When John Howard reshuffled his ministers this month, installing Tony Abbott as the potential “head-kicker” in the health portfolio, Michael Mallia, general manager of power protection at Invensys Powerware smiled. The focus on healthcare in the lead up to next year’s election brings with it the prospect of more money invested in medical facilities; new clinics being built, hospital refurbishments and in the midst of it all, contracts to build power protection for the IT networks.
For Invensys, healthcare is a particularly strong vertical, encompassing medical, bio-medical and pharmaceutical. But although the increased government spend is likely to line the vendor’s pockets there is little chance this revenue will flow through to the company’s IT resellers for the simple reason that government departments buy direct. Many in fact go to the extent of making it a condition of sale.
“Healthcare, telecommunications and government have always been strong vertical markets for UPS sales, but not necessarily good for the IT reseller channel as most of these industries approach us directly,” Malli said.
Even sales that aren’t brokered directly are typically filtered through engineering or electrical contractors.
This preoccupation with the electrical infrastructure was not really an IT reseller focus, he said.
Using UPS as a key differentiator
True as this may be, it hasn’t stopped some resellers turning it to their advantage. ASI Solutions, an end-to-end IT solutions provider, has chosen UPS expertise as its differentiator in a marketplace where desktop and server skills are a dime-a-dozen.
ASI appreciates that every business needs an angle, something that makes them different from the next guy. It uses UPS sales to infiltrate the organisation before exploring other sales opportunities.
“It’s a flooded market,” Queensland state manager for ASI Solutions, Peter Black, said. “If I come in touting desktops and servers the customer is going to tell me to join the queue. ASI offers something a little different in UPS protection. Once established in the organisation we can then work our way out to the IP telephony, desktops, and so on.”
Black considers UPS a relatively easy sell if you are armed with the right facts and figures. The recent blackout that plunged New York into darkness, converting urbanites into campers, is making the cause-and-effect sales pitch easier. “People understand the potential threat so you can simply ask the question, ‘What would happen to your business,’” Black said.
Often businesses genuinely believe they are protected so ASI Solutions couples the initial question with a site survey.
“We show them which batteries in their existing UPS systems are dead, which battery is about to die and check that the capacity of the UPS is appropriate to the size and load of their infrastructure,” he said.
The free two-hour consultancy, done in conjunction with UPS manufacturer American Power Conversion (APC) has a 100 per cent success rate to date. The product at the crux of the sale is APC’s modular UPS system, InfraStruXure (ISX), a “pay as you grow” architecture that allows users to install additional capacity via “building blocks”.
The concept of ISX is to incorporate the functionality of a data centre — climate control, rack mounting and power protection — into a scalable platform for high-end mission critical business operations. This allows the user to add or remove blocks as required and in theory eliminates the need for data centre managers to build the entire infrastructure before they require that capacity.
Black said ASI Solutions has sold five ISX solutions to date (with an estimated street value of $750,000) and has another six on the books.
He said the unique nature of the ISX solution meant it returned a better margin than traditional UPS sales. The revenue from installing the unit was minimal, but once the three-year warranty expired ASI knew the client would be back for an upgrade.
The lucrative nature of UPS service contracts is the industry’s best-kept secret, according to Shawn Matthews, national service and technical manager of PowerTech Systems. The Melbourne-based UPS manufacturer claims to generate 80 per cent of its annual revenue from service and maintenance contracts. It has a 4500-odd customer base, most of which have been on the book for 15-20 years.
“The renewal of service contracts is a major factor in driving our business,” Matthews said. “A new UPS system comes with a 24-month warranty and when that runs out you know the client will purchase an extended service agreement because the exposure and risk is great.”
At twice the cost of the initial UPS sale, Matthews said service and maintenance contracts were almost guaranteed revenue that reaped a much better margin for resellers.
The reseller gets a kick-back from the vendor for the sale of the contract and can choose to sub-contract the work back to the manufacturer.
The benefit of this, according to Mathews, is that the reseller has no break-fix liability on the UPS system yet they gain the confidence of the customer by supplying a 24x7 service.
Meanwhile, the customer gets technical support from the people that built the box and is issued an 1800 number direct to the manufacturer so when there is a power failure at 2am the reseller won’t be disturbed.
Cash injections and new niches
While Invensys Powerware is priming its coffers for the prospective cash injection into healthcare, ASI’s Black said Queensland had benefited significantly from the splurge in defence funding under Howard’s anti-terrorism campaign. The terrorist threat had also spurred airlines to upgrade infrastructure, a priority fuelled by the continued competitive stoushes between Virgin and Qantas.
Meanwhile, Black said the traditionally tight-fisted media corporations were improving outdated systems in an effort to overcome trans-continent infrastructure issues as more US dollars filter into Australia.
In Victoria, PowerTech’s Matthews said education was starting to spend more on power protection as schools adopted cameras and alarms for fires and burglaries, particularly in the holiday periods.
But with IT plug-and-play products contributing only about 35 per cent to UPS vendor’s total sales, many are looking for alternative areas beyond computing to other devices that need uninterrupted power.
Managing director, Upsonic Power, Paul Riva, said that as well as the medical industry, Upsonic was making inroads in the security services, surveillance and alarms vertical. While the manufacturer was sourcing these opportunities largely off its own back, Riva said the majority of sales are channelled back through IT resellers.
“In our experience there is no such reseller out there that caters to the gap that exists between, for example, the security industry and the power protection sector,” he said. “We are talking to a few of the security companies but it is very difficult to set this market up.” This being the case he believes IT resellers are well positioned to leverage existing UPS knowledge in these new areas.
And he might well be right. Matthews said most resellers, IT or otherwise, chose not to think outside the square and missed opportunities in the process. Some months ago a Victorian reseller, Triptech Systems, approached PowerTech on behalf of a commercial roller door company seeking seven day backup on all its commercial installations. Because the sites, like shopping centres, had no available floor space next to the roller doors, the UPS units had to be re-engineered for ceiling mounts. Weight, heat and battery life were the top considerations. Space restrictions forbade PowerTech stacking up several batteries so it devised a way for the UPS system to go into ‘Save’ mode except when the door is in operation.
PowerTech has sold 40 of the systems to date and the sales were all filtered through Triptech Systems.
“This lead actually came in through a reseller,” Matthews said. “Once the nitty, gritty redevelopment of the product was complete, the customer chose to continue dealing through a third party for several reasons; the reseller provided a one-stop-shop, the client was happy with the level of attention and responsive nature of the reseller, and it provided less paperwork and administrative headaches for the client.
“In the ongoing battle between direct sales versus channel, Triptech Systems proves that the concept of value-add still has some room for good old fashioned customer lovin’.”