Resellers Hustle for Fed Year-End Dollars

Radio ads are touting trade-in deals for government legacy systems ... Busy federal contracting officers receive "survival kits" filled with snacks and supplies ... Airplanes pull advertising banners across the hazy Washington sky. Why are government resellers suddenly marketing themselves with such fervor? Because it's the end of the federal buying season when agencies rush to spend their discretionary dollars before the fiscal year closes Sept. 30 ? perhaps the most crucial selling period for government resellers.And with resellers now facing flat corporate and consumer sales, this year's government buying season is especially important to bottom lines.GTSI Corp., the largest reseller of computer hardware and software to the government, will typically experience five times the level of bookings in September as compared to January or February, said Dendy Young, chairman and chief executive officer of the Chantilly, Va.-based company."September always makes a major impact on third-quarter sales," said Larry Kirsch, senior vice president of CDW-G, the wholly owned government-focused subsidiary of reseller CDW Computer Centers Inc., Vernon Hills, Ill. ComTeq Federal Inc., Rockville, Md., is keeping its sales office open on Saturdays and even on Sunday the last weekend in September as well, said Gary Sorkin, president of ComTeq Federal, a wholly owned subsidiary of PC Connection Inc., Merrimack, N.H."We're optimistic for strong performance this September," he said.Aggressive marketing does pay off, said Brian Alexander, analyst with investment firm Raymond James and Associates, St. Petersburg, Fla. "Whatever company has exposure will pick up sales," he said. For example, Logicon FDC, a Greenbelt, Md., unit of Northrop Grumman Corp., Los Angeles, has stepped up its radio campaign touting trade-in value for telecom equipment. Both GTSI and ComTeq sent survival kits filled with candy and other supplies to contracting officers and other federal employees working the late nights and weekends getting budgets in order. "They were very well-received," said a GTSI spokesperson of the survival kits, adding that one agency office even called the sales office asking to be placed on next year's recipient list. Although no one expects government officials to purchase from a particular reseller because they saw a bus ad or received bags of goodies, such efforts help keep a company's name in front of its customers."As the [reseller] market becomes more commodity-based, companies will have to go to increasing lengths to make identities for themselves," said Ellen Zidar, manager of e-government services at Input Inc., a Vienna, Va.-based IT market research company.Perhaps the most enthusiastic branding effort, for this season anyway, comes from CDW-G. This company has covered Washington metro busses with ads, bought spots on the CNN and CNBC networks and even hired airplanes to fly around the D.C. area with banners touting the company. Such eagerness is not surprising, not only because CDW is a relatively new player in this space ? its government subsidiary was formed in 1998, though CDW sold to the government before that ? but also because CDW-G enjoys the financial backing of a healthy parent company, which last year touted $4 billion in sales. The company faces a challenge to shake customers loose from the largest provider in this space, GTSI, said Ray Bjorklund, vice president of consulting services for Federal Sources Inc., McLean, Va.Going up against GTSI is a "tough order," largely because the 18-year-old GTSI is dedicated solely to selling to the government space, he said.According to Input, GTSI has made $87 million in sales in General Services Administration schedule sales for fiscal 2001 up until Aug. 30. It was followed closely by CDW-G at $60 million. Other companies making inroads include MicroWarehouse Inc., Norwalk, Conn., with $39 million, World Wide Technology Inc., St. Louis, Mo., $38 million and ComTeq, $27 million. And GTSI, with $700 million in annual sales, will not easily cede its lead. "We think it's difficult for companies to come in and duplicate our level of long-term commitment," said GTSI's Young. Young said that there are peculiarities of serving the government market that commercially focused companies may not be equipped for. For instance, federal clients don't pay until everything is delivered and working to specifications, which involves a high level of service and flexibility in collections. Logistics software needs to handle multiple addressing and billing information for individual orders, something most logistics software can't do."It's a price game, but also one of customer responsiveness," Bjorklund said of the government reseller market. A reseller needs to do three things to successfully canvass a market ? run a Web-based buying service, keep a strong sales force in place and dedicate representatives to build relationships with individual agencies, he said.Companies are also carving out individual specialties. ComTeq does 75 percent of its sales in servers, storage and networking equipment, Sorkin said.GTSI has been focusing its efforts on larger solution sales and the more complex side of the hardware market: The company just earned Cisco Gold status, the highest certification that Cisco Systems Inc., San Jose, Calif., bestows on its partners.CDW-G's focus is on maintaining the next-day delivery standard and eager customer support that its parent company has become known for, Kirsch said.Of course, drawing attention with some creative marketing doesn't hurt either. Of the survival kits, Young said, "It's our way of saying 'We're here. We care. We understand that you're working late.' "