Reseller's Sales Sparkle With IRS Deal

By Richard McCaffery, Staff WriterWhen Gary Sorkin and three co-founders started ComTeq Federal Inc. in 1994, they didn't expect to be shooting for $100 million in sales in their sixth year of operation.But the Rockville, Md., reseller is well on its way to exceeding that mark, having eclipsed $20 million in sales just 45 days into the new year, company officials said."We are booming," said Sorkin, ComTeq's 51-year-old president. The company, which sells PCs, servers, related hardware, storage equipment and software, has 50 employees, but Sorkin plans to hire up to 15 more in 1999. Right now, he is looking for managers to handle a recent partnership with Hewlett-Packard and to lead ComTeq's electronic commerce push. The company's revenues have bolted from $15.8 million in 1994 to $63.4 million in 1998, and its profits are growing even faster, said Sorkin, who declined to provide details.Driving the growth is what could be ComTeq's most lucrative blanket purchase agreement ever, a four-year deal with the Internal Revenue Service worth up to $60 million. ComTeq has teamed with Micron Electronics Inc. of Nampa, Idaho, a company that's had great success selling computers directly to end users, to provide computers to IRS field auditors. The partnership, formed when the BPA was announced in October 1998, underscores a little-known fact outside the sales channel: Direct sales companies aren't 100 percent direct. Many will sell computers through resellers if that's what the customer wants. "ComTeq understands the customer," said Ron Clevenger, inside sales director at Micron Government Computer Systems. "They have a very good presence in the Washington, D.C., area and work very well with our staff to promote the products."As for the direct model, Clevenger said it's all about making customers comfortable. "We recognize there's a tremendous opportunity to do business directly and indirectly," he said. "We've structured the business to leverage both models. Our philosophy is to let the customer vote."Four teams have blanket purchase agreements to supply products to the IRS, according to Dan McLaughlin, branch chief of department systems at the IRS. They are: *ComTeq and Micron; *Government Technology Services Inc. of Chantilly, Va., and Compaq Computer Corp. of Houston; *IntelliSys Technology Corp. of Fairfax, Va., and Dell Computer Corp. of Round Rock, Texas; *Presidio Corp. of Lanham, Md., and IBM Corp. of Armonk, N.Y.McLaughlin said the Treasury Department, which oversees the IRS, is managed as a marketplace. "There's a lot of competition there, so the prices are down very low," he said.ComTeq won the BPA based on its past performance, including delivery times and customer satisfaction, McLaughlin said. As part of the IRS deal, ComTeq is installing proprietary IRS software on the Micron computers and adding security features to the microchips, Sorkin said. Under the BPA, ComTeq delivered more than $17 million worth of equipment — 6,000 machines — to 29 locations in 60 days. The contract is open to other buyers within the Treasury Department, according to ComTeq. Along with the IRS deal, ComTeq sells products to the Federal Energy Regulatory Commission, NASA, the U.S. Memorial Holocaust Museum, the Navy and the National Institutes of Health. Sorkin's goal this year is to win as many large BPAs as possible and to Web-enable ComTeq's business software.The privately held reseller is blossoming as many of its peers struggle. Squeezed by low margins and pressure from direct sales companies like Micron and Dell, resellers can no longer make a living just shipping boxes.Sorkin, a former senior vice president in charge of federal business at CompuCom Systems Inc., said he knew this when that company decided to sell ComTeq in 1994. At CompuCom, Sorkin helped revamp the company's federal sales model, cutting costs and improving efficiency by centralizing sales offices and relying more on computers.Earlier, as an executive at Business Land Inc., a company bought in 1991 by Entex Information Services Inc., Sorkin said he worked on a project for Eastman Kodak Co. that ended up being one of corporate America's earliest outsourcing efforts. It was aimed at streamlining the delivery of computer systems to customers. Much of what Sorkin learned he brought to ComTeq, which does 90 percent of its business with the federal government."We knew if we were going to succeed, we would have to do things differently," Sorkin said. ComTeq focused on higher margin products, such as servers and storage products. It built partnerships with brand-name companies like Compaq Computer Corp., 3Com Corp. and Microsoft Corp. And it looked to find technology and services it could add to vendors' products.