IT distribution is one of the most unpredictable markets in Australia.
The spectres of consolidation and liquidation are ever-present and the number of distributors over the past 10 years has continued to dwindle.
The global financial meltdown and recent collapse of several prominent Australian IT companies are also doing their part to erode the channel’s confidence.
CRN met with itX to discuss its unique approach to distribution and its plans for growth during these tempestuous times.
“I often say to people that I’d like to be the only distributor in town with no stock,” said Greg Newham, general manager of distribution.
“That’s not possible, but ... we don’t build our business on the ability to move stock around. We leave that to the time and place distributors. At the end of the day we consider ourselves to be a sales and marketing organisation and so shipping a box out shouldn’t be the primary activity. We are an information distribution point.”
itX has been under the stewardship of Newham for the past eight years. His background in sales can be traced back to that most perfect of clichés.
“I started out selling vacuum cleaners door to door for five years. That was my university degree in terms of becoming a successful salesperson,” said Newham.
When the job began sucking the life out of him, Newham shifted gears to work in the telecommunications industry. He spent 10 years as national sales manager with Link, a paging and mobile service provider, and two years in the same role with First Direct, a mobile phone airtime provider.
The successful acquisition of First Direct by RSL Comm sent Newham searching for new opportunities. He was accepted for the position of general manager at itX (then Alstom) and has headed the distributor ever since.
A vacillating market
Newham has witnessed a number of changes in the distribution market over the years.
“It isn’t very hard to go broke in this business. Distributors work on slender margins at the end of the day so you have to manage your business very closely and have a strong, stable strategy,” said Newham. “The amount of distributors in the country continues to shrink and there’s also not as many resellers as there were five years ago.”
Growing a distribution business is no easy task.
With vendors frequently changing their business models and distribution line-ups and an increasing reliance on loans to provide working capital, the distribution game is becoming increasingly competitive.
“You can’t just wake up tomorrow and decide you’re going to sell something new. There are very few new opportunities in the market, generally speaking. We don’t have any debt in our business which is a key factor. High debt and a shrinking market is a very scary proposition,” said Newham.
Keeping it simple
“Our motto is we make IT easy and my whole philosophy is to simplify things. That’s what I’ve tried to drill into our people,” said Newham.
“It’s human nature to complicate things and the message ends up getting lost in marketing fluff. A lot of what we do is about simplifying the messages and passing them down into the channel. The message has got to be clear, easy to understand, and easy to replicate.”
Newham said his approach is based on the principle of simplicity.
“We spend most of our energies helping people to break down the sales message to its bare components so they can elevate a pitch. We put a lot of emphasis on marketing and sales enablement and really taking the complexity out of the marketing.”
A key component of this is training. itX staff work to help resellers cut through vendor hype, understand the products and identify the right questions to ask to capitalise on any selling opportunities.
Drilling down into the basic sales messages that will convince a customer to spend money and understanding a customer’s requirements are a crucial part of this process.
“The problem with the IT industry is that there’s an expectation that salespeople know all about IT and that’s absolutely a myth,” said Newham.
“It’s not possible for them to. People use terms, but how many of them really know what they are?”
The importance of support
itX has a number of programs to help its channel partners. The first of these is its sales university program.
“We get a select number of partners in a room for a couple of days and leverage the vendor’s talent and sales expertise to help educate our channel,” said Newham.
The distributor also helps vendors invest their marketing dollars into innovative programs called sales pipelines.
A sophisticated backend system allows itX to produce lead generation campaigns on behalf of vendors that can be used by multiple resellers.
As vendors demand strong marketing and sales enablement from their distributors, the sales pipelines allow them to receive an effective and transparent spread of their marketing dollars.
Resellers get the benefits of this spend by being able to send professional and personalised marketing campaigns to their customer databases at no cost.
“We spend a lot of time trying to get the messaging right, trying to create campaigns that are a bit viral, a bit different. They are simple to use and easy to leverage and the real strength is in the lead tracking,” said Newham.
The campaigns enable resellers to access reports detailing who has received the email, whether they have read it and the amount of time spent using it.
Newham said the pipelines help turn sales leads into appointments and appointments into business.
“The campaign that we’ve got is unique, we have a lot of energy behind it and it’s a very successful program. I encourage resellers to take advantage of it, especially at the moment when the market is tightening up,” said Newham.
The pipelines are available to the entire stable of itX’s thousands of registered partners, ranging from specialist security resellers and independent software vendors to resellers with large enterprise and government customers.
About 500 or so use it frequently.
“The partners at the end of the day are the ones that are talking to the customers,” said Newham.
“The customers are ultimately the ones who make the decision. Our job is to keep our partners educated and also to help them to market and to generate leads.”
The recipe for itX’s success can be attributed to a small product set with a high market share.
itX has expanded this market share by looking for either a strong lead product or a solid supporting product that can be marketed to its existing reseller base.
“We don’t sell many products and that’s not an accident, that’s by design,” said Newham.
“We chose the vendors we think are going to add material benefit to us and our partners. Keeping the product set tight is a key ingredient of what we do.
“We are careful about the products we choose, we don’t just fill up a sheet with logos.”
The distributor has experienced healthy growth over the past few years, largely driven by its long-held stable of Sun, Citrix, Oracle and Secure Computing products.
Since the start of the year itX has picked up several vendors including Datacore and Visioncore.
The recent addition of VMWare to its portfolio has also proved to be great for business.
itX’s roots in server-based computing has seen it naturally focus heavily on virtualisation, both with an infrastructure play with Sun Microsystems and software solutions from Citrix and VMWare.
“Virtualisation is still a very hot topic and that market segment is poised for significant growth, so hopefully we can get our fair share of that,” said Newham.
While itX has undergone steady organic growth, acquisitions of smaller niche distributors are part of a long-term strategy to add value to the core business and provide a footprint into new areas.
The $6m acquisition of specialist printing and media distributor, Briell Marketing, in July was the most recent.
“It’s no secret that we’re on lookout for other businesses that we can acquire,” said Newham.
“But it has to make sense. It’s not just a matter of acquisitions at any cost, there are plenty of distributors that have gone broke doing that.
“We don’t want to be the biggest distributor in town, our goal is to be the best distributor in town. We’ll continue to scour for those smaller or niche distributors that add value to our main business and any acquisition opportunities if they make sense. We will keep true to our goal of knowing more about the products we sell than our competitors.”
The itX factor
This article appeared in the 13 October, 2008 issue of CRN magazine.
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