Most channel organisations and executives will be fully familiar with the concept of adding value to their core offerings to customers. For years now, analysts and other industry pundits have been stating the wisdom - indeed, the absolute essential nature - of moving away from a reliance on box shifting.
Grant Maxwell, managing director of North Sydney-based SME outsourcing company Glenhurst Communications, is no exception to this rule, but he is doing it in reverse.
With a business model based around delivering outsourcing services, he now finds himself adding value for his customers by supplying products in addition to core services, rather than the other way around. As he is not dependent on or motivated by margins, Maxwell finds "it all just part of the service".
As in any line of business, Maxwell knows customers are gold to an outsourcer.
Therefore, if they want him to resource products, he will do just that.
"The secret I have discovered is that you have to provide everything the customer wants," he said. The entire success of Glenhurst is due to the strong focus we place on our customer relationships. The contract we have with customers is actually very short. It defines the relationship which has to be that we become part of the customer's team."It is this process of truly taking over an organisation's IT operations which leads Glenhurst to add value by supplying products, according to Maxwell.
"We do not actively pursue [hardware and other product] sales," he said. "We have customers who ring us needing something and asking if we can resource it for them. If we can do so on their behalf without it going through us then we do that too. If we can claim a dealer margin, we pass that onto the customer and they like that.
"We are sitting on the customer's side of the table [when purchasing hardware] and are not being buddy-buddy with any particular suppliers.
Origins in Unix
So just where did Maxwell and Glenhurst Communications come from? Maxwell is a New Zealander by birth and claims to have only ever worked for himself in the computer industry. After a brief period in national service for the Air Force, he started on a career in quality assurance before launching an enterprise called DataMaster Computer Systems with a partner back in New Zealand in the early 1980s.
Maxwell described his early experience as being built on contracting out as "a Unix problem solver and knowledge resource". He developed a fax server product which eventually led to a migration across to Australia because "that is where most of our customers thought we were based", Maxwell said.
A dramatic change was forced upon his business model when the Windows environment and front end changed the nature of enterprise computing. This threatened the viability of the core fax product.
"It nearly sent us broke," Maxwell said. "So we changed the business model, taking focus off the fax product. From a Unix background, the business had an instant customer base of people we had been consulting to, which allowed us to change into a contract administration service."Glenhurst was formed in 1991 and, according to Maxwell, the business has never looked back. It now claims to have a focus on what he jokingly refers to as "LANs, VANs and automobiles". More accurately, it designs, builds and manages enterprise networks while also providing customers with a high bandwidth value-added network which it owns and rents out.
It all started so innocently, too. "I got into computers really by accident," Maxwell declares. "I bought one. It just grew from there."Early experiments with Unix code cutting led to a steady stream of contracts, contacts and experience in a range of industries and applications. It was a learning curve that took in more than just technology and formed the foundation of the IT outsourcing services Glenhurst offers today. All the same, Maxwell is the first to admit his success with Glenhurst was beyond comprehension when he first came to Australia.
"I was a real thickie and never went to university," he said. "I just seemed to have an affinity with computers. I can see how things work."Painful lessonsIn addition to the importance Maxwell places on managing customer relationships, he pointed to three standout revelations he has had in constructing Glenhurst's current business model.
Firstly, he insists pricing is crucial to the success and credibility of any IT services company. "If you let them drive you down on pricing, all you are doing is giving away your margin," Maxwell said. "You can probably also be sure you will have to service them to a higher level as well. If the customer squeezes you down on price, they are also going to push you up on services so you are being asked to work for nothing. Nobody likes to do that."Maxwell said it is not just a case of setting your prices. You then have to not compromise on them once you have done so. "Our prices are fairly carefully formed, we don't just pick numbers out of the air. If a customer questions your pricing, they are actually questioning your integrity. If you are willing to drop your prices, why were they so high in the first place?"Maxwell said he has also learned the importance of carefully selecting partner arrangements to avoid serving two masters. In IT management services, partnering is fraught with danger if you are servicing an end user but being contracted by a third-party integrator, he said.
"You must own the customer relationship. You can't work any other way," he said. "We have had many opportunities to provide services through another organisation but we won't do it."Maxwell is just as adamant there is only one person at the customer's organisation which should be dealing with outsourcing. His third free tip is to deal with the CEO of the organisation you are servicing.
"Technology solutions today are all about business issues," Maxwell said. "You have to be able to go all the way to the top. I always give [the head of the organisation] my mobile number and tell them they can call me anytime if they have any issues with anything in relation to their IT."Growth hormonesAs with any growing business, Maxwell has found he needs to embrace change to accommodate expansion. He has vast technical and business processes consulting experience, but is not so strong in marketing or managing Glenhurst's business development.
Put simply, to take the business to the next level, he needed to take on partners with marketing nous.
"I had a typical company in Australia of this size in that it was funded from cashflow," Maxwell said. "The only alternative is to fund it from capital and we are in the process of changing to a capital-funded business growth strategy.
This has involved taking on two partners, each with enormous experience in their respective fields of business development and sales and marketing.
"One of the most important parts of growing the company is to make myself redundant, so the company isn't dependent on me," Maxwell said. "I want to focus on customer relationships. One of the real challenges for me has been to wean the customers off me."