Words of wisdom for channel longevity

Life expectancy for IT companies in the small Australian market is often brutally short. Spinning from gold rush to famine, from leading edge to bleeding edge or just plain left behind, working in the world of technology has brought as many failures as fortunes.

Few companies have been around as long as Dimension Data, which celebrated its 20th anniversary in Australia last year. CEO Steve Nola has been in the driver’s seat since 2002, and can count back his time with the company to 1989, when he set up the Victorian branch of the company’s precursor, ComTech.

In this profile, Nola lists the five strategies he has employed to such success with the distributor and integrator.

The greatest temptation in IT is to follow the fad of the day, which encourages short-term thinking. Nola said this is a common problem within the industry – something he’s consciously avoided.

DiData has taken the opposite approach and always focused on the long term, a philosophy which underpins its strategy and is largely responsible for the company’s longevity, said Nola.

“You put very different foundations down for a business that you want to build for many, many years to come, rather than say, let’s maximise returns for the next year and then worry about what happens next.”

The first, and very familiar, point is to invest in staff. While this advice is frequently bandied about, none practise it to the same degree as DiData, which ploughs back 20 percent of its profits into staff training. Nola said he believes it is the highest rate of investment in staff in the industry.

Staff are particularly important for a disti-integrator as it produces no products of its own. “The thing that differentiates us from the next organisation is the quality of people that we have. You know there’s still 50 percent of staff in some form of technical support – in pre-sales, consulting or engineering,” said Nola.

“Especially when you are talk about deploying technology. It’s complex, it typically doesn’t go in nicely, there’s always going to be issues. And if you support your client and do it well, I think that’s the key to our success.”

The second tip is to pick your products carefully and stick to them. The same goes for selecting partners.

During his term as CEO, Nola focused the company on supplying IT infrastructure, and culled vendors and products that were either not likely to dominate the marketplace or were in areas where DiData wasn’t likely to pick up market share.

“Our portfolio of product is pretty narrow. We don’t sell [just] anything that crosses our desks,” said Nola.

A number of benefits flow from having a select range. It improves a reseller’s presence in the market, as it becomes somewhat synonymous with the technology. Nola points out that DiData is the number one or two player in the local market for each of its partners.
More importantly, it also simplifies investment choices. Instead of spreading training money across a wide range of equipment, DiData has been able to invest heavily in staff training and go-to-market strategies, which gives it a depth of knowledge and experience in its products – a useful competitive advantage.

Long-term thinking is particularly important here. While exciting, new products often pop up from vendors outside DiData’s collection, Nola has always resisted the temptation to jump.

Long after the joy of the initial sales has worn off, a reseller has to honour its servicing and maintenance obligations to its long-term customers, and if the vendor is inconsistent or – worse – disappears, the reseller is left in a difficult position.

“If you’re not really selling [a product] you are encumbered by a short-term position.”

When DiData decides to get involved with a vendor, it researches the vendor’s plans for growth, its commitment and spend on R&D and an analysis of its competitors.

The third piece of advice is: do your research. There’s no point limiting the number of products and vendors if you are backing the wrong horse. Read widely, learn from the field and talk to your customers, said Nola. From his own history, Nola knows how valuable a broad exposure can be in finding new solutions.

After graduating with an electrical engineering degree in the mid-1980s, Nola’s first employer was Telecom. The fresh recruit was rotated through several departments before landing in Telecom’s first foray into computing. Nola researched networking technologies, including WANs, LANs, token ring, Ethernet on coax and unshielded pairs. Nola impressed the right people and was assigned to a small four-person group responsible for designing and installing the first fibreoptic networks in Sydney and Melbourne. The project, which he believes was at the time the largest of its kind in the southern hemisphere, provided an incredible experience, said Nola.

“It was quite leading edge in terms of the scale of the deployment. The CEO [Mel Ward] came back and said, ‘That’s great, what apps do you want to put on it?’”

Drawing on his earlier networking research, when he had put in place several networks within his division, Nola suggested using the fibreoptic network to connect most of the Telecom offices together. Ward agreed.

“We deployed the first LANs in Telecom back in the late ’80s. And we really started to enjoy that big-scale deployment, playing with brand new technology, [although] a lot of it didn’t work terribly well. It’s a far cry from the engineering degree that I did.”
Nola brought that heavy research focus with him and made it an essential part of DiData’s outlook.

“It’s very much that long-term approach [of] investing heavily for the future, but also investing before the market cycle actually hits. We spend a fair bit of time researching where the market is going to move and investing before potentially we can actually make a dollar. That gives us an advantage when the market does move and we can take a competitive first mover position.”

Nola lists the technologies that DiData saw coming and got in early: routers (“when most of the industry didn’t believe you could do it”), video-conferencing (12 years ago), Cisco (since 1990), Checkpoint (mid-1990s) and Netscape (DiData was the exclusive distributor of Mosaic, before it was renamed).

Two-and-a-half years ago, Didata took half a dozen of its best engineers out of the field to really specialise in Unified Communications and convergence, despite knowing there wouldn’t be any return for a couple of years.

“Now Unified Communications is a very hot topic, and I believe we have taken a very strong leadership position based on the investment we made three years ago,” said Nola.

So how does DiData do its research? Nola admits that it takes commitment.

Investing before the curve “takes a lot of foresight, it takes a lot of cash, but it also takes a lot of belief that you can execute once the market does move. I think you really have to be a student of the industry.”

It also means listening to the people who know best; your staff and your customers.

Nola said companies with a more rigid hierarchy often dismiss people lower in the chain, leading to wasted opportunities. Nola insists on a very flat hierarchy within DiData, where decisions are pushed as far down as possible. Engineers in particular are encouraged to share ideas with management, whose role is to synthesise the best into new solutions for clients.

“Our best ideas do come from guys who play with this stuff in their personal time, who do a lot of reading and research – it’s almost free R&D.”

Client feedback is also important, especially as they are the testing ground for new ideas.

Which raises the fourth point: choose your clients well and work the accounts hard. It’s better to establish good, long-term relationships with repeat business than to chase every person who walks in the door. The unorthodox method definitely works: not one client in DiData’s top 40 accounts has changed in the past 10 years.

Instead of building a client list metres long, the integrator has extended its reach deeper within each client and grown alongside them – a different way of doing business to the rest of the market, said Nola.

“It’s not about trying to do business with every single client, it just doesn’t work that way and that’s a very expensive exercise. You have to pick your horses and ride them pretty hard. That’s served us very, very well.”

The fifth dictum is much like the first. Once you have good staff, hang onto them. In an industry already facing skills shortages, and a profession which is seeing enrolment in IT-related tertiary courses fall by as much as 15 percent, holding onto good talent is only going to get harder.

DiData has in place formalised career development and mentor programs, as well as two induction processes – one for the company, and one for the job itself. DiData has a “passport program” for new recruits where they receive stamps for completing modules, some of which are hands-on, but mostly are online courses developed in-house.

DiData has received recognition externally (it was voted one of the best employers in Australia last year) and internally; 40 percent of staff have been with the company for more than five years.

Nola said an important element in staff satisfaction is a “very good” corporate social responsibility program and involvement in charities. Another is that flat hierarchical structure with its diffused responsibility and decision-making.

“Although we’ve been around for 20 years, it still feels like a family company,” said Nola. High staff retention “saves money, [but] that’s the by-product. I think the benefit is the consistency you can deliver internally as well as to your client. It’s always great to have the same people there and not deal with a fresh face every six months. I think that is why clients tend to stick with us.”

Nola said the full effect of the skills shortage won’t be seen for a while yet – a concern as projects are already being forced to move from one city to another. Nola notes a recent ATO project that relocated from Canberra to Melbourne due to the lack of IT professionals.
Fixing the shortage is the responsibility of the whole IT industry, as well as government, said Nola. “We have a risk of not being able to service the demand at a local level, which puts pressure on innovation and pressure on costs. In the shorter term, that’s probably the biggest issue for me.”