Mike Jones: Reseller origins give CCD competitive edge

Arriving at Computacenter’s head office is close to how it would feel pitching up in front of the campus of a major US...

Arriving at Computacenter’s head office is close to how it would feel pitching up in front of the campus of a major US corporation. There’s a lot of glass and steel, a lake — with the obligatory fountains — a restaurant block; it’s all there, just as you’d imagine it. It’s big and it’s modern. And it’s in Hatfield.

Critics might liken the buildings to big grey boxes punctuated by glass but, given Computacenter’s reputation as the largest box-shifter in the UK, that might not be taken as an all-together disparaging reference by the people working in them. Mike Jones, Computacenter’s director of direct services, has a corner office that looks out over what are still green fields, although how long they will remain so is another question.

Among his responsibilities is CCD, the distribution part of Computacenter. The business, which also includes Unix specialist Metrologie — bought from the receivers in November 1999 — has a turnover of in excess of £250m, according to Jones. That’s pretty significant any way you look at it. So it’s strange that there’s only one reference to CCD in Computacenter’s annual report for 1999 (and that’s in connection with the acquisition of Metrologie).

Conspiracy theorists might think Computacenter is somehow reluctant to promote the existence of its distribution activity. They might argue that the reseller’s reluctance is due to the impression that it won’t play too well with City analysts keen to see businesses such as Computacenter marching down the services route. But that’s conspiracy theorists for you.

What cannot be disputed is that CCD, unlike most of its broadline distribution rivals, is not the central part of the overall business. Computacenter’s primary focus is as a reseller that also happens to have a distribution operation. In this regard, it’s very similar to rival Specialist Computer Holdings, which has a reseller business, SCC, and two distribution operations, ETC and Interchange.

But it’s hardly surprising, given their origins. Computacenter Distribution, as it was then, began in 1987 (the same year, incidentally, as ETC) as an adjunct to the reseller operation, with an IBM contract. As Jones admits, in the early days it gave Computacenter scale and a competitive edge with its vendor partners. He also readily accepts that CCD is “not the core of the business [Computacenter] in terms of revenue. What we are is a significant part of the business”.

Like ETC, CCD has four major vendors — Compaq, Toshiba, IBM and Hewlett-Packard — although the Metrologie acquisition brought a few more, such as NEC, Philips and Boundless, along with the rights to Compaq’s Alpha platform. Jones describes the purchase of Metrologie as “a great opportunity for us. We were looking to grow the distribution business, but the resources to do it would have been pretty high. The demise of CHS Electronics [Metrologie’s parent company] gave us a great opportunity to take ten steps forward”.

Jones says there were a lot of “good people” that it was able to bring across and add on to the CCD sales force. The decision was taken to keep the Metrologie identity separate — “there was a lot of value in the name; it was perceived as a high value-add distributor”. It also made sense to maintain the separation for Metrologie resellers to give them “comfort in customer situations”.

Competency counts

He claims the key competence of the CCD business “is around predictability”. There are three main drivers behind this: people, the systems the business is connected and driven from and logistics. From the staffing point of view, Jones claims it has a high level of staff retention. He’s been with the company for 13 years and there are some who work for him who have been there even longer. In addition, CCD offers dedicated account management in a system similar to that offered by Computacenter to its corporate accounts. “There is full account management, ownership and responsibility. We have a high level of account managers — in excess of 40 — supported by 30 people in sales support.”

It does not run around vendor teams. All of the 800-1,000 customers are allocated to salespeople. There are few exceptions, although one of Metrologie’s volume partners has a new business team. In addition, there is a team targeting independent software vendors that is going out and creating opportunities. A storage team is also charged with generating storage business, particularly for Compaq, and passing it through to the account teams.

As for the systems used to run the business, they are common to Computacenter, and are based on a network of AS/400s. “The level of investment is clearly very high to Computacenter, which we benefit from,” Jones comments.

There is no separation of stock between CCD and Computacenter. There’s one stockholding and one warehouse. Which brings us to logistics. He doesn’t think distributors can fulfil everything for resellers, but he believes that as they are required to provide more services outside their existing businesses, CCD is better placed to exploit that shift. If dealers can’t cope with the volume or capabilities of any deals, “then come to us”.

He produces a slide which details the services CCD is able to offer reseller customers, each of which is a chargeable item, that it can draw on from Computacenter. It is very similar to the slide for services Computacenter can offer its corporate customers. Jones describes it as “a shopping list, a pick and mix. Because we’ve got the scale to do it, we can offer it at the right price. And you don’t have to have the whole thing.”

And he stresses the Computacenter guarantee of competency. “We’re not building something new just to offer to resellers. We’ve done all of this before.”

Man versus machine

Another thing CCD did reasonably early was set up a Web site, launching in 1997. It was a general Web browser for services and products, along with a customer price list, availability and stock ordering. It was primarily used for product availability enquiries. For placing orders and pricing negotiations, resellers tended to switch back to account managers. Key customers are now working on an e-link which allows them to place orders and track them, but Jones argues it is merely a tool for the account model CCD has today, rather than a replacement of the business process.

While Web sites provide information, cut down on the frequency of calls and the time necessary to handle them, he describes them as things that are supportive of the business relationship: “Fundamental to what we do is account management.”

He argues that human expertise is still required. “The system can say a lot of things, but it’s the interpretation, how does the information fit in with your system. It can only present the information it’s been given.” Experienced account managers can use their experience to give resellers realistic ideas of when the stock will arrive and help them to set the expectations of their customers. And unlike the distributor’s broadline rivals, he doesn’t believe the Web storefront approach, with its resultant lock-in of customers, is the right approach.

Winds of change

Asked what he thinks is the biggest threat in the future, Jones suggests it’s the danger of a sea-change in the way manufacturers approach the channel. He points to the situation 18 months ago when it looked likely that Compaq planned to take more and more of its business direct. “I believed it couldn’t happen at the time — and I turned out to be right. I’m encouraged by the messages coming out of Compaq now. It’s turning back to embrace the channel. All it succeeded in doing [before] was disappointing and aggravating the channel.”

He admits there’s a lack of predictability in the channel as a result. “The product changes I think we can cope with, it’s just the change in the structure and basis of the channel.”

But he stresses that whatever changes may happen, CCD can cope with them: “It’s a scalable business.”

Are hybrids the future?

Hybrids such as CCD and ETC have come in for some stick from trade-only distributors in the past because of the potential for creating channel conflict, a line of attack also taken most recently by Simon Welch, group marketing manager at Clarity Technology, when responding to the news that CCD was considering applying for Sun distribution status. He argued last week that Sun VARs often came into competition with Computacenter — which has a Sun reseller business — making it difficult for the distribution arm to win over customers.

But Jones argues that some of CCD’s key strengths lie in its Computacenter roots, such as logistics, systems of scale and the competency to deal with the corporate market. “It’s a massively positive point that we can draw on that resource. As the distribution model evolves to more service provision and some outsourcing activities — not the whole show, because I don’t think that’s practical — we have a skill set that is repeatable and scalable.” While the core of CCD’s business is in its technical capabilities and sales and marketing, it is “backed up by a massive proven resource to enable us to fulfil. It makes our business infinitely scalable”.

And he stresses that CCD is not a standalone business; it’s intertwined with Computacenter, so it isn’t something the reseller could sell off easily. “You might have a fabulous right arm,” he says, “but you wouldn’t chop it off and leave it on its own.”

And as for those who complain that businesses such as ETC and CCD are distorting vendors’ distribution policies — the UK is probably one of the only major markets where hybrids exist — by making it difficult to standardise on trade-only partners, Jones replies: “It’s disruptive, but I think there’s a lot to be said for the position ETC and ourselves have got to. There’s a clear success in the model we employ.”

He adds, rather cheekily, in words that are bound to irritate his broadliner rivals: “Maybe the right model is the hybrid model.” And as for those who live in hope that the vendors might one day bite the bullet and axe hybrids, he says: “It will be difficult to do given the market share we and ETC have. And the value we add in terms of supporting the channel is quite high too.”

As if that wasn’t bad enough, like ETC, CCD is also considering exporting the hybrid model and introducing something similar in France on the back of Computacenter France. If you suggest that the last thing vendors might like to see is more hybrids in other territories, Jones answers: “It’s for us to argue that case with the manufacturers. But as [we’re from] Computacenter, they’re keen to listen — we’ve got an advantage there. It’s not like we’re a standing start distributor — we’ve got proven logistics and existing relationships with vendors.”

The only straw of comfort for broadline rivals might be drawn from the fact that CCD is not actively pursuing new product franchises, with the possible exception of Sun. “I’m more or less comfortable with the product set we have today. I can guarantee service levels — if we get too broad, we take that away.” Getting too broad is not something Jones wants to do. Having a focused product set means “the business is driven around a high level of competence and predominantly around the Computacenter product set. There’s none of the exposure in trying to be a broadbased distributor”.

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