CDN’s 9th Annual Roundtable: How SMB resellers are surviving

Peter McMahon
Vice President of sales, Protek Systems

This 21-year-old London, Ont. solution provider with an office in Windsor, Ont. has a staff of 47. Its salesforce is on the road, working with clients on needs-analysis-type selling. In 1995 Protek merged with a photocopier company,

giving it a hard-copy division. Currently the company refreshing its advertising strategy.

Sheldon waters
CEO, DSM Computing Solutions

A provider of complete IT solutions to small and medium businesses, this Toronto firm specializes in five to 100 workstation enviromments. It also has a business intelligence software division. DSM has outsourced its business development to a third party who does core marketing to get qualified leads. Growth has also come from strategic alliances with other solution providers and acquisitions.

Zoreena Abas
President, Albert WhiteTechnologies

A value-added reseller in Markham (Ont.), the company is trying to transition into becoming an IT solution provider, and, Abas admits, it’s been a bit slow. It has a Windows product line, and a two-year-old enterprise product line selling and servicing Sun Microsystems products, with which it is trying to gain competitencies in the Unix and Linux markets.

Patrick Power
Managing partner, OAM Group

Toronto-based OAM has two divisions: One focuses on high-end Fortune 500 infrastructure deals, and the other group on the traditional SMB companies with up to 500 seats. Recently the company has expanded into VoIP technology, which Power says may be strong enough soon to run on its own. In fact, he says he’s starting to pull away from his usual roles in sales and marketing to concentrate on voice.

Jacob stoller

An independent industry analyst, writer and consultant, Jacob helps VAR’s and ISV’s restructure their marketing strategies around business issues. A 20-year industry veteran, he works with clients in both Canada and the U.S. He is currently working on a book on permanent changes occurring in the IT industry.

The following is an edited transcript

CDN: How’s business been in the last 12 months?

Patrick Power: It’s been good. Like everyone here we suffered through the downturn, and it was painful . . . We did our first acquisition this year, and it was a challenge, but was a good fit and it went very smoothly.

I don’t believe the solution to this problem is to go into services per se. I think the solution to any IT problem a VAR has right now is focus: You need to look at what you’re good at, and either decide that’s what you want to keep doing because there’s a market for it, or you have to look if there’s a new area that you can transition some of your strengths that is good overlap. The acquisition was designed to bolster our Microsoft services businesses, but at the same time we invested in voice and wireless — and that was a challenge because when the money’s not coming in as strong you don’t have as much to put out. We put up with some pain with the belief that was an emerging market for everyone. I don’t know whether it’s luck or timing, but it’s worked out well. . . .

Zoreena Abas: The last quarter was excellent. We hope it will continue. But the first six months of this year was not very good . . . We got into a different market so we’re able to look forward to a great future.

Peter McMahon: Could I ask if people are seeing growth coming from business closings, or are you picking up market share? Because we’re seeing a lot of competitors go under, and that’s where we’re seeing our growth.

Sheldon Waters: [Business] has been relatively steady, we’ve experienced the same sort of 20 per cent increase in revenue, if I naturalize that — we did one acquisition. We’re really seeing a lot of refresh, planned and strategic refresh. We’re also adding new products: We’ve got this push to productize our business from a service perspective, going out to our customer base and drilling down into things like spam protection, intrusion detection, firewall monitoring, remote monitoring . . .

I agree there have been a number of competitors disappear. There’s a lot more flexibility in the marketplace to get customers, there’s less tension at the new customer acquisition level from other quotes and vendors in there.

PP: You (Zoreena) are in a more unique situation, where you’re trying to make some significant changes to your business model as well, and that’s good because I think succcess in this industry is bred by each other’s success, and I don’t believe there’s a lot of competition in the SMB market. I know we don’t compete much in our SMB accounts, and your model is very good.

PM: Our business is up 22 per cent, and that’s coming off some fairly high growth . . . and I think one of things we’ve tried to focus on is being that consultant or trusted advisor. We’ve done it by using a little of everybody’s solutions here. One of the things we’ve focused on is really understanding the offerings we take to our customers. We also do it very much in the mid-size market; we don’t go after the enterprise at all. And we do it with services — we’ve got 25 people in our services department.

It’s interesting, Patrick, in your comment that there’s not a lot cf competition in the SMB. We’re seeing a lot more. I call it the squeeze. The large guys aren’t making any money any more, so they’re coming down-market because they see it as this wonderful fruit. The other problem we have is the ‘trunk-slammer’ — the guy runs his whole business out of his trunk.

SW: I really love this conept of big boys coming to play in the small boys’ sandbox. And they lose dramatically. They don’t know how to do it, they don’t have the infrastructure to do it. They don’t have the touch to do it.

PM: The challenge is you’re going to be clobbered on price.

SW: On the hardware, at the beginning. You can’t be so hardware focused. I say to my customers: “”You know what? They’re selling you this stuff at $23,000, my price is $28,000, you should buy it from them. I’ll be here for you when you’re finished because you’re going to require help, you’re going to require the kind of service and support we provide. The best I can do is $27,000. If you think the difference is not worth it, please buy from those people and we’ll be there to help you, because you’ll need it. Realize that I’m going to be at a disadvantage when I try and help you, and every time it happens I’m going to tell you I just spent three billable hours trying to get you fixed on this issue which the vendor who sold it hasn’t come to the plate on.”” So losing control of the hardware could be to your advantage.

Jacob Stoller: There’s two issues here. Often there’s issues with the vendors going direct and getting into the mid-market. And that to me is a lack of discipline in the way they’re set up. When they have channels they’re supposed to be getting the revenue from the channel [and] going after the larger, enterprise accounts. What happens is they’re struggling so they call on a mid-market insurance company or something like that . . .

SW: We’ve had IBM, for example, come in and take deals from us, and not even huge deals. I think the vendors have gone from a model of ‘Reseller, you are our bread and butter’ . . . Now they’ve discovered this thing called the Internet and it’s really destroyed the fabric of our traditional business. Because now they think, ‘We don’t need these guys any more.’

PP: And that’s personified by Dell. I mean, how do you compete against Dell?

PM: We’re a little more fortunate in that we’re more removed from Toronto. We do fight Dell. But we have a position with

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