Trust me I'm a reseller

Buying IT can put you at the mercy of suppliers if you don't do your homework. Nick Booth looks at how to avoid being stung

Buying IT can put you at the mercy of suppliers if you don't do your homework. Nick Booth looks at how to avoid being stung

Some years ago the IT buyer for a large UK police force visited a potential supplier to see an automated traffic management system in action that the force was thinking of ordering. Without going into details, this contract would have been a massive undertaking, given the complexity of dealing with the hundreds of police fleet vehicles and contractors, and thousands of payments made in fines. The supplier's pitch for business was headed by a desperately ambitious young man whose IT development skills were in inverse proportion to the scale of his unshakeable self-belief. Which is how he managed to carry off the feat of selling a system that was not just incomplete - it had not even been started.

Needless to say, the system's failings generated record levels of complaint. Still, this proved to be a major coup for the IT supplier, which managed to iron out all the glitches after a year or so, by which time a big US company was impressed enough to buy the firm.

Opinion on the likes of these IT suppliers divides people into two camps. There are those who maintain that we need more brave pioneers, with the chutzpah to "think outside the box" and follow their dreams. If the UK had more people like this, the argument runs, we would not be in terminal decline. This camp seems to be dominated by sales people, market development managers and people who like to think they can revolutionise business. They almost always work for companies that sell IT, whether it is their own or from a third party.

In the other camp are the pedants, typically IT managers, who like to get bogged down in the fine details - like whether a system works - before they buy anything. They insist on knowing whether, say, an IT system has any track record of achieving its stated targets, or whether the supplier has any previously satisfied customers.

Still, no one likes to think of themselves as a contributor to the already sclerotic business culture that exists in the UK. What do you work in IT for, if not to enable people to do their work? This is why many IT buyers in the UK are naturally disposed towards the more entrepreneurial suppliers, because we all like a trier. And besides, a small company will go out of its way to please you whereas a big supplier can take or leave your custom. Too often, the relationship with a major supplier reminds you how much more you need them than they need you.

All of which leads to the situation where, every year, thousands of IT buyers find themselves lamenting unfulfilled contracts, after using suppliers who have gone out of business before they managed to deliver the goods or services that have been paid for.

It is the IT buyer who has most to lose in these transactions. A former head of IT at a local authority obviously thought his local reseller had a persuasive case when it convinced him to buy Computer Associates' Unicenter management system from them. Having spent £150,000 on the system and related services, council auditors are now convinced that the system will never be used. An investigation into the purchase of the system, which has been going on for more than a year, has so far concluded that the head of IT had not engaged in any illegal activity, was not guilty of breaking any of the council's rules on procurement procedure, there was no evidence of corruption and there were no grounds for legal action. Nevertheless, the system is never going to be used and he is no longer working for the council.

"I believe he acted in good faith and in the honest belief he was securing value for money for this council," says Neil Childs, the district auditor. "I consider that at most he was guilty of misplaced enthusiasm and lack of judgement." Councillors are now trying to persuade the reseller to waive remaining payments, even though they have no legal right to expect this to happen.

It is an expensive business then - making a hasty decision about a supplier. What makes it even more dangerous is that suppliers may not be all they appear to be. All kinds of smoke and mirrors can be employed to give a professional veneer.

Alan McGibbon, founder of Scalable Networks, admits that two years ago, when trying to get his company off the ground, a little "kidology" was necessary. For example, it is relatively easy to get your company listed as a public listed company (PLC); all you need is two directors with a £50,000 stake each. Pitching for business as Scalable Networks PLC strengthened his hand enormously.

"People take you a lot more seriously if you're a PLC, it goes a long way to inspire confidence. It gives you a massive jump on the competition," says McGibbon.

Few would begrudge McGibbon this sleight of hand, because he has a long history of involvement in the industry, having spent decades with IT manufacturers such as Madge and Bay Networks.

Nevertheless, even he concedes that most IT buyers are putting themselves at risk because they do little research into the background of their suppliers. "I don't think any customer has ever come to visit us at our premises," he says. Not that they have anything to hide, he points out, "But it amazes me how rarely IT buyers do this and it's one of the simplest techniques for weeding out the dodgy suppliers."

Then again a visit to a supplier's premises will not always tell you more about their viability as a supplier. All kinds of fronting techniques are used to pump up the apparent size of a supplier. The most common deception involves borrowing offices.

If a company rents a room in a large managed office, they may want to convince visitors that they own the whole building. Some go as far as replacing the name on the front of the building with their own for the duration of a visit. Often the other inhabitants of the building are happy to go along with the deception, because they know the favour will be returned.

Another method of adding to the standing of a company is to add the names of famous entrepreneurs to the board of directors. A spokesman for one reseller confesses that the company had added the names of a number of prominent Lords to the board members listed on its headed notepaper, in an attempt to prove that there was a sound financial foundation to the company. This works because no-one ever checks and they do not expect the celebrated members to turn up for meetings. "We could have put Sir John Harvey Jones on there and got away with it," he said.

Another reseller admits that, in the early days, his company would hire students from the local technical college to bump up the head count at his company when a big client was due to visit. They were told to sit in a room and pretend to make calls for a couple of hours, simulating the type of activity you might expect to see if you walked past a call centre that deals with technical support enquiries.

James Henderson, head of IT at the University of Buckingham, says he is now an expert at spotting the puffed up resellers of questionable means. But even he concedes that he would have been taken in by the bogus support centre. "I've never heard of that one before and I'm pretty good at weeding out the dodgy suppliers," he says. "Having said that, most IT directors are fairly bright and busy people, and they're going to see right through any petty attempts at deception."

Maybe so but, being busy, IT directors probably do not have as much time to devote to detecting a deception as the supplier has to setting it up. It is common for manufacturers and distributors to help their sales partners (the resellers) to make a market by lending them their premises. So you may be impressed by the demonstration suite you visit in which you see, say, an enterprise resource planning system in action, but what you do not know is that the man demonstrating the product actually runs his operation from above a chip shop in Penge.

This is something that most IT buyers have an instinct for sniffing out, counters Henderson. IT managers or directors will hone their skills for assessing people in the endless staff interviews they have to sit in on. It is a question of refining that instinct for spotting a bogus sales person, he argues. "I dismiss anyone who's not bright or passionate about their subject," he says.

He outlines a list of criteria for whittling down potential suppliers. You have blown your chances of a contract with his department if you have any of the following: a flash car, an earring or a cheap suit. You will also be excluded if you are either late, or tired. There must be one salesman to talk business and one "techie". Presumably, an expensively-suited salesman, who lives within walking distance and has nothing else to do all day, would make his ideal supplier. Anyone else would be too busy, rich or likely to get caught in traffic.

The acid test is the visit to the supplier's premises, Henderson says. "The one thing they can't conceal is if the staff are happy. If there's a buzz about the place you know they'll be enthusiastic about fulfilling the contract."

The most obvious checks to make when assessing suppliers are the references. Sadly, many suppliers references tell little more than if the supplier wrote the reference themselves, which is frequently the case. But few customers follow up references anyway. Neither do they bother to check with a credit agency, which is a cheap and effective method of checking a supplier.

If reseller A proposes to sell you, say, £500,000 worth of kit, and Dun & Bradstreet tells you that A's credit worthiness ends at £20,000, that is a risk that is worth avoiding. Credit checks cost barely more than a deskjet printer cartridge and are infinitely more valuable.

Though manufacturers are known to collude with their channel in order to push sales, they will tell you where the supplier is in the general hierarchy. Do not be impressed by certificates and testimonials awarded to a reseller, says Harvey Virdee, a former IT director for manufacturer Girovend. "They give them away to anyone. Accreditation means nothing," he says. As a rule of thumb, if a reseller does not have its own account manager with a manufacturer, the manufacturer obviously does not rate them very highly.

"We need to support new companies, not least because they'll work so much harder to make a project work," says Virdee.

Before you can get a supplier who will work harder for you, you need to put some work in yourself. Otherwise, warns David Taylor at Certus, you are missing a great opportunity to forge powerful alliances with suppliers, that could yield much more productive work. "Alliances can enable real advantages for both parties, that can help us with our decision-making and cross-skilling."

But you have to work on it. "A supplier relationship isn't determined during the selection and negotiation phase, or when events take a turn for the worse, but during the mundane relationships in between. And at all levels, the success of the relationship is as much dependent on communication at the coal-face as it is on your relationship with the supplier's representative or leader," concludes Taylor, a former spokesman for the IT Director's Forum.

Still, it is easy for him to say that, he has never bought a pup from a phantom supplier.

Seven steps to screening suppliers
1.
Avoid dodgy dealers

2. Visit any potential supplier and, if possible, return unannounced

3. Check for happy staff. If morale is good, the staff are more likely to be motivated

4. Ask for and follow up references with customers

5. Check for manufacturer's accreditation and that the supplier accreditation is not tied to an engineer who has since left

6. Check credit rating with an agency

7. Enquire about the reseller with the IT supplier's account manager.

Read more on IT legislation and regulation

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