The technology industry has shifted sharply to consumer electronics such as smartphones, tablets and mobile applications—even as many analyst firms slash their PC forecasts. Today’s business travelers often leave their laptops at home, preferring to carry just a tablet and a smartphone.
The advent of mobility, consumer electronics and cloud computing in the enterprise is changing how the technology industry—and business in general—works. When any client device can access information in the cloud, why do we need PCs?
You may think that a company once known as Computer Discount Warehouse is worried about this trend, but that’s not the case. Instead, direct-market reseller CDW is experiencing strong product sales at the same time that it’s making inroads in the technology services business.
Now, with new CEO Thomas Richards at its helm, CDW plans to put more investment dollars into building up those services.
"There are a lot of opportunities for growth," Richards told eWEEK and Channel Insider. "There are opportunities in other services we can offer customers. The world of technology is about change—dynamic change."
CDW is on the right track with its services strategy, according to analyst firm Gartner. Vice President of Research Tiffani Bova told eWEEK and Channel Insider that direct resellers, much like IT distributors, are in an ideal position to serve as cloud services brokerages. They have the vendor relationships, the long lists of customers in markets that are interested in cloud computing and the capital to pull it all together.
"Cloud service brokerages will be the ideal role for direct marketers to consider while they continue to maintain their existing retail business and decide how to remain relevant in new delivery models as telcos and others move into those businesses," she said.
Richards joined CDW as president and COO in 2009, and was the heir apparent to then-CEO John Edwardson. In October, Richards moved into the top job.
Though Richards has spent his 33-year career in technology, many of those years were not at a PC maker or an IT distributor. In fact, he spent 19 of the early years of his career at a very different kind of company: Bell Atlantic, a local telecommunications carrier.
One might argue that Richards’ compute and telecommunications experience gives him the right combination to tackle an IT market that is changing to embrace services and managed services in addition to product resales. Richards pointed out that the convergence of compute and telecommunications has been going on for quite some time. He said that several older technologies, such as shared resources and virtual private networks, are the predecessors to modern services such as cloud computing and virtualization.
After becoming CEO, Richards immediately embarked on a reassessment of CDW’s strategy, looking to expand the company’s resources in IT services, cloud computing and mobility. Though he admitted to the reassessment, Richards downplayed it. He said that it’s been more of an evolution than a revolution, as the changes have been going on for quite some time.
Gartner’s Bova seems to agree. She said that CDW and other direct resellers, such as Insight and PC Mall, made initial moves in the services direction through acquisitions a few years back, with Insight buying Calence, PC Mall buying Wareforce and CDW buying Berbee. But those were just initial moves, she added, and none of the direct resellers has really taken the ball and run with it on managed services.
However, Bova pointed out that these resellers don’t necessarily have to switch over from product sales to service sales. "Direct marketers are highly tied to volume rebates, co-op funds and other incentives that manufacturers provide based on the large number of products they touch," she said. "They’ve been expanding that for a long time with close-to-product services such as support, maintenance and warranty."
Now these companies need to decide where they want to take their business. "What percentage of revenues do they want to have coming from different businesses?" she asked. "What do they want to be when they grow up?"
With the accelerated interest in and adoption of cloud services, it will become more and more important for the channel to invest in skills and capabilities that will ensure they can remain relevant in this new supply-chain model.
In fact, CDW has already hired close to 300 people this year, with most of them tied to sales or expanding service delivery capabilities in the cloud computing and mobility markets. CDW also resells Apple products, including iPads, so there’s money to be made in both sales and services around these devices, Richards said.
"We are clearly seeing more demand for iPads," he added. "It was pretty amazing to watch the growth go from zero to 100, so to speak, as iPads became part of what people bring to work."
Are tablets a fad? Not according to Richards, but the CEO does believe there are two distinct classes of users: individuals who consume information and ones who create it. Tablets are loved by people who consume information, he said. Maybe that’s why Richards leaves his iPad at home when he goes to the office and takes it with him only when he travels.
Clearly, there is still a reseller market for IT products. "Will the resale model go away any time soon? Absolutely not," Gartner’s Bova said. "They don’t need to go all the way over to the cloud." However, she added, if resellers want to take that direction, they are in a great position to do so with their existing real estate, data centers, SMB (small and midsize business) and enterprise relationships, as well as their vendor ties.
Building and maintaining customer relationships are essential to resellers. As Richards says: "If we had to solve an IT problem that required us to get 1,000 notebooks and asset tags, I don’t look at that as a reseller, but as somebody who could solve a problem for a customer. We have been—and still are—in the solutions business, whether it’s virtualization, audits or implementations."
Basically, Richards describes it as being in the position to provide whatever the customer needs. Kent State University is a prime example.
Though it was a customer of Berbee before CDW acquired that company, Kent State remains with CDW. CDW/Berbee, which has been managing that infrastructure for about five years, manages 6,000 Microsoft Exchange seats for the university, as well as the servers that run mission-critical operational tasks, such as payroll, human resources and student registration.
Kent State CIO Ed Mahon, who has visited CDW’s headquarters and data centers, has been impressed with the company’s execution. "We’ve built a system that is very reliable; it hardly ever goes down," he said. "When it does [go down], they are very quick at getting us back up and running."
Mahon, an advocate of cloud computing, wrote an article on alternative sourcing strategies for EDUCAUSE Review Magazine this past summer. In it, he pointed out that outsourcing day-to-day IT services frees up internal IT staff to focus on more strategic work such as development.
Mahon is now talking to CDW about deepening their engagement to achieve just that. "We are looking at the managed PC environment," he said. "It’s a way to drive down the total cost of ownership of providing PCs to staff.
"Today, we might purchase a computer and have someone spend a few hours configuring it. But CDW has automated the process. [The PC is] configured at the factory and automated with management integrated in the PC."
That’s the kind of valuable solution Richards is promoting. "We’re here to help customers take advantage of these great efficiencies, but implement them in a way that doesn’t drive their organizational cost structure significantly higher," he said.
It’s that philosophy—along with a defined customer service, feedback and assistance strategy—that won CDW the Forrester Research Voice of the Customer award in 2010. CDW was one of only three winners; the other two were Dell and American Express.
"CDW has implemented a disciplined approach to listening to customers on a regular basis and having processes in place to take action on what they hear," said Andrew McInnes, a customer experience analyst at Forrester.
For instance, the program includes surveying a large percentage of CDW’s customer base to get feedback on their experiences. Those survey responses, in turn, present the company with opportunities for follow-up.
In addition, CDW’s "VoC" (Voice of the Customer) platform generates "hot alerts" based on business rules programmed into the system, automatically routing issues to designated employees and tracking responsive actions to make sure adequate resolutions are reached, according to Forrester.
CDW uses its alerts for both service problems and sales leads—an approach that has paid off. In 2009 the system enabled the company to resolve thousands of service issues and generate millions of dollars in incremental revenue. And, as everyone in the industry is aware, 2009 was not a year known for high spending in the IT market.
CDW also customized its surveys to meet the needs of particular customers and employees. Surveys are tailored for both active, high-volume customers and inactive, low-value customers. The more engaged group receives more frequent and more detailed surveys.
In addition, employees at CDW receive different types of reports. For instance, executives receive high-level quarterly reports, while sales managers receive semi-annual reports on their direct employees that are timed to coincide with performance assessments.
CDW also provides incentives to employees to prioritize the customer experience. Account managers get feedback from their individual accounts, and they become eligible for promotions to senior or executive levels only when they achieve increasingly high customer satisfaction scores. Employees can also win various job perks—such as the privilege to work from home—based on whether they receive positive customer feedback.
Employees are the key to expanding CDW’s services footprint.
"We’ve got really talented people, and they are very entrepreneurial and competitive," Richards said. "We’ve been making incremental investments in employees to expand in those areas that we’ve been talking about."
With his plans to increase resources around services in cloud and mobility, Richards continues to push CDW forward.
"We’ve been on a pretty consistent march since the end of last year," he said, "and we will continue to expand service delivery and our sales organization as we go into next year. We are building a 2012 plan."