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Time is money: Product code services

01 Oct 2008

We’ve all heard the saying ‘time is money’, and the best way to make money is to spend your time wisely, but so often we get caught up in trivial tasks when our time could be better spent elsewhere.  Product code services are one way to maximise the time you spend on quality, revenue generating tasks, since distributors and vendors are able to complete certain, more standard, jobs on your behalf.  The Channel spoke to several distributors to find out what they offer in this growing services business and how they can help you.The aim of product codes services is simple: to make resellers’ lives easier and their workflow more efficient by providing a specific service under a product code which can be quickly and easily ordered. Ingram Micro’s Manager of Sales, Operations and Customer Experience, Craig McEwan, also said the aim of their offering, Ingram Micro Services by Divers, was not only to make resellers’ lives easier but also to “give them another source of revenue without having to invest in additional personnel”. The question of personnel is an important one, because essentially product code services allow resellers to outsource their work to distributors and vendors, thus reducing the need for extra staffing or certification in a specialty area that they may only require rarely. Terry Dunn, Managing Director of Value Added Distributors (VAD) commented that product code services were a good way to “ensure that the services and warranty upgrades and whatever other service offerings that are available to the vendor get to the market” giving resellers the choice between selling their own services or using those provided by a vendor or distributor. Change of sceneOver the last year there has been an increase in the number of productised services offered. Justin Tye, Managing Director of eXeed said, “We’ve been going for six years and there is increasing demand for it [productised services] all the time, as people are starting to add on more and more requirements to tenders.” He added that customers’ requests for increasingly complex solutions are driving demand because resellers do not always have all the skills to tick every single box in a tender application. He also noted a trend for solutions increasingly to include requests that reflect growing concern for the environment. McEwan of Ingram Micro also mentioned this change, explaining that “services like delivery services are being added, where government departments or a school will want a delivery but they won’t want the packaging but they want to make sure that it’s all recycled. We offer a service where we will take all the PCs, put them into a container that is re-usable and send them to the government department, then have the container returned to us – that way they will have no packaging at all and the packaging gets recycled”. As solutions become more and more expensive we can expect to see further offerings in the form of service packages, which will help resellers to fulfil the detailed requests of tenders.Popular productsInevitably not all services are able to be productised because, according to Dave Rosenberg, Sales Manager of Datastor and Tye of eXeed, some things are just too complex or specific. VAD’s Dunn suggests that whilst all services could potentially be productised, there would be very little point since you are unlikely to sell many of them very often. “There are a lot of things that Express Data does now that you could call product code services that we don’t call product code services because we consider them part and parcel of the service – in New Zealand with the size and the scale of New Zealand businesses there are a lot of things that may not make sense to be productised because they happen so infrequently in comparative terms,” said Paul Plester, General Manager Sales and Marketing of Express Data.The idea behind product code services is to productise popular requests so that there is no need to go through the rigmarole of requesting information and preparing quotes each time. They also reduce the risk of error by cutting down on the double or triple handling of data. Express Data’s Plester explained that “automating those areas [data input] and preventing double handling means there’s going to be less possibility of the wrong configurations and hence less re-work required and returns”.Ingram Micro’s Ingram Micro Services by Divers has a plethora of very specific products on their website where all the services are packaged as a product service code. “We do this so that our customer can order products online with the service and it just goes through seamlessly,” explained McEwan. Express Data’s Fast Quote produces a quote in three seconds, allows you to save previous configurations and re-order them when necessary and makes a point of not changing the product vendor code wherever possible to make finding the appropriate service easier. Datastor and eXeed have their most popular products set up as codes in their databases and also do a lot of CTOs (configurations to order). Datastor has a “productised service list”; however, “that part of the business is limited as far as where our sales come from.” said Rosenberg. “If you look at some of the other people who are doing it, they offer more generic services – our business tends to be quite specialised, quite project based, so they tend to be more specific type quotes,” he added.  VAD is not a services business, per se, but provides services to their reseller community as part and parcel of their service, with the option of bespoke work. The most popular products vary according to distributor; however, warranty upgrades figure quite high on the list. VAD and Express Data actively track and remind resellers of warranty opportunities while Ingram Micro is currently building a module within their existing software to do this. Specific PC/server configurations are also very popular: “The single most popular SKU, bar none, is the downgrade from Windows Vista to XP,” said McEwan of Ingram Micro, while eXeed’s Tye said that configuration to order (whether part of a product code or not) was most popular along with asset tagging, HP Care Packs (which typically include a warranty extension), and the increasingly popular environmentally friendly services.  To compete or not to competeThe increasing number of product code services shows their growing popularity and Ingram Micro, for one, has plans to expand this branch of its business. McEwan said they wanted to create a history before really pushing their offering and now that they have proof of concept they will be “putting a concerted effort in between now and the end of the year to grow the business dramatically”. “I’d like to at least double the amount of business we are doing,” he added, explaining Ingram is just about to embark on a telemarketing campaign to target a specific subset of customers who already buy a lot of product from them but who are not using the service. Dunn of VAD added that generally all resellers used product code services to a greater or lesser degree but implied that the Kiwi ‘do-it-yourselfers’ and those who do not put a value on their time probably use them less . Tye from eXeed offered another reason: “Resellers, in my experience, are somewhat reluctant to walk away from margin if they feel they can offer the service themselves.” This sentiment is echoed in the feeling amongst some resellers and systems integrators, that the growth of product code service offerings is a threat to their business – additional competition with the channel. The distributors we interviewed were, however, emphatic that they do not compete with the channel. “The product code services are in no way competition to the reseller. In fact, I believe it’s quite the opposite. We are offering them a service, but they in turn charge out without the outlay or overhead of additional staff,” said McEwan of Ingram Micro, who also pointed out that resellers and systems integrators save on shipping and freight charges, and can take advantage of Ingram Micro’s lower wholesale prices. One of their largest customers is also their largest user of product code services, using it every day. “They get the message that they can make more money by letting us do their upgrades and downgrades etcetera, while their engineers are out on site doing break-fix installation work where they can charge more,” concluded McEwan. VAD’s Dunn was just as adamant, putting it thus: “We are not there to eat their [the resellers’] lunch. Most resellers that we are working with don’t see vendor pack offerings as necessarily competing with them. They cherry pick over them and take the bits that are key to what they are doing and if they’ve got the skills themselves, they are able to use those instead.” Express Data’s Plester sees another advantage: “It comes down to ease of use – particularly with more mobile devices around,” he said, explaining that the reseller can be sitting with the client and prepare an almost instantaneous quote on Fast Quote – no to-ing and fro-ing, no spreads sheets, just three seconds on a mobile device. “Ultimately we are making it easier for our resellers to do business full stop.” However, eXeed, has taken a different and possibly controversial approach as Tye explained. He views product code services as a passive sell due to concerns over competing with the channel and feels they “should be cause for debate because the reseller channel, in our view, should have the capability, if they are going to pitch for business, to be able to deliver what the customer wants [...] To be honest, if you are selling a solution that requires a lot of additional services from third parties, then you should probably be thinking carefully about whether or not you should be pitching for the business the first place.”  Tye felt that it is all very well to take advantage of these product code services, but when distributors proactively sell solutions, telling resellers that they will do all the work for them, it is “the thin end of the wedge”. “It has the ability over time to conflict in a competitive way with what the channel should be providing as a revenue generating part of their own service, rather than having to rely on a third party to deliver it.” He finished: “We are somewhat sceptical about it because of the degree of competition it initiates with the channel, so we think it’s only something that the channel should initiate”. Dunn from VAD was also aware of potential conflict with the channel and commented that, although they are continually developing as new products come to market, “it would be very easy for us to confuse being a distributor with being a reseller”. It would appear that there is a fine line between helping and competing, but competent distributors are well aware of this and steer well clear of supplying the end user market, ensuring that all invoicing is done through the reseller.End user argumentOf course, the question of competition can have an impact on the end user, which is why most distributors and vendors prefer their partnership with resellers to remain concealed from the end user. This way they are simply helping their channel partners. McEwan from Ingram Micro said, “The service should be transparent. I don’t think the end user needs to worry about how they are getting the product, they should worry about whether they buying from a reputable company.”  Express Data’s Plester agreed, “At the end of the day the end user probably doesn’t need to know. Express Data is in the business of making the reseller look good and if they can use the service to make themselves look better, more professional, slicker to their customers, they will use us more.” Others, such as Datastor’s Rosenberg, are more ambivalent, suggesting that it can work equally successfully either way. Dunn from VAD agreed: “I don’t think the reseller or the end user has an issue where the vendor is used to help those specialist skills to the table. In fact, if anything, I think it can potentially enhance the offering and de-risk it for the end user – and for the reseller.” The subject of risk also springs to mind for eXeed’s Tye who cautions: “If the reseller takes responsibility for the project and they are the prime contractor on that project, then they carry all the risk. If the third party that’s been sub-contracted to provide a service stuffs up, it falls on the reseller, not the third party.”  Benefits and bonusesDespite the concerns of competition and liability, the benefits to resellers do seem to outweigh the negatives, especially since they are free to pick and choose the products of most help to them, gaining access to skilled staff with no outlay. They are able to save on staffing and resource costs, take advantage of reduced freight charges and ultimately provide solutions to complex tenders they may not otherwise be able to fulfil. Ingram Micro’s McEwan added that these savings “then have a flow on effect to the end user, who should essentially get a reduced cost overall”. In fact, all the distributors said that out of all the channel points of contact, the reseller or systems integrator benefitted the most from these schemes.Of course, distributors also benefit from increased ‘stickiness’ with the reseller and the more contact they have, the greater the chance they have of increasing fidelity and sales. Despite his reservations, Tye demonstrated the benefits for all concerned: “We [the distributor] get to participate in a larger proportion of the revenue that is attributed to a sale. They benefit the reseller because they can sell to a wider range of customers because they can appear to be bigger than they really are, and from the customer’s point of view, they can go to a single company for the deployment of a complex solution, and have that company appear to be delivering everything that they need.” Rosenberg of Datastor summed it up saying, “It’s about ensuring that the resources are available in a timewhich the end customer requires it in. And it’s about delivering high end services in a cost effective way.” Everyone should benefit if it is done correctly.Reseller reminderThe increase in demand and the growth of the product code services offering shows that they are evidently a tempting prospect for many. If you do plan to use them, eXeed’s Tye says it is important to know “when you should contract a third party to assist and when you should do it yourself”. Once you have decided to use the product code service offering, you need to decide on a realistic price and examine the margins. Because the product code services are ordered by code number, and are generally non-returnable unless faulty, Rosenberg of Datastor suggests you ensure that you “know exactly what is delivered within the services”, a sentiment echoed by Dunn from VAD, who said to look at “the scope of the work that is covered or defined”. Typically the ‘scope’ is quite descriptive, so if something is not mentioned then it simply is not included – don’t expect installation if it isn’t specified! Ingram Micro’s McEwan also reminds resellers to check the time it takes to complete the service (they have a maximum 48 hour turn around) so as not to disappoint the end customer. ConclusionIt is clear that there is still some controversy around product code services and their place in the channel marketplace. Nonetheless, their expansion is evidence of their popularity and as it continues to grow more resellers will learn to trust it. Of course, that does not mean that vendors and distributors do not need to continue to be watchful about crossing over into competition with their reseller partners and, like Rosenberg of Datastor pointed out, they must continue to support invested resellers over and above others. The future of product code services is likely to be a popular one, and Express Data’s Plester suggested, we are likely to see multi vendor solutions: “As the IT industry becomes more complex (with virtualisation, with collaboration, with unified communications, we are coming in to a period where the complexity is being reasserted inside the IT industry) we can see in the future that a lot of these product code services will be cross vendor bundles and services”. At the end of the day, whatever the service or the product, we choose the service that best suits our needs and has our best interests at heart. As Rosenberg of Datasor put it, at the risk of sounding touchy-feely, “the ideal partnership is one where everyone feels good”.   

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