As an IT trade correspondent, I’ve become exposed to both good and bad forms of salesmanship from a variety of sources, from PR and marketing professionals trying to persuade me to write about their clients, to industry stalwarts trying to convince me that their latest product will revolutionise the market.
My exposure to this art form is probably less intense than that endured by the readers of ComputerScope and Channels, but I believe Brian Honan, managing director of Osmosis Ireland, when he says that the old fashioned skill of pro-active selling is vanishing in the IT trade.
‘Selling is gone. Most of the distributors are merely order takers. We’ve got to get back to the idea of selling. Sales is an art. You have to be able to sell something to someone and tell them the key benefits of that product and why they should have it.’
By his own account, his skills of persuasion and relationship building along with those of the management team have helped to keep the wolf from the door of Osmosis Ireland on more than one occasion, particularly in the beginning.
The company, which started in 1998 as the Irish subsidiary of UK firm Osmosis Technologies and was run entirely by local people, did very well in its first year but was almost strangled at birth when the UK parent, by then 11 years in business, went into receivership in May 1999.
But thanks to a local management buyout led by Honan and Adrian Mulvey and supported by BDO Simpson Xavier, the Irish subsidiary became something more akin to an industry orphan by setting up as an independent firm, but also by retaining the Osmosis name.
‘In hindsight, it was a good thing in the long run but it was actually desperate for the first two years,’ said Honan. ‘We approached all the vendors on the one hand, who had taken massive hits on this company going out of business for £7m stg and on the other hand, here we were sayng “Hello, we’re Osmosis Ireland.” It was like rubbing salt in their wounds.’
Regardless, many of its customers chose to renew their relationship with the new management. One of its strongest cards at the time was the Microsoft OEM distributorship for Ireland, but this was also in danger of being lost thanks to the hit that the software giant took on the demise of Osmosis UK. However, Honan travelled all the way to Cannes in France to meet Microsoft’s EMEA sales head and its UK head and persuaded them to let Osmosis Ireland inherit the contract.
From a cash flow point of view, the biggest difficulty for the new firm was that because of what Osmosis had done in the UK, Osmosis Ireland was not being given the credit lines to do business, which meant that a lot of business was being done pretty much cash for cash, said Honan. ‘In the long run it’s worked out really well. We’ve built up the reputation of Osmosis once again in Ireland and bought up credit lines.’ The company last year moved to the 40,000sq ft premises of Estuary House in Swords, Co Dublin.
Capitalising on convergence
Technologies that are converging with IT are areas that Osmosis has been quick to capitalise on. In the past two or three years, the company has taken something of a lead in the audio visual and digital CCTV market thanks to a conscious decision to look at areas other than IT. Honan says that its IT vendor agreements were not enough to sustain it as a company, particularly as margins were getting more and more squeezed.
‘The AV market did not have a structured channel,’ he said. ‘It had two distributors in Ireland but they were distributors-come-resellers. They had distributor agreements and they were expecting all the resellers and installers to buy from them but were competing with them on the big jobs.’ Moving into AV appears to have been a shrewd move as, according to Honan, a large number of installers signed up with the firm shortly afterwards. AV now represents a third of the company’s business. Other companies, such as Sharptext and number of smaller niche distributors, have since cottoned on to the potential of AV technologies.
Digital CCTV continues to be an area that can only grow for Osmosis after its pioneering efforts in establishing a market foothold, but Honan admits that it is generally a ‘tougher nut to crack’, as many traditional CCTV installers are uncomfortable with converging IT technologies such as digital video recorders. ‘We’ve found that that many CCTV installers are stuck with analogue, so we’ve tried to hold their hand and bring them into the digital age with DVRs because it’s a much a learning curve for them.’
To this end, Osmosis has run a number of monthly training seminars for staff in traditional CCTV companies and has won a lot of loyal customers as a result, says Honan. ‘There’s a higher margin in CCTV, but more effort has to go in to looking after them.’ He estimates that business in 2004 in CCTV will top €5m.
‘There are a number of IT resellers who we feel have the expertise to move into the AV and CCTV side of things because at the moment it’s purely an IT base,’ he added.
Plugging the gaps
Despite the progress in moving to CCTV and AV, Honan frankly admits there is a bit of a hole in the company’s IT portfolio, namely for a server, storage and PC brand. The company sells a number of branded notebooks, but would like to add to its vendor base a top name such as IBM, which has had a single distributor arrangement with Sharptext since early this year.
‘We’ve talked to IBM. They haven’t said no, but they’ve said they’re happy with their channel.’ However, he’s convinced that this happiness is not going to last. ‘Sole distribution in my opinion does not work in Ireland. Competition is good. It keeps everyone on their toes.’ As an example of why he thinks it doesn’t work, he said that certain resellers have credit limits with Sharptext and once they’re over that limit, they can’t buy any more, for cash flow reasons.
As an ‘experiment’, Honan recently sourced some IBM hardware from Computer 2000 in the UK just to see how easily it could find customers. He says nearly 60 companies purchased these IBM machines. ‘It was an exercise for IBM on behalf of Osmosis. We proved that we could sell the products.’
Osmosis deals with many local system builders but Honan reports a falling off in system builder business as the bigger PC brands eat further into the desktop and laptop market share, leaving them to focus on specific, high end machines or other niches, such as gaming systems. However, system builders are fighting back, and notes that Microsoft are starting to do a ‘huge push’ on system builders.
Staying niche
If Osmosis is successful in securing a significant deal from a major PC vendor, does this mean that it aims to join the ranks of the top broadline distributors?
‘In Ireland, broadlining is ridiculous, in my opinion, because all you’re doing is ignoring some vendors, taking the big ones on and holding these vendorships so other people can’t get them. There is no way, physically, that you can sell for 70 different manufacturers in Ireland. I would say we would have 15 vendors at most in the IT sector and we will concentrate on those 15 and have a nice spread of business across them.
‘I do feel there will be consolidation in the market. Someone is going to come in and purchase one or two distributors to compete with Sharptext and Clarity.’ As well as a strong belief in fair competition, Honan’s heart is firmly on the side of clean channels as the best way to do business in the trade, and is strongly critical of distributors who also sell directly, even if its just consumables.
The convenience of online trading is shortly to be offered to customers via its new Web site, in the development of which Honan says the company has made a significant investment. Many resellers told of the advantages of online ordering using Computer 2000’s website because of its convenience, particularly since they can run orders outside peak times.
The new website, not surprisingly, is modelled on that of C2000. In addition, Osmosis is are also planning to suspend much of the sales negotiation on some products in a bid to encourage customers to use the site. ‘We’re taking the view that by taking away the wasted time in negotiation and give the initial price they’re looking for a see how it runs because that’s what C2000 do,’ said Honan.
The company is also considering a loyalty scheme. ‘But it’s a very complex thing, to develop your online trading business because everyone is different.’
Rewarding loyalty
Osmosis may also take the step in the future of allowing more of its staff (average age: 27) to become stakeholders in the firm, as a reward for years of loyalty and effort. Honan admits that this is an unusual thing in the Irish IT trade but ‘at the end of day, even with all my efforts to move into new areas, I can’t do it without the people.’
‘About 80 per cent of Osmosis feel that we owe them something back and they know that and that’s why they stay with us, and remain loyal to us. Many of them are offered jobs on a weekly basis because they are so successful in their own areas. It’s important to know that they will have something at the end of it all besides a nice salary.’
There were some management changes in 2003, which he was reluctant to elaborate on ‘because it’s done and dusted’, except to say that there were a number of severance packages that had to be agreed. The company had revenues of €25m for 2003. ‘This year has been much better.’ It is hoped that the company can settle on a wave of steady growth of between 10 and 15 per cent.
In the sales team, he singles out sales director Jackie Geraghty, who formerly worked at Golden Pages, for particular praise. ‘She’s brilliant because she has helped to motivate the sales team away from order taking and waiting for the phone to ring to selling this year.’
The company has 10 sales people. ‘11 including me,’ he says, adding that he gets on the blower as much as he can. An electronic engineer by trade, he quickly learnt that his skills were more in the area of sales than in tinkering with technology. He previously worked for Techlink in Leixlip, the very first Microsoft OEM distributor, before being poached by Osmosis Ireland in 1998 to be its sales director.
He says that Osmosis had managed to grow in Ireland even without taking the time to ‘get out there’ but now employs a number of field sales people, which he says has worked well in getting the Osmosis name more widely known. ‘It’s made a big different to our image—not corporate image, just image.’
24/01/05
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