In the Driver's Seat
Seek Larger Contract Roles
In response to market demand, distributors are bringing value-added services
to the table
By Heather B. Hayes
No longer content to be silent subcontractors, distributors in the federal market are becoming proactive in their relationships with integrators and resellers. "We want to be true partners in the procurement process," said Steve Marcus, vice president for services and sales support at Dallas-based CompuCom Systems.
"We want to be able to stand with an integrator on equal footing and work to ensure that the end user's requirements are fulfilled," he said.
Traditionally, distributors were looked to for their ability to stock and ship products efficiently. Today, however, they are bringing value-added services to the table, such as configuration and staging of desktop computers, presales and post-award technical support, integration assistance and, in some instances, innovative financial programs.
Of course, all of this comes not on a whim but in response to market demand. Time was, federal agencies preferred to buy direct from the manufacturer. Then, with the advent of open systems and networking, they began to buy their products through integrators.
"The goal of any reputable distributor is never to sell to an end user. Period," said Curt Cornell, director of the government division for Ingram Micro Inc.
Now, said Curt Cornell, director of the government division for Ingram Micro Inc., Santa Ana, Calif., the wealth and increasing complexity of products and enterprisewide installations have created the need for a buffer role between manufacturer and integrator, one that can assist with the special nuances of different products and systems. What's more, thanks to procurement reform, integrators now must compete in a market that is more commercial in nature, increasingly crowded with vendors and rife with contract vehicles that are governmentwide and broad in product scope.
Integrators can no longer devote the bulk of their resources to staying on top of the technical nature of each and every product, and they certainly can't afford - nor should they even desire - to remain in the warehousing business. In fact, the opportunities for distributors are tremendous, industry experts noted, but only for those companies astute enough to offer more value than just drop-shipping products.
"There are so many contract vehicles and, obviously, no one integrator can do everything," said Steve Martin, group vice president for Unisys Global Customer Services, a systems integrator with headquarters in Blue Bell, Pa. "It's a real challenge trying to be as cost-effective and cost-efficient as you can, so you can be successful in selling off whatever contract vehicle you have at a profit."
As a result, systems integrators are downsizing their staffs "to the point that they need sources of supply that will provide them with more than just the product," explained Joe Vartabedian, president and general manager of Promark Technology East, a distributor based in Laurel, Md. "They need someone who can help take responsibility for technical and integration issues."
And systems integrators are just now beginning to recognize that there are, indeed, practical cost and logistical advantages gained when products are delivered through a third-party distributor rather than directly from the manufacturer. "I think that we bring business efficiencies versus bringing a burden to the industry," stated Cornell. "We're here to assist integrators in their business of selling to the end users. And basically what we're hearing is 'help us cut costs, help us be more efficient."
Paul C. Snyder of Comstor said there's fear among resellers that distributors will skip over them and sell directly to end users.
Another reason distributors are coming to the aid of systems integrators is a bit more self-serving, however. There is fear among federal resellers, said Paul C. Snyder, vice president of government programs for Comstor, a Chantilly, Va.-based supplier of microcomputer products, that distributors will begin leapfrogging them and directly bargaining their discounted prices with end users.
Such a betrayal would cause serious friction between the two sectors, and most distributors are only too willing to avoid even the appearance of impropriety. "Putting these tools in place to make it easier for our customers to sell to the end user is a show of faith on our part that we're not planning on showing up on government buys," he explained. "The goal of any reputable distributor," Cornell emphasized, "is never to sell to an end user. Period."
One of the few companies that has been able to successfully wear both hats is Chantilly, Va.-based Government Technology Services Inc. - but only because it was established first as a reseller and then a distributor. The company estimates that between 15 and 20 percent of its business involves leveraging its knowledge in the government market and its resources to better enable integrators and other resellers to sell to end users.
But value-added services underpin their efforts. For example, the company authorizes its reseller customers to sell from its GSA schedules, a service that saves them a great deal of front-end expense and legwork.
For GTSI, the effort is purely a sideline, said president and CEO Dendy Young. "For us, it's a customer service to help out our partners," he said. "Integrators are not set up to handle the tremendous volume of orders and the tremendous number of products that are out there, and we are. That's our business."
Programs and Pilots
To successfully partner with systems integrators, progressive distributors are relying on time-honored strategies, as well as new and innovative programs. Service today begins right at the beginning of the procurement process.
Ingram Micro, for instance, offers proposal assistance by identifying appropriate products that meet end user requirements, determining product pricing, researching all the compliance and integration issues involved and pulling together all the required paperwork, such as marketing slicks, technical data sheets and trade agreement certifications. "We do all that for the integrator, which significantly reduces their bid and proposal costs on the front end," explained Cornell.
Vartabedian notes that demo support is
another important presale need. "On past [indefinite-delivery, indefinite-quantity] contracts, there was a limited amount of product, but today there are so many products listed that integrators can't possibly know what the customer is going to buy, much less stock it all," he said. "So an integrator is looking to an integrator to supply those demos."
On the fulfillment side, distributors are offering obvious efficiencies such as quick-
response price quotations and same-day shipment and delivery services, but one of the more trendy enterprises right now is the pervasiveness of configuration centers to help manage the desktop. Customizing hardware and installing software was once an integrator's domain, but they are much more willing to outsource this task to distributors. Marcus notes that this demand will soon progress to involve not just configuring computers that are already manufactured, but actually assembling the box on behalf of the manufacturer to meet a customer's exact specifications. In fact, GTSI is already receiving just the shell of the computer and installing hardware components on site.
In a powerful view of the distributor/integrator partnership of the near future, CompuCom recently teamed with Unisys to perform configuration and staging for all its contracts, including the recently awarded Social Security Administration's Intelligent Workstation/Local Area Network program to deploy more than 1,500 Windows NT LANs, 56,000 desktop computers and 2,500 laptops. It is worth $280 million over seven years. CompuCom configures the software and operating systems at its advanced configuration center before testing and shipping the LANs to SSA sites around the country. Marcus notes that the company is turning out 75 systems each week.
Explained Unisys' Martin, who coordinated the partnership, "Configuration and staging is a relatively low margin/high investment area that we have done in the past, but quite frankly it's not one of our core competencies. But it is very critical for a fast, smooth, less painful installation - a situation that makes the client happy and reduces our cost. So it is crucial that it's done properly, and we felt that CompuCom was particularly skilled in this area."
Ingram Micro is providing much of the same service in its teaming arrangement with Boeing Co., Seattle, on the Army Reserve Component Automation System program. For this, the firm will eventually deliver 60,000 configured PCs to hundreds of Army Reserve and National Guard sites. Cornell notes he anticipates demand to grow markedly in the near future, not only from integrators working in the federal market but those setting their sights on the massive state and local market. As a result, the company has plans to build a third configuration facility.
In the Driver's Seat
When it comes to partnering with integrators, distributors note that they are especially picky. Their services are not available on demand; teaming agreements are largely contingent on the integrator's business philosophy, past performance and financial viability.
"It's important we deal with reputable companies that are delivering some type of value to the government," explained Bill Shafley, vice president of marketing for GTSI. "Because as we deal with them and supply products to them, we become part of the whole equation. Our reputation becomes tied to how that product is being delivered to the end user. We want to make sure that we're working with integrators who can fulfill on the delivery of that product in a timely fashion and according to the means that the government has dictated."
Marcus agreed, adding, "You want someone who's a good cultural fit with your company, who has the same desire to be successful with the customer."