Resellers go back to school

Selling computer equipment and technologies to schools and colleges is viewed by many resellers in the same way that many people see teaching: a vocation that is OK to be involved in, as long as you feel passionate about it and do not want to make money.

Customers in the education market are widely seen as highly price-sensitive, not interested in anything that might earn the supplier a margin. They are turned off by value-added services, and generally cold to what technology can really offer. In other words, the sort of customer that you would want only if you were into self-flagellation or had some particularly bad karma to work off.

And yet, education rides as high as ever in any list of niche markets served by the indirect channel. There must be something in it for those few who can tolerate its shortcomings, but what?

The pulses of many resellers must have quickened on 1 May 1997. On that day, a Labour government committed to 'education, education, education' came into power. If there was ever a buck to be made, this was surely the time.

When the government set up the National Grid for Learning (NGfL), and Chancellor Gordon Brown committed almost £1bn to the provision of hardware and training to schools and colleges, this hope seemed fully borne out.

After all, with the arguable exception of defence, when had any government ever put up this much cash for technology investment? There was every reason to suppose that at least some of this torrent of cash would wind up as reseller turnover.

However, when Computer Reseller News questioned a cross-section of resellers at the time of Brown's bonanza announcement, the response was mixed. It seemed to float between "none of this money will come our way, because it never does", and "this is tremendous news all round, and will really open up the market".

Eighteen months on, and feelings are still mixed. There are few companies closer to the education market than RM (formerly Research Machines). As the biggest UK supplier of PCs to the education sector, it often finds itself being approached by the Department for Education and Employment over matters of policy.

Phil Hemmings, marketing director at RM, says: "Large amounts of government money have gone in, and been spent. I would estimate that between 30 and 40 per cent more money was spent by schools on IT in the academic year to September 1999 compared with the previous year, making the market worth about £350m a year. You notice a real difference."

Hemmings believes the extra money has led a lot of companies to try out the market for the first time. "Many resellers and system builders have been getting into the market, something they had never considered before. We have retained our share and grown with the market, but there are now lots of small companies out there addressing it as well, mostly on a localised basis," he says.

Primary colours
Hemmings has identified some important trends within the market that have emerged in the past year or two. Secondary schools have been fairly sophisticated IT users for a number of years now, investing in networking infrastructure and web tools, he says. "They are now being joined by primary schools, who were always standalone users. Networks are simply the way people do things now in education."

This is partly to allow web access, an integral tenet of the NGfL, which would otherwise be delivered by a confusing mish mash of switched phone lines, says Hemmings.

Robert Royce, sales director at reseller Sanderson MSL, also has a positive view. "Education is a market of huge potential. Some of the promises that followed the last election have been fulfilled. We have certainly experienced good growth."

Royce claims Sanderson addresses the whole education spectrum, right from universities to primary schools. "Even the youngest pupils are getting the best hardware running all the latest applications."

He believes lower-than-expected margins in the corporate sector, thanks to preferential licensing deals from software vendors, has put many resellers off education. "We are active in supplying the public sector, health, police and corporate markets as well as education, and we can expect two or three points more margin on all of those in comparison. But of our £48m annual software turnover, about £15m is education software. It's still business worth going for," he says.

The complexity of software licensing for schools is one good reason why the bulk of education resellers are specialists, said Royce. "You need to know your way around the different schemes, and to know what you're talking about. We've simplified things for ourselves to an extent by setting up a website for schools to order off. I expect this business to grow," he said.

The school of hard knocks
But not everyone shares a sense of post-NGfL uplift. NE Computing was already speculatively dipping its toe into education for the first time back in 1998, when the NGfL was announced, hoping that it would prove a fertile hunting ground for sales of its thin-client solutions. Jonathan Eyres, managing director at the reseller, says: "Education came and went for us, and now we're addressing our core market of the top 100 UK corporates. At the time, thin clients seemed an ideal solution for schools. But there was a perception that fat clients offered better value."

Eyres has long since concluded that thin client is a services business. "Once you start talking services, you're alienating many in education," he says. "They want a solution they can buy in and then wave you goodbye. "Eyre says NE's other problem was the want of a track record. "We really had no education-specific products, just some network computing Devices terminals. I think you need to be a bit of a specialist to make headway in education."

There were other resellers sceptical about NGfL benefits when they were announced, and remain so. Ian Brown, managing director at education reseller Entec, reserved judgement 18 months ago, saying: "My experience is that money like this is often handed out in an odd way. Some institutions that aren't expecting anything get a windfall, whereas others that need it more get nothing."

It is probably a fair assumption to say that more resellers have noticed a benefit from increased government investment in the past two years than those that have not. For resellers that have been incrementally successful, a question must surely lurk in the back of their minds: what if the well should dry up, or a new government stops the flow of cash?

Hemmings feels there is not too much to worry about. "There is still money filtering into the system from that first wave of government investment. I think a high standard of technology in schools is here to stay. Maybe investment will not keep increasing at 50 per cent per year as it has done for the past two, but it will keep moving forward," he says.

There will doubtless always be good reasons for most resellers to shun education. The volume of education business available has clearly risen, benefiting more companies committed to the sector as specialists than it has passed by. The market has also broadened beyond standalone desktops and basic applications.

The lack of margin compared with the corporate sector will be the sticking point for most sceptics, and in today's reseller channel, where profit can be hard to come by in any sector, who can begrudge them this view?

Conclusions

• The government's education promises and its subsequent financial commitment seemed to herald a great new dawn for audio/visual (AV) product resellers in the education sector. But opinion among resellers is divided about just how far-reaching the changes have really been.
• Margins may be tight in education, particularly in software licences, but there are large volumes of business to be won.
• IT in education is no longer just about cheap PCs linked over a simple market. Many of the system elements that you would find in a corporate network are a growing part of school investment. These include security, high-speed connections, web services and storage.
• The majority of AV product resellers that sell into the education market are specialists.
• In the future, educational spending on IT by the government might slow down, but it probably will not dry up totally.

What the future holds for resellers in education

IT in education is all about cheap PCs linked on a peer-to-peer network and running only the most basic software applications. Not really, says Ian Kilpatrick, managing director at distributor Wick Hill, which has been supplying resellers in the education market for 15 years.

Kilpatrick says the main product Wick Hill supplies to the education channel these days is SchoolMate from WatchGuard, essentially a firewall designed specially for schools and colleges. "Schools need to protect themselves from attacks, just like any business, particularly from their own kids, some of whom like nothing better than to try to bring the network down," he says.

One of the underlying reasons for interest in SchoolMate is its web blocker technology. "Teachers can use this to allow or disallow access to the internet according to the time of day or type of user," he says.

He says usually one school might take responsibility for the firewall, and three or four others might connect and get the benefit. "About half a day's consultancy is needed for each implementation, which is good business for our resellers."

Viruses are another reason for schools to invest in the right technology, says Kilpatrick. "Most schools have email now. But just think of the damage the 'I LoveYou' virus might wreak among people of that age. It must be every school's worst nightmare."

The next big wave
He pinpoints virtual private network (VPN) deployment in schools as the next big wave. "Interest is growing, even if sales haven't exactly gone through the roof. In education, there's a time delay where what you are selling now is out of last year's budget, and anything new won't be on the shopping list until next year. VPNs are ideal for schools, because you cut the phone costs out of connection time, providing security at the same time."

He feels voice over IP is a solution treated with caution by corporates, but tailor-made for schools. "For a school, saving 20 per cent on its phone bill is worth a scratchy line now and again." Asymmetric digital subscriber line (ADSL) is also a likely contender for school money next year, or the year after, he says.

Robert Royce, sales director at reseller Sanderson MSL, has another unlikely tip for future growth in the education sector: storage. "Schools are holding a lot of data these days, and they will find they need archiving and storage management."

Wap might be another education growth area of the future, says Phil Hemmings, marketing director at RM: "Schools may be obliged to embrace what pupils are carrying, and that's going to be Wap."