Appropriately for a man whose organisation has adopted the tagline ‘lessen the stress’ for its latest ad campaign, Liam Halpin appears to take things in his stride.
Whether it’s talking about growth at the company’s business in Ireland, its involvement with the reseller channel that sells its products or the moves of its rivals, Fujitsu Siemens’ channel director is happy to sound off on any topic as it affects his business.
It seems he has a good deal to be pleased about: the past 12 months have seen the manufacturer add ‘substantially’ to its reseller numbers and also to the quality of reseller that it deals with, Halpin claims. He attributes this to a mix of uncertainty in the market and unclear market strategies by rivals, who he accuses turning their backs on the very channel they used to build up their own businesses.
‘Really it’s a great opportunity for us,’ he suggests. ‘We are absolutely clear about what our channel message is. We value the channel and the channel is our route to market.’
Resellers most under threat from manufacturers with large service offerings are those who gain much of their margin from providing services. Halpin is quite happy to stir things a little by suggesting that resellers would be better off procuring their hardware from a vendor that will not compete with them for services business. ‘We just want to sell you the tin. We have no interest at this stage or moving into the future, in having a view on services revenue. And that is a big, big plus.’
Another bee in Halpin’s bonnet concerns vendors who sell directly, bypassing the reseller channel. He can afford to take the high moral ground: in the years since FSC came to be, it has moved its business towards an indirect sales model. For historical reasons, much of its Irish business had been direct, but the company is not far off achieving its stated aim of a 100 per cent channel-only business.
Transition phase
‘We’ve now moved our business from being 70 per cent direct to being 85 per cent through the channel,’ he relates. ‘To explain why the other 15 per cent isn’t in there yet, we have customers that we would have signed framework contracts with when we had a direct sales operation and who we are contractually locked into. What we’ve started to do in those accounts is positioning channel partners, providing the services that are going in to those accounts, so that when they come back out for tender, the channel partner is in place.
‘A good example would be one of the universities, where we’re continuing to supply them directly, quote-unquote. A reseller is doing the invoicing for us, a reseller is doing the delivery for us, a reseller is doing the installation for us, and the customer knows that when they come back out to tender in October of this year, we will be submitting a bid in conjunction with that reseller.’
FSC’s current local market share fluctuates from seven to ten per cent depending on each quarter. Its largest growth centres are in consumer and business notebooks and in Intel-based servers. Some significant wins have also boosted the company’s PrimePower enterprise systems range.
‘Our goal in terms of market share would be over the next two years to get up to 15 to 18 per cent,’ Halpin says. ‘There is no other place for us to grow but with the channel. This time next year, that 85 per cent we spoke about will be 100 per cent of our business in this country, put through the channel.’As part of a move to widen its reach into the channel, FSC recently added Clarity to its roster of existing distributors, Midia and Sharptext.
Direct downside
Halpin refutes the widely held belief that customers prefer buying directly from manufacturers, and that this method offers the best value. He encourages resellers instead to stand up to the likes of Dell and not merely assume that direct-sales operators will win the business every time. ‘Everybody can compete with Dell, but Dell would have the world believe that they can’t. We’re not afraid of Dell and really the weaknesses in the Dell model are a great opportunity for the channel because Dell cannot compete with the channel.
‘Because the customers perceive there’s value for money, we would understand that if the customer is saying “look, I want Dell because they’re the cheapest”, they’re taking the point of least resistance and not taking the time to say “OK Mr. Customer, I can get you the Dell, however, we’re going to have to wait two weeks”.’
FSC’s channel director further claims that Dell is attempting to move into the channel and has a cautionary word for resellers who take the view that if you can’t beat ’em, join ’em. ‘How can any channel partner legitimately bring a vendor into their account, where every one of their adverts starts off with: “buy direct, it’s the best way to buy”? Dell is the complete anathema of the channel and it’s about time the channel started to say “stop”, we’re not going to co-operate with you, we’re not going to help you come into our business and take our customers. And in addition to that, does the direct model serve the customer best? No, because a direct vendor cannot deliver the real services that a customer needs: installation, training, ghosting — all the things that resellers do.’
Halpin also takes issue with price-led advertising, where the customer appears to get a better deal from one manufacturer. This puts the reseller in an awkward position because they will be obliged to produce a competitive price. Halpin says that some of the tricks performed to meet certain price points do no-one any favours. ‘We don’t advertise products that there isn’t a market for,’ he insists. ‘We’re not going to advertise a server with 128Mbytes of memory just to hit a price point, we’re not going to advertise a server with a Celeron processor just to hit a price point.’
Importantly, FSC retains a good deal of local control; a key element of this is its use of a transfer cost model as opposed to a transfer price model. ‘The benefit to us as a management group and to resellers is that we make the decision on how much profit we make on the product locally, we don’t have to apply back to Europe to do a bid price,’ Halpin explains. This doesn’t put Ireland at a disadvantage versus larger markets such as the UK, or France or Germany. For example, a tender for 200 PCs and 10 servers and 15 laptops is a reasonable piece of business for Ireland but would not be of sufficient scale elsewhere to deserve any special treatment. ‘The local management group have the ability to look at local opportunities and make the decision based on our own costs. So we’re not carrying the costs of any other country,’ Halpin adds.
Supply lines
FSC has two ways of handling products and distribution. One is the ‘Made for you’ programme which covers hardware configured to order. If a reseller wants a particular spec customised to their customer’s requirement, then they can order it through distribution. This programme typically comes into its own when the vendor and its resellers have project business to fulfil, such as a government department tender.
The other is a programme called value for you (V4Y). This is based on stock sitting in distribution, ready for delivery: a selection of desktops, towers, notebooks and servers, as well as a Tablet PC model.
This programme is designed to allow the channel to respond quickly to customers; the products are all readily available for closing deals quickly. ‘All of the products are featured in our “lessen the stress” campaign, which is going to be our umbrella end-user and reseller campaign moving forward,’ Halpin explains.
Fujitsu Siemens has three tiers of partner. Its corporate reseller tier currently comprises six companies: Calyx, Datapac, CK, PFH, Memorex/EDS and Cara in Northern Ireland.
This group is backed by account managers within Fujitsu Siemens who focus on developing sales leads among sectors such as large customers, government and third level education.
Six is not far off the final number for this group of resellers, Halpin adds. ‘We will be looking to put a cap on it very soon because there’s no point in us in having the complete and utter replicate set of HP corporate resellers,’ he says.
In addition to its corporate resellers, FSC retains Fujitsu Services (formerly ICL), Siemens Business Services and Amdahl (a Fujitsu company), who act as both corporate resellers and enterprise resellers. The latter category covers FSC’s Sparc-based PrimePower systems.
A programme called Elite covers the next grade of reseller. A number of partner account managers within Fujitsu Siemens are given a list of nominated resellers that they regularly visit and support with special pricing within their customer base.
Elite resellers can take part in channel programmes that FSC runs. Its current ‘lessen the stress’ campaign will generate sales leads that will only be referred to Elite resellers.
According to Halpin, Fujitsu Siemens is keen to swell the numbers among the Elite category and in the third, non-managed reseller community. ‘We would like to bring more into the Elite category, working with us closer and we would also look to just be doing more business across the entire reseller portfolio,’ he says.
‘From an elite reseller perspective we’ve got complete geographical coverage. We’ve got at least one elite reseller in every county. In terms of the corporate resellers we’ve got not only Dublin-based resellers but we’ve got regional based resellers. If you take Calyx as an example, Calyx have an office in Cork … we’ve got the geographical coverage that we require, it’s not on our list of “to do”.’
On distribution
My view would be that sole distribution doesn’t work for either the vendor or for the channel. A lot of resellers would have a credit limit with a number of distributors and based on where their credit limit is at a given time of the month, it doesn’t suit them to have all their business with one distributor. We would see the same reseller putting their business across a number of distributors and when we had four distributors we had people who were buying from all four, playing the credit game. So from a reseller’s perspective, one distributor isn’t healthy. From a manufacturer’s point of view, if a distributor is going through a business crisis that is associated with their individual business, if you as a vendor are attached to that then your business is 100 per cent affected by that. So sole distribution is something we will never go down.
The other side of the coin is that people buy from people and distributors would have resellers who buy from them because they like their individual account managers within the distributor, so it’s not necessarily the company, it’s the people they’re buying from.
You can’t underestimate that factor, so by having a number of distributors — and the right number of distributors — you maximise your ability to take advantage of that.
On retail trends
In the retail segment we’ve been very, very successful. We’ve been successful in my view for a couple of reasons. One of them is, we don’t put product into the market just to hit a price point. So, all of our consumer PCs have DVD and CD rewriter, they all have an on-site warranty, they’ve all got a comprehensive software package. In terms of graphics, they’ve all got Intel extreme graphics or a dedicated ATI or Nvidia graphics product.
Our retail strategy has been that we’ve supported retail stores and we also have our dedicated partner mypc, which run www.mypc.ie and a call centre. That would be our equivalent of a Sony Centre: in that they only sell Fujitsu Siemens. The margin that they sell at is the same margin as the rest of the resellers.
It is important because there are customers out there, certainly in the retail space, who would go into a Sony Centre and buy a TV, they wouldn’t go to Power City or D.I.D. to buy the same TV.
What we’ve been able to do in the retail space is, if we’ve been driving product on mypc, either on the Website or in the press or on the radio, the local resellers get as much demand from those adverts as mypc. So mypc is pitched to take business from the customer who would traditionally buy from Dell or Gateway. But it’s there also to stimulate demand in the normal reseller channel.
Our other major retailers would be ESB in the South and Tescos and Laser in the North.
One of the things about the Irish market that’s different to other markets is that the Irish market is brand-driven, be it TVs and videos or whatever.
There really aren’t any indigenous PC brands that have major credibility. If you go to the UK you’ve got companies like Viglen, Mesh, Tiny, they’re real brands that have been established for a long, long time. And because they’re from the UK, they have a loyalty amongst British people to buy those brands. Similarly in France and Germany. There is nobody in Ireland who is either in that position or is poised to be in that position.
On channel certification
My view on the channel is that anybody can become a computer reseller tomorrow. That person may set up in business and may offer a fantastic service to customers. Or the opposite may be true. And I think the industry would benefit greatly from some form of certification similar to RECI (Register of Electrical Contractors of Ireland). If we went out today to get our houses rewired and you pick up the yellow pages, you see two adverts for electricians and one has RECI on it and the other doesn’t, we know that a) if we buy from a RECI guy, we’re going to get what we pay for and if we don’t, we’ve got some recourse. But if you go with the guy who just has an ad, you don’t know what you’re getting.
My own view is the computer industry needs to start behaving like an industry, where the vendors in conjunction with the channel should come together and say “we’re going to have a RECI style certification. And to have that certification, these are the minimum criteria that you as a computer reseller have to make”. The vendors then can make a commitment to those certified resellers that all of their activities in the market are around supporting certified resellers. And then the promotion to the end customers is that if you buy from a certified provider, that organisation has the backing of the industry and is able to deliver a minimum level of standard.
It doesn’t do us, or whatever brand any good for a reseller to sell our product and overcharge or not deliver the services, because at the end of the day, the customer is looking at a box with our name on it. It’s in the whole industry’s interest to have some form of minimum recognition.
We’re actually one of the few industries that don’t have a coherent industry body. If you look at the motor industry, you’ve got SIMI, the consumer electronics business has CEDA. They’re protecting their industry and protecting their customers.
29/05/2003
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