ROUNDTABLE: Selling converged networks to SMB

ROUNDTABLE: Selling converged networks to SMB

Brian Corrigan, ARN (BC): What are the major selling points when taking converged networks into SMB?

Kevin Bloch, Cisco (KB): The issues we are trying to address can be summarised in three words - it's got to be smart, simple and secure.

Tony Heywood, LAN Systems (TH): Is the CEO only concerned with cost or is he interested in what advanced technologies can bring to the table in terms of changing the way he does business, communicates with customers and manages information?

Andrew Lowy, Efficient Data Communications, (AL): Cost is definitely a factor but I don't like to look at making things too easy because services are where we make our money. Having said that, bringing costs in line with what a customer wants to pay is important.

TH: Are there any other challenges you see SMBs struggle with on a daily basis in terms of adopting new technology that is actually going to benefit the business?

KB: A CEO knows his business - he knows how to make a widget and sell a widget. As much as everyone talks about selling benefits, the CEO doesn't see that, he sees what it's going to cost him upfront. That's the difference between selling to a bank and selling to a small business that is run by a doctor or builder that wants to get on with what he's doing. All you're going to do as a reseller is lighten the administrative load and hopefully reduce costs.

Wendy O'Keeffe, LAN Systems (WO): Is security an issue in this environment?

Craig Somerville, Somerville Group (CS): I'm not sure how many of our customers have a grip on how important security is yet. Most small business owners would have an idea that a virus has just hit but do they understand the impact to their business? I see our roles changing. As we are moving towards things like IP telephony, where you are taking a bigger chunk of their business and it's not just the switching layer, the management team has a lot more interface into that side of the business and we are competing a lot more with traditional telephony providers. Packaging and bringing that cost down has been a big problem for us until now. We don't want to use cost as a reason for not winning business but it has become an issue in that space.

Tim Sone, Ensyst (TS): I think some of them understand security. I have come across lawyers before that have been scared by the prospect of integrating phones with computers. For security reasons, they couldn't get beyond the fact that it was integrated.

KB: We see that as a selling opportunity and rely on our resellers to explain that to small business.

Rodney Aspen, Oriel (RA): The definition of small business from a government perspective is up to 20 people and that is your doctors, lawyers and small branch office environments. That's not our market but we have had opportunities in that space and it comes down to cost at the end of the day. The closer you get to 200 people the more you can start talking about services because they have some IT knowledge within the company. Then the relationship forms between our IT people and theirs. They start talking about the benefits of the technology and their IT manager is able to sell that functionality into the business with our support.

CS: You are still forced to sell it as a technical sale then, rather than a CEO sale?

RA: For that size of organisation, experience thus far is yes, absolutely. It's usually business savvy IT managers that are able to relate business benefits, particularly in areas like unified messaging and integration.

KB: The value proposition for a reseller is to take 100 per cent of business off the table. A small business wants you to tell them you can do everything they want at a lower cost with a higher level of reliability. If you can do that, why wouldn't they use you? To me, that's what convergence is at the SMB level.

WO: A CEO to me is only interested in finding operational cost reduction.

CS: It doesn't always work like that when we are rolling out the new technology. We came across a classic where a customer had five different carrier accounts every month across 100 account numbers. We were rolling out IP telephony and, at the end of the consolidation, fixed line costs actually went up. The difference is that we are delivering substantially more functionality between different branches and huge call cost reduction using the WAN. It's not always about reducing the cost of doing business. Ultimately it will be but in the first 12 months the sale is more about delivering increased functionality.

BC: A recent IDC report said there is a huge VoIP opportunity in small business for resellers but warned that anybody trying to tackle the market as a whole is going to be in trouble. It suggested picking a vertical target and forming relationships with local councils or chambers of commerce that have a client list you can target. Is that a strategy you are using?

Magnus Maynard, Touchbase (MM): There are lots of businesses with less than 50 people who spend more than others with 400 people because their requirements are so high. If you can find those companies, they are goldmines.

KB: We have a partner in North America who goes after the sub-50 market. They tell the customer what they can do but then say they will only start if they are guaranteed 100 per cent of the business. At the lower end of the market you have to be volume-oriented and scalable.

CS: If someone like that comes in and takes my business then we haven't done our job well. We don't grow that many customers in a year but most of them have been with us for a long time. When we sit down at the end of the year and look at our revenue base and the customers that are at the top of it, it is amazing how many of them have less than 100 users.

TH: As an integrator, you are building bespoke solutions for a customer that requires them but there is an audience out there that just wants a product. Is it feasible to build a business model alongside what you are currently doing to target that product-oriented market?

John Schneider, Computer Systems Australia (JS): We build our business around services and couple products with that. The difficulty is getting our account managers and customer engagement people from the data centre to the boardroom. Having that boardroom conversation is a skill you've got to have. If you can't build that story then you are better off going to a point solution and selling them that.

CS: We have been sitting down with Cisco and talking about how we move significant numbers in IP telephony. It's really about reducing the cost of sale and simplifying the rollout so we don't need five engineers sitting there rolling out handsets to people that want dial tone.

TH: Is there actually a return on investment on a private WAN versus a public switch? Is that really part of the value proposition? CS: It totally depends on the customer. There are call costs that you can do so something about with the WAN and others that you can't.

AL: We tend to go for a traditional solution and just put override codes on to reduce the ongoing telco costs.

KB: That's the point of it. You have a value proposition that you have created and you focus on that. The most obvious value proposition is cost. That's where the telcos come from. If they had really taken convergence by the horns, which they haven't, they would have totally wiped out the reseller market in SMB. Most of you guys are selling into the mid-market. I am saying you shouldn't be going down into SMB unless you have a very clear value proposition. A CEO wants to know whether you are going to lower costs and if it is going to be reliable. If you can't answer that in a minute then get out. Each one of you has different skill sets and histories that you can bring to the table. When you look at the SMB market, there are 400,000 businesses you can target.

CS: But a lot of them are 5-20 seats. If you take them out there are 8000 in the market we are looking at with 50-250 seats.

TH: When I was selling PBXs and key systems, if I came back without a maintenance contract on the order I had missed an opportunity. It was absolutely standard. Is it an important part of converged network sales in SMB?

CS: It can be but there are a number of secondhand dealers out there. I had a discussion today where the customer told me not to worry about maintenance because they could buy secondhand parts.

WO: At Cisco, you have to be setting a brand strategy around educating the SMB customer to look at totally different ways of approaching an entire network or business. That's the message I would like to see.

CS: That's a hard thing to do and it's a barrier to sales for us. When we go and lay a tender on the table we have a new IP telephony system in there with new switch infrastructure and new routing platforms. Then you've got a cheap quote sitting next to it and they don't care. We go for infrastructure change and have to sit down to resell the value of what we are doing. That's a message we need to get through to the general community and it's not an easy one.

TH: It's very important for customers to get a return on investment. How do you, as integrators, build on what is already installed so they can take advantage of the functionality?

Peter Mavridis, S Central (PM): We find a lot of our customers don't have the right infrastructure in place, which means their expectations are often higher than the results that can be achieved. So you try to sell them on an infrastructure upgrade and the costs go out of the water. We turn back a lot of customers that ask us to build on their existing infrastructure simply because we don't think it's suitable and the quality won't be there.

JS: You can always sidestep the issue. We quote all the options and then ultimately sell a solution.

TH: So where does a completely managed system fit into that, where you retain ownership of the equipment and give the customer a monthly invoice?

CS: For us in this room, managed services are a long-term threat to our business. It's a part of what we're all doing today but look out when the big guys start delivering.

TH: There are some that say the telcos have a wholesale future and the integrators have a retail future. You can control the relationship and provide everything to your customer.

KB: If you were a telco, which market would you go for? They want the wholesale.

RA: But their retail sales forces are just as strong as their wholesale sales forces. Every single customer we go to has been touched by a telco.

TH: The telcos biggest problem is the cost of producing the bill. Maybe the opportunity for the SMB and a converged network is really about whole of service provision.

KB: Everybody thinks telephony is telephony and it's simple. It's actually very complicated because of the different segments you sell into. SMB is the same. If you try to go after SMB as a whole you are toast. You have to be selective about geography, vertical market and value proposition. If there are 40,000 potential customers, go after 10,000 because otherwise you will get creamed.

TH: Is vertical market part of your consideration?

MM: It looks like vertical markets but a lot of the time for us it comes down to a customer changing infrastructure because of a vendor's advice. Once that decision has been made it is the job of the integrator or reseller to prove they are the best at doing that job. If you can be successful in the services side, you find that it doesn't really matter who the client is. We always have a big debate about whether to target private or public companies. A private company has a totally different driver and wants to make decisions based upon realising more assets within the business. A publicly listed company is usually larger and wants to reduce costs. That is where you have to target the client on what they want to achieve. You can sell convergence because it is a boardroom decision and when you show that money can be saved they don't care what the technology is. The person at the top makes the decisions and it depends how they are motivated.

AL: The problem is when you have to spend so much time in the ROI, and the capital is high at the same time, it's hard to make those two meet.

RA: How far can you productise something before a solution appears in Harvey Norman?

CS: They are not capable of delivering.

TH: Well, they are capable of delivering a network connection to small business. Harvey Norman never used to sell printers but they do now.

CS: Every customer network is different from a services point of view. We are really only looking at the converged IP network and there's a whole bunch of applications sitting on top of it, which is the value we bring.

TH: Are integrators able to create an application suite that completes the sale and makes it much more attractive even though it might cost more?

CS: That's what our business is today. We have convergence but there's a lot on top of the IP telephony that goes into making the IT infrastructure of the business. All those apps and things are very much a part of it. The strength of the integrator doing IP telephony for a customer is that we are already doing their GroupWise, Exchange or Notes. It's totally different for the telephony guys because they don't have those skills.

KB: On a global basis, we are looking for partners that add value over and above what we do. So if you rip out all of the Cisco gear, what did you supply as a reseller? I know there are global programs that give you rebates later on if you focus on a particular vertical with this application-style of business.

BC: When you look at the markets you are targeting, what applications are proving particularly successful at the moment?

CS: Applications have moved from off the shelf to being quickly developed for a particular customer need. We do quite a lot in the education space and there are a lot of applications in there that drive their business. Our challenge is not to develop applications but to integrate them and deliver technologies that can integrate them. That's where we as integrators are still a step ahead in this market because we have the guys to do that. We look at the rapid delivery of smaller applications that bring benefit to a business and take those with us on a week of scope work or a month of designing. Before you know it, that application is in there and the business can move onto it. That's an opportunity for us but it's also a cost of business.

KB: Does convergence help that?

CS: Absolutely. At the moment, everyone is focused on a Windows desktop with all the little icons everywhere and our job is to take all that down to a place where we do our business. That may be changing the autodials in a telephony system, invoicing a customer or making up an order. That's really where convergence can help us today. The technologies we have been talking about for years like middleware are starting to come out. Lots of the productivity things that we can get from technology are becoming easier to do and that's where we have huge opportunity. There is a simple delivery system that the IP network has brought us.

KB: Convergence is really the benefit to you for providing the service to the customer and, as you put more and more on this converged network, it has to be more robust. You can't buy a Dick Smith-type network anymore.

CS: It's easier these days to go back and sell redundancy into a network. People are starting to see the value because if they lose the IP network they lose everything. The challenge for us is the reliability.

TH: Tim, you have a very strong storage business. Is selling convergence an opportunity to migrate your business, such as storage, across to SMB?

TS: I would have to say yes. Moving away from fibre-based HBAs and things like that into IP-based storage is definitely a possibility but the biggest drawback is performance. IP network offers half the performance of fibre so depending on the application it may or may not be possible. If you can line somebody up that needs storage, phones and whatever else that can all be done on IP, you have definitely got a pretty good case to put forward.

TH: So is SMB the target for that completely integrated business?

TS: I think for 100 seats and above. It might be tough to sell below that because of the price point.

TH: Is there anything glaring vendors can do to assist resellers in the SMB market?

RA: They could pay a little more credit to organisations like ours. Most of the focus is on Gold partners. We even had a recent experience where we had already won a deal but Cisco advised the customer to go to a Gold partner. We had such a relationship with the customer that it didn't happen but to target that market space there's got to be support.

TH: What can they do at a marketing support level that will enable you to be more effective at selling your story to your customer?

JS: Educating the market about what a successful implementation is. It's not about the cost.

AL: It really hurts when you have put all this effort in and another partner comes in with the same rights to take charge of that account. You can spend six months on an account and somebody asks for the same reduction in cost to buy the kit and get into the market. I would like to see protection.

TS: EMC would have the best channel model hands down. If every vendor went out and looked at what they are doing and copied it, the world would be a better place. They have a deal registration program that works and a price protection system so that if somebody does a drive-by and offers it below cost, EMC will pick up the difference and protect your margin percentage.

MM: Cisco is the most channel friendly voice partner we have ever had. They are accepting of a very different market place. Cisco's voice market place is still relatively new but from our perspective we are seeing other vendors going direct.

TH: What else can a distributor do to help you tackle this market effectively?

Anthony Sarkis, Accucom (AS): We are a great technology and sales company but we are lacking in marketing experience. In 17 years, we have never marketed our company. It really comes down to the product mix and the services. How can you help us make money and therefore give you more business?

TH: We have toyed with bringing finance to the table and low level professional services like staging and configuration of boxes so it can just be a plug in installation. We have talked about consultancy services. But what other things are costing integrators money without adding value to the business?

CS: Get people to answer the phone. Too many times we do all this consulting with a customer and get to the point where we have got to make a decision but can't get prices. That is the biggest issue I have today with all of our distributors. For us, your role is delivery.

RA: How do we go to market and find new clients? You've got your regular clients that you grow slowly but if we are really going to hit this market hard as a group, it really requires the kind of push that marketing provides. We just don't have the resources to do that so we need to leverage off our vendor and distribution partners.

BC: What effect does everybody think a SIP standard will have on the market?

CS: I think there's a huge amount of opportunity for us early on before the mainstream guys pick up on SIP. People don't understand it yet or what it can deliver. Everybody knows what analog is and analog works on anything - SIP is going to become the same.

TS: But there are a lot of standards out there. Everybody has their version of the standard.

CS: That happens early on with a lot of standards - Ethernet was a good example but now you can take it and plug it into anything. SIP has got to be the same.

TH: Will that increase your number of competitors?

JS: Yes and no. Even though there's an SIP standard there are still proprietary protocols over the standard so it's not ubiquitous at this point in time.

AS: Regardless of whether there is more competition, a standard is still better than no standard.

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