New Web Site Features May Expand GTSI's Reach

New Web Site Features May Expand GTSI's Reach

Dendy Young

By Nick Wakeman, Staff Writer

A revamped Web page is the latest weapon Government Technology Services Inc. is using to win over customers, reduce costs and build market share as it strives to bounce back from a string of unprofitable years in the mid-1990s.

GTSI, the largest reseller of computer products and services to the federal government, has long been a believer in using the Web to serve customers with its first Internet presence coming in 1993, said Dendy Young, chairman and chief executive of the Chantilly, Va.-based company.

The latest Web incarnation for GTSI includes features that allow manufacturers to set up their own subsite to sell through GTSI contracts. Government contracting offices can set up subsites as well. Different types of buyers, like credit card holders, are directed to services designed specifically for them.

The idea is to simplify how customers and suppliers interact with GTSI, but the Web also is a tool for GTSI to reduce costs, Young said.

"Clearly it cost us less to operate on the Web than it does to take orders face to face or over the telephone," he said.

But the relationships GTSI has formed through personal interaction with its customers will help the Web initiative, because trust is critical to getting customers to buy online, he said.

"Business is done between people," Young said.

Selling to the government, controlling costs and increasing profits margins is critical to resellers like GTSI, analysts said.

"The margins are so low in the reseller business that you have to be efficient in your operations," said William Loomis, managing director at the investment banking firm Legg Mason Wood Walker in Baltimore.

A net margin of 1 percent is considered great, he said. "That is just too slim a margin for anything to go wrong."

And GTSI knows what it is like when things go wrong. As government buying habits changed and manufacturers with direct models hit the government marketplace, GTSI faced some tough times, according to analysts.

In 1995, 1996 and 1997, the company failed to turn a profit. But in 1998, the company began to climb out of the cellar with the acquisition of the reselling unit of BTG Inc. of Fairfax, Va., and an improved bottom line. In 1998, the company had $605.8 million in revenue and net income of $2.3 million, compared to $486.3 million in revenue in 1997 and a loss of $5.1 million.

In 1999, revenue grew to $668.5 million and net income of $2.7 million. The company's stock has ranged from a high of $10.94 to a low of $2.44 in the past 12 months. On April 18, the stock was trading at $2.97.

The Web is an important part of the turnaround story at GTSI, Young said. "You have to have the ability to handle and work efficiently with your customers," he said. "That is what leads to growth and an improved bottom line."

Currently, less than 10 percent of GTSI's revenue is from business conducted over the Web. But many customers use the Web to shop, and then pick up the telephone and call their salespersons, said Betty Greene, director of GTSI.com.

Young said he expects that to change, though, as customers become more comfortable with buying over the Web.

"It is important to already be [on the Web] when that happens," Young said. "I think that there is good chance that this could be the year."

But if government customers get more comfortable buying from GTSI online, they also are going to get more comfortable buying from GTSI's competitors like Dell Computer Corp., said Thomas Meagher, a vice president with investment banking firm BB&T Capital Markets of Richmond.

"With so many contract vehicles and more manufacturers with the direct model, the [value-added resellers] just
get squeezed on all sides," he said. But GTSI has size to give it long-term stability, Meagher said.

Greene said that the new GTSI Web page reflects a lot of lessons learned from previous versions.

"The first lesson was that we had to simplify the look," she said. "The old site was too confusing. We tried to be all things to all people."

The new site has standardized navigation bars, and guides users according to the type of buyers they are, how they want to buy and whom they want to buy from. GTSI has more than 30 contracts representing more than 2,000 hardware and software vendors, so the new page also lists top sellers and pre-bundled packages.

"We want to help the customer understand what others are doing and then allow them to go deeper if they need to," she said.

In the works are extranet features that would allow GTSI's suppliers to access data on their sales through GTSI to look for trends and other business intelligence, Greene said.

Agency contract offices also can access data from GTSI
to discover what their agencies are buying and how it is being bought and find other information such as warranties, she said.

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