the hardest consequences of the global financial crisis. Borrowing money has become harder and more expensive for consumers and businesses alike. SMBs have been particularly affected, says Grant.
"We know that SMBs are typically cash poor and we know that in a tougher economy it becomes even more relevant.
A lot of SMBs rely on lending to drive investment for new capital asset purchase," says Grant. "But if that lending has been tightened, as it has been for consumers, then less SMBs can qualify.
So if the Government can help compensate for that by giving additional tax incentives that's a really good thing."
Intel and HP are among several vendors incorporating messages into their marketing vehicles and educating their channel partners on what the tax breaks mean for customers.
"The government's being very clear that the reason for the initiative is to encourage particularly small business to invest back into their business to make them more effective during tougher times," says Grant.
"It's a massive incentive for businesses to do something," agrees Paul Kristoris, managing director at Leader Computers.
"Those businesses can have up to the end of December to get their money but if they want to get it in this financial year then they need to spend it before 30 June."
Larger businesses will need to work fast to get their IT strategies and procurement sorted out before 30 June.
However, the extension of the deadline of the 50 percent investment allowance for businesses with turnover below $2 million to the end of the year has given resellers a seven-month window to drive their sales teams as hard as they can.
That extra breathing space is crucial for those looking for new customers and for sending the right message to the right people.
"The issues I have with marketing this is that it will be a play for new business in new clients for us, so we will need to research our target market more closely.
[There is] nothing worse than getting a marketing piece that reminds you that you can only get 10 percent because your turnover is $2,000,001," says David Mackie, director of Canberra-based Synergistic Network Solutions.
"We will talk with our accountant next week about services to implement an item being CAPEX or not as this will skew the benefit, and if the software exclusion means OEM, and how this is dealt with if it needs separation," says Mackie.
The one potential stumbling block is that resellers aren't qualified to give financial advice, which adds an extra step in the sales process - getting the customer's accountant involved. Pushing too hard without independent financial advice could risk the relationship, say some resellers.
"In our business we are talking to clients about it, but at the same time asking them to seek guidance from their accountant before committing as 'we' don't want to be seen as 'snake oil salesmen'," says Correct Solutions' Wayne Small.
Synergistic's Mackie agrees. "We intend to market this but there are more questions than a small business can safely answer without advice, not to mention the restriction and risk on providing financial advice since we are only qualified to give IT advice."
Resellers react
The tax breaks have opened up a huge breach in the wall of pessimism created by the global financial crisis. However, not all resellers have rushed to take advantage.
One reseller said the 50 percent tax break had prompted his customers to bring forward hardware investment, but he admitted he had let the budget "slide past me" this year.
"To be honest, I'm not too much aware of any resellers targeting the 50 percent bonus right now," says Wayne Small.
"It's my belief that most smaller SMB resellers don't really understand just how to market this to their clients. Instead they don't take advantage of it to push or close sales more quickly."
Melbourne-based Scorpion Technology Computers has been promoting the education tax rebate which was introduced last year and is now advertising on the latest tax breaks and working with vendors on promotional deals.
"Unfortunately a lot of these things are not well promoted or widely publicised and we are trying to do that," says William Kartawidjaja, director.
The reseller is using several avenues to communicate with customers including in-store displays, posters, mailing lists, forum posts, news posts on its website and advertising in magazines and local and state newspapers.
"We are expecting an increase in our sales. We can see that already this month, it is our busiest to date. A lot of products are moving," says Kartawidjaja.
Scorpion has relied on Intel's marketing kit to target the government incentives. The kit comes with prepared emailing templates, brochures and posters.
"We don't have to do much more than utilise those materials," says Kartawidjaja.
"The consumer just needs to be made a bit more aware. If everyone knows about it then it would definitely make a much bigger impact."
Sydney's Impact Systems is running a small business network campaign on servers, including application servers and thin clients.
"For those businesses that have been holding off and not doing anything about their old or aged equipment, that will be a boost," says Peter Agamalis, sales director.
"We've incorporated a server with options of upgrades," from five to 30 racks, says Agamalis. The top package comes with a free UPS, corporate anti-virus, gigabit switch, onsite warranty and a 1TB external hard drive for backup.
Agamalis expects the thin client campaign to do well, which is based around Product N computing.
"We are announcing that we can save the end user up to 50 percent on hardware and software costs, up to 70 percent on maintenance costs, and up to 90 percent on energy costs."
The minimum investment for the thin-client package is $5300.
Agamalis hopes the tax breaks will improve on an April that "has been a little crappy".
The reseller is launching its first catalogue soon which should combine with the campaigns to make May and June stronger months.
"I think it's going to be good for everybody. It's almost equivalent to the Government's equivalent stimulus package, the $14,000 first time housing grant.
The tax cuts involved in investing in equipment is another way for industry to take advantage of those measures," says Agamalis.
It's deal time
Vendors like HP put together deals to take advantage of the $900 cash handouts.
HP won't say until its next financial results how successful those deals were at boosting sales, but it is following the same strategy again with the recent announcements.
"While we didn't specifically say it, they were designed to be a good pricepoint for people receiving their $900 payment.
If they were a family with children who qualified for the education rebate they could claim 50 percent of that back as part of the education rebate that the government has introduced," says Grant.
HP's tax deals targeted at small businesses include double memory, double the size hard drive offer which started on 1 March.
These improvements gives a PC more power, make employees more productive so they can respond to their customers more quickly, says Grant.
Another retail offer specifically for small business bundles a PC, printer and Microsoft Office, with price depending on configuration.
Grant says he doesn't know how successful these promotions will be. "It's very difficult to put numbers around that. But it is one of the most significant contributions the Federal Government has made for some time."
Software and other "intangible" assets are not covered by the investment allowances.
Where a taxpayer purchases a package that consists of hardware and software, only the portion of the cost that is attributable to the hardware will be eligible for the tax break, says a Microsoft spokesman.
Nevertheless, Microsoft Australia is working with its OEM partners to promote the value of its pre-installed software.
Distributor LAN1 is expecting SMBs to spend on telephony, because it is a technology that has delivered on productivity promises in the past, says Mark Roberts, IP networking product manager.
LAN1's telephony business has been growing steadily through the recession and the distributor has been approached by other vendors in this area, says Roberts.
The distributor is looking at going above 50+ seats serviced by its two partners Talkswitch and Vegastream, and below into the sub-20 extensions market.
LAN1 has put together low-cost phone bundles some of which are targeted at resellers themselves.
One not-for-retail bundle is a small business phone system by Canadian vendor Talkswitch that includes an IPBX and 10 handsets for less than $3000. A retail version costs an extra $1000.
"A lot of the resellers would fall in the category that qualifies for the benefits. They may have a couple of stores and if they use telephony intelligently they can loadshare across the stores," says Roberts.
"It's in their interest as well. It's not only saying the Government's giving us a helping hand to help you sell, it's also about coming up with special bundles including NFR bundles."
LAN1 has put together other bundles for security products, such as CCTV and UTMS devices from Sonicwall and Palo Alto.
Apart from targeting cash-strapped SMBs, the distie is also looking at emerging companies. "If they're a startup company and keen to get into the market then they are going to have to spend that money anyway."
No promotions were available for storage, LAN1's fourth focus apart from security, surveillance and networking. "That's the three we are starting with at the moment. We haven't put together all the bundles yet because it's only been a week since announcement and working with vendors."
However, Roberts doesn't expect storage to be one technology SMBs will rush out to buy this time.
"I think a lot of storage sales are like the anti-virus sales of the past - they tend to look at it after the horse has bolted. They tend to be break-fix sales, not strategic for SMBs."
Kartawidjaja from Scorpion Technology says a generous 15 percent cashback on FujiXerox colour laser printers has been successful as have cashback deals from other vendors.
An Acer promotion promises to match a better price and give a rebate if a customer finds the same product advertised more cheaply elsewhere.
Leader Computers, the second largest Australian PC and notebook manufacturer, is releasing in June a national end-of-financial-year campaign on desktops and notebooks.
The campaign includes a full-colour catalogue going to every State, including Tasmania, which cost "around $50,000".
"We are disseminating this message through hundreds of resellers throughout the country," says Paul Kristoris from Leader Computers.
The catalogue ties in with advertising in the sports media, especially the AFL. The catalogue will be advertised through electronic signage at football games and consequently on TV.
"Right now we are focusing on brand awareness and the fact that we are an Australian manufacturer and that businesses only have a short window" to qualify for the new tax breaks, says Kristoris.
Kristoris says Leader's proactive resellers are using its catalogue in their own campaigns, some of which are advertising on TV, radio, print or direct mail.
"We anticipate a very strong May and June, and we expect very strong trading when other businesses [which] can't afford to buy any IT [now] will look to spend it in the new financial year," says Kristoris.
"We expect it to be a very tough market, but we still expect to grow.
"We've had a good first half of the year. It's been tough, but the people who have been positive and not sucked in by the negative news in the media have also done OK in a tough market. But our budgets for the second half of the year is that we intend to grow our market."
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