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War stories and strategies from channel veterans

Business lessons from long-serving Australian resellers.

By Steven Kiernan, Tony Yoo on Jul 29 2015, 3:25PM

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Standing the test of time

CRN invited a select group of IT providers to a roundtable lunch to understand how they had evolved over their history. They discussed vendor boundaries, the scarcity of good sales staff and how to recover from bad incidents across this wide-ranging discussion.

We have hand-picked some of the best insights from the roundtable, which took place on 18 June, the afternoon before the launch party kicking off the 2015 CRN Fast50. The lunch could not have taken place without the support of the "Platinum+" sponsors of the 2015 CRN Fast50: Distribution Central, ESET, LogicNow and GE Capital.

Resellers and MSPs

• Joe Ciancio, managing director of Maxsum Solutions (founded 2001)
• Andrew Charos, northern region manager of Advent One (founded 2000)
• Anthony Woodward, chief executive of Bulletproof Networks (founded 2000)
• Marcus Simkin, chief executive of Myriad IT (founded 1999)
• Bruce Swan, director of TAA Connect (founded 1992)
• Chris Munro, technology infrastructure director of Kiandra IT (founded 1995)
• Jodie Korber, managing director of Lanrex (founded 1987)
• Syd Borg, chief executive of PCS Australia (founded 1971)

Hosts

• Steven Kiernan, editor of CRN
• Tony Yoo, senior journalist, CRN

Be prepared to ditch a vendor if it isn't working for you

CRN: Can anyone share experiences of how they have changed their vendor roster over the years?

Syd Borg, PCS Australia: We’ve made some major changes over the years. I see the relationship with the vendor is exactly the same as with your customer – I want them to be a part of my business and my family. But I’m entitled to a decent margin, it’s as simple as that – if you want me to be around and to still be able to provide a service.

For 26 years we were NEC’s largest dealer in the country year after year. That’s in the days when NEC was the number one PC, number one laser printer, number one dot matrix printer, number one server and number one laptop company. Through the early and mid-1980s we were bringing in jumbo jets full of their product.

We were a one-vendor house. This is who we sold, we believed in it and we backed it... Even though clients used to say ‘We want to buy from you but we don’t want the NEC product we want HP’, we would walk away and take that punt. Then the writing was on the wall towards the early 2000s.

We’ve never been a multi-vendor dealership. We chose a hardware vendor, we chose a PC vendor, we chose a networking vendor and we stuck with those vendors. True it’s cost us some business at times, but we won more than we lost.

It's not just about the products when picking vendors – margins matter

CRN: With so much new technology constantly appearing, how do resellers know which vendors to partner with?

Nick Verykios, Distribution Central: We’re seeing that the most successful resellers now aren’t managing the technology life cycle, but the margin life cycle. The margin life cycle is 'How much money can I make off a particular vendor?' in a particular point in time.

So in that particular situation if you’re making bets on Amazon [Web Services] who think that one point [of margin] is a lot, you’re screwed. AWS is absolutely an enabler to do a whole bunch of other stuff. But if the vendor isn’t allowing you to make substantial margins in order to be able to do what your customer wants to do, you’ve got the wrong vendor. Make substantial decisions based on the margin life cycle, not the technology life cycle.

Bruce Swan, TAA Connect: It’s hard to balance that off with actually saying at the same time ‘you’re focusing on the customer and solving their issues’ when all you’re doing is chasing the margin around what brand is the best one to push this month.

Nick: We as an organisation, we’re more of a service organisation – the vendor products to us are the enabler. That’s all it is, it isn’t a business model at all. It’s about the outcomes we sell on top of it where we make all the margin.

The vendor doesn't own your customer

CRN: Who is the vendor's customer - the reseller or the end user?

Syd Borg, PCSA: The thing that I’ve always been very disappointed in in vendors – and I’ve clashed with just about every one of them – is that I think the vendor forgets who the client is and that really irks me.

That even goes for the major players. They will challenge and threaten you and I find that truly objectionable, hence why I keep them away from my clients. And it’s probably why I still have customers. I’m their [the vendor's] customer first and they have no hesitation in telling them that.

I once had an almighty clash with Acer. After having brought so much significant business to them and assisted them with what they were doing, they challenged me and started approaching my clients. They learned a lesson. It took 60 days to convert every one of our customers to another vendor after [Acer’s] break of trust. Then it took another five years for them [Acer] to wake up and courted us back.

Then we started moving back to them again, but you have to be tough as resellers. You have to really stand up for yourself and what you do for your clients, and what business you’re bringing to a vendor or distributor.

Why resellers made the switch to a managed services model

CRN: Who started in system building, and has grown managed services?

Joe Ciancio, Maxsum: I remember the first thing we got an order we had for a school for 200 PCs and then for the next week three of us sat in a room and built PCs, and that was great fun, but when you get to a certain level of maturity, the cash flow modelling doesn’t work. It’s really lumpy, so we made a concerted effort to transition to supported systems.

Previously every minute you’re on the clock dealing with the client. Now it’s flipped around the other way, because you have to be really careful and leverage all the tools, all the automation tools that you’ve got so that you’re spending the least amount of time and getting the best results.

Chris Munro, Kiandra IT (pictured): It’s probably not rocket science, but the recurring revenue model is the best thing for business. We had some customers who were really poorly performing, we’ve had some customers who were incredibly well performing, and the idea is that the more volume you get the better you’re able to soak up the big and the little ones.

If you're all about chunky projects and not recurring revenue, you're exposed

CRN: How and why have your tried to grow managed services?

Marcus Simkin, Myriad IT: Traditionally we used to do big bang projects and it was very ‘feast and famine’. Now we’re just trying to streamline the whole process… Even though we could sign a big deal and have a big engagement, we still want to go down that managed service way, because it’s commercially best for the business.

Andrew Charos, Advent One (pictured): For us, the transformation happened five years ago in terms of managed services. Up until then, everything was great and fantastic. When you’re in the infrastructure or systems integration business and you are selling kit to box hunters and IT managers it’s great, but you’ve got no annuity stream.

Marcus Simkin, Myriad IT: Then it comes back to the quality of sales people…

Andrew Charos, Advent One: I don’t want to rely on sales people to run my business. I’d rather have some kind of commitment and annuity stream – whether it'd be 12-, 24- or 36-month contracts. You create stickiness with the customer.

Customers are getting more educated. This changes the power balance

CRN: Are clients more educated and engaging supplier later in their decision making process?

Marcus Simkin, Myriad IT (pictured): Yes, clients are more knowledgeable about IT. IT and all services within IT now are a commodity. They’re smart now and they will pull you up on stuff and say ‘that’s not right’. IT used to be that black box you want in the business, and now that’s not. So you have got to have credibility, you have to bring value to the table.

Joe Ciancio, Maxsum: The biggest success that we have is where we’re bettering the client’s business by acting as a virtual CIO and understanding their business in a very detailed way. You are then the authority and making the decisions around IT and you can tell them ‘this is the way it should be done’.

Getting involved earlier in buying decision might require a change of strategy

CRN: How can resellers and MSPs make sure they are involved earlier in buying decisions?

Anthony Woodward, Bulletproof (pictured): We made an acquisition at the end of last year [Pantha Corp] to bring in a consulting business inside the group. The reason we did that is because we wanted to have the conversation earlier with the customers. Earlier in the decision making process because – and I’m sure everyone here agrees –when customers have gone all the way down the road in their decision making process, they’re past the point where you can have a sensible discussion about ‘Is this the right thing for you?’

Chris Munro, Kiandra IT: I’m not so sure. I think more often now I think the customer actually has the right model in mind and can make the decisions. They get the cloud. I think of the old ways when we used to say ‘You have to have a lot of servers on-premises to do all this sort of stuff’. Now it’s like ‘No, it doesn’t make sense, I think we actually need to go to cloud. I want to pay on-demand and want to do all this scale up and down'.

We are being involved later in the decision making process and it’s dangerous to assume that the customer always thinks they know what they want, but they don’t. Quite often now I think they actually do know what they want and it’s quite valid, all of it.

Everyone is trying to crack the cloud commissions conundrum

CRN: How do you manage the shift from traditional commissions as salespeople start selling services?

Joe Ciancio, Maxsum (far right): Commission in my business is a dirty word – we don’t offer commission any more. It’s what both Marcus and Paul were saying about building the trust and the relationship and getting the whole thing, not just make the next sale and get the commission. Just taking that all away, so they’re not focused on that at all.

Andrew Charos, Advent One: When we’re hiring guys now that’s the way we do it. You hire the people who accept that.

Marcus Simkin, Myriad IT: How I structure commissions is we actually have pretty strong contracts. So someone on a three-year contract, I’ll pay him [the salesperson] on three years upfront. Because I’ve got to have belief that we can manage contracts and deliver on what we’ve said. I’m a big believer, and I’ll happily have my top sales person being the highest earner in the organisation, because it means that the business is doing well. I have no issues with that.

It's not getting any easier to find good sales people

Marcus Simkin, Myriad IT (right): Everyone around the table is either a business owner or a CEO –hand up those who haven’t got any problem trying to hire or keep good salespeople? It’s the biggest bloody problem.

Andrew Charos, Advent One: It always has been, right.

Marcus Simkin: Unfortunately whether it'd be this or any other industry, there is nowhere anyone can go to be trained to become a professional BDM, account manager, sales manager. If you’re an accountant, builder, engineer, doctor or lawyer you have a pathway to become that. But if you say ‘I want to be a bloody good salesman’, where do you go to learn to be a salesman?

Andrew Charos: I don’t necessarily agree with it, but I’ll throw it out there – they say people are made when they’re born. In my opinion, I don’t care what situation it is if you’re trying to pick up a chick at a club or trying to negotiate where you’re going to go on holidays with your partner, your wife and children, you’re selling.

Standing the test of time

Resellers and MSPs

Hosts

• Steven Kiernan, editor of CRN
• Tony Yoo, senior journalist, CRN

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