It isn’t often that resellers play giant killer against the federal government. But this summer a group of VARs that sell hardware to Ottawa stood together and smothered its attempt to bully the channel into submission.
The fight was marshalled by Herman Yeh, president of Ottawa’s Northern Micro, a man who coincidentally had been an IT systems manager for the government early in his career before opening a one-person computer store in 1985.
Yeh helped establish, then was elected president of, the Canadian Information Technology Providers Association, a group of 29 resellers and 14 vendor and distributor sponsors battling Public Works’ attempt to squeeze IT suppliers. It’s part of a larger ongoing struggle between the department and all suppliers it buys from, which isn’t over yet.
But in August, after a loud campaign, Yeh’s group and others forced Public Works to back down on a new formula for bidding on printer contracts and made it work more closely with the industry to come up with what the private sector hopes will be a fairer procurement process.
Asked if in his 22 years of business he’s ever seen the channel win a fight together like this, Yeh says, “Never. This is the first time.”
The story began in 2005 when the government decided, under a program called The Way Forward, that it wanted to cut $2.5 billion over five years out of its procurement of goods and services. Among the ways would be a change in the national standing orders, the system Ottawa uses for choosing approved suppliers. Vendors – and their resellers – who hold a standing order can bid on departmental purchasing contracts.
There were concerns among some Ottawa VARs early in the year, but it wasn’t until the appearance of a proposed national standing order for printers in the spring that a number were galvanized for action. One group embraced all suppliers, including IT consultants, and called itself the Canadian Coalition of Small Businesses.
But hardware VARs decided to form a group of their own after seeing details that bureaucrats wanted to limit the number of suppliers they buy from and institute reverse auctions among the winning suppliers as a way to squeeze prices down.
In April, Chris Coates, who heads a company that represents a number of IT manufacturers in Ottawa, called a meeting of resellers to formally fight the proposal. Coates, as neither a reseller nor a vendor, was seen as neutral. A board of directors was shortly chosen, and from them Yeh was selected to be its head.
When he started Northern Micro 21 years ago no one would have thought he’d eventually lead a fight against the mighty bureaucracy. After getting a degree in computer science and statistics from the University of Toronto, where he also took courses in business management, he worked in IT for a federal agency. Then he left to open a store selling PCs and networking equipment. Within a year he’d hired three more people.
Soon he realized it was risky to focus solely on consumer sales, so the company began selling to the government. In 1992 it won its first standing offer to provide white boxes carrying the Northern Micro name, ultimately reselling them to other VARs as well. Then Yeh began adding vendors – first IBM, then Hewlett-Packard, Toshiba and others.
In 1997 the company diversified again to sell Microsoft’s Axapta (now Dynamics AX) enterprise resource management application.
Today the company, which has 70 employees, does around $45 million in annual sales through a range of government, corporate and small business products and services.
After the initial proposed master printer standing offer was published, Yeh and the association hoped talking to bureaucrats of their concerns would get action.
But in June, faced with a mere tweaking of the proposal, it went vigorously on the offensive with a fax campaign to members of parliament.
Boosted by lobbying from ITAC, CATA and other groups – and helped by allegations that the private-sector consultants advising Public Works on the procurement strategy had squandered money themselves – Public Works minister Michael Fortier axed the reverse auctions idea and promised to work more closely with industry on reforming procurement.
At press time the association was reviewing a proposed final version of the printer offer. The fight isn’t over yet, however. Now being discussed is a new standing offer procedure for the purchase of servers, desktop and laptop PCs.
“They still have not put any emphasis on how they will help the SMB-based reseller or manufacturer do more business with the government,” Yeh complains. But he is hopeful Public Works will be responsive.
“Some of the input we gave them before, they’re actually using it,” he says.
“They use maybe 40, 50 per cent of what we suggested. That wasn’t bad. We know we cannot get everything we want. But if they’re going in the right direction we applaud them.”