Selling to the IT industry

IT customers are tough customers, say local distributors.

Selling to fellow IT companies puts a sales person in the hot seat. IT customers are knowledgeable, demanding, and know exactly what the margins should be. They also know where to find loopholes to avoid having to buy anything at all, say distributors working in the sector.

Simon Campbell-Young, CEO of Phoenix Distribution, says his company regularly sells to IT companies. He sees IT companies as ideal clients: “For us, the perfect customer is someone who understands their own customer well and has a high degree of technical knowledge. This knowledge benefits us from a sales perspective, since we don’t need to explain why they need the solution and there are seldom unrealistic expectations around what it can deliver. The IT-based customer understands acutely why they need the solution, to the point that often they approach us, rather than the other way around.”

“Overall, IT customers are tough customers, though,” he adds. Since IT firms already operate in the IT space, they’re well aware of what the technology costs and what the margins should be. Says Campbell-Young: “With an educated customer working in the same industry, you’re constantly having to justify and quantify why the price is X and not Y and why your margin should be X and not Y. They want you to justify the value-added proposition that you bring. In our case, this might be providing pre-configuration services, advising them on the architecture or providing technical support services. The challenge here is deploying the right skillsets and offering something beyond what the customer has the capability to do in-house.”

Ice to Eskimos

Depending on your line of business, it may be pointless to try and sell to IT companies.

Rob Brown, CEO of security solutions reseller DRS, says his company does very little selling into the IT sector. “A lot of IT companies seem to think they can do this stuff themselves. They buy the software from a distributor and install it themselves, since they have the skills in-house.  

“Unless you have something different to offer, like a service desk or a SAP or accounting system, most IT companies are well equipped to handle procurement, integration and management of the solution themselves.

“For security software, most companies do their own IT procurement, installation and management. They’re not receptive to buying it from a channel player when they could buy it from the distributor, and naturally they want to save on the margin. Similarly, I don’t get someone in to manage my Microsoft infrastructure – I manage it myself. We do buy some things like service desk and accounting systems from other companies, but for everything else, we arrange our own discounts from vendors and install it ourselves.”

Brown says that as a knowledgeable customer himself, he expects serious know-how from IT companies selling solutions into his company. “I interrogate things like support – we have our own tech guys, so the company selling us a solution would have to send very experienced techies to implement it properly.”

Exploiting loopholes

Pierre Louw, national sales manager at Netxactics, says selling to the IT industry is difficult at best.  “Being a distributor of IT products means most of our partners are IT companies. Our partners in turn sell our products on to their end-users who predominantly plays in the mid to large market segment,” he says. “Potentially big buyers are often part of a conglomerate of companies who buy from other companies within the group; or else they are multinationals whose procurement policies are dictated by head office policy.”

Conglomerates have negotiating muscle when it comes to large scale procurement, and may buy solutions on behalf of the entire group. A local office of a multinational wouldn’t reinvent the wheel and would simply push down the globally agreed contract, Louw says.

Smaller businesses and channel players are a different story, he says. Any vendor or distributor selling directly to a channel partner is confronted with the challenge that a channel partner may have to show allegiance to multiple vendors and distributors, and spread its IT procurement among all of them.

In the case of a sole distributor, channel partners and smaller players looking for a particular solution must go directly to the distributor holding the product rights. But even in this scenario, there are ways around actually buying the solution, he says.

“For example, if a local IT company wants a certain product, they can’t go looking for it directly. But they can come to us and apply to become a reseller of our products, after which they can buy at a reseller price. With certain products, we offer resellers a product for free to use within their own environment. Sometimes, we find a company using this opportunity to get the product at low – or no – cost to themselves, and then they don’t push it down the channel. You could probably run trial licences for years with the same product from different distributors and never actually pay for the product.  It’s unethical, but it’s a loophole that some businesses use to save a great deal of money. IT companies know this and they’re well aware of ways to avoid costs on their own IT infrastructure.”

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