As IT distributors strive to find new ways of creating value-add for resellers, the developments at Ideal Hardware in the past year can only be described as drastic by any measure.
Last June, Ideal issued a profit warning which prompted a share price slump and a massive restructuring operation with a new board of directors. By this time, Ideal's holding company, InterX, was well on the way to establishing a fresh strategic direction for the distributor. So last June, IT Network was launched, an online infomediary offering corporate buyers a tool that allows them to compare a range of products.
An Ideal situation?
In November, when it was announced that InterX was looking to sell Ideal - a firm that had got itself back on track, was delivering value to resellers and by distribution standards was turning in a decent profit - the industry's reaction was not one of surprise, but of inevitability. Even so, the speed of the transition has been remarkable.
For a company to actively seek to offload its cash-cow - its only source of profit, in fact - so it can solely focus on improving the value of an unprofitable and unproven business, is testament to the confidence of the InterX board, and in particular its chief executive, James Wickes.
Just look at InterX's share price. Even taking into account the frenzy surrounding internet-related stocks at present, the rise is remarkable for a business that was experiencing structural problems less than a year ago. But of all the people to convince, InterX has focused almost exclusively on the only group that matters - the City.
"People are very canny and can see how we have metamorphosed from a distribution business into an information business," said Wickes.
In terms of running a successful business, Wickes has taken his lead from management guru Charles Handy, who uses the theory of the Sigmoid Curve to emphasise the necessity of a business to be able to predict changes in the market, and be in a position to react quickly to those changes.
The transformation of InterX is practically a blueprint of Handy's theory, as it stresses the need to think about the next business cycle when the current business is at its peak. In the space of a year, the heart and soul of the business is on the verge of being sold; selling hardware just doesn't fit in with the direction of InterX as a vendor of information.
Striving for success
Wickes is regarded in the industry as something of a maverick, although he does not have a Midas touch; the questionable success of the private satellite TV network for resellers (from which IT Network in its current iteration is derived) in the mid-1990s are testament to that. But Wickes's success is down to combination of his strong work ethic and the fact that he totally believes in what he is doing.
Having rubbed off on the City, Wickes's conviction has also helped to bring some of the UK's most experienced IT executives onto InterX's board. When InterX bought Cromwell for £226m last month, it recruited Robert Bruce, formerly head of sales at Cromwell rival Broadvision, as its chief executive, and Philip Crawford, who is also president of EDS International and former managing director of Oracle UK, as part-time chairman.
These appointments followed in the wake of Rob Wirszycz, former director of global alliances at EDS, being appointed as chief executive at IT Network.
Wickes said he was "flattered" by Wirszycz's arrival, but as the head of IT Network, Wirszycz has a major task on his hands. He said he had come back to the channel because EDS lacked the edge that made every decision a potential make or break for the business. IT Network has been slow to take off, has lacked marketing funds and a lot of work needs to be done to push its message - and its value - to both corporate buyers and resellers.
IT Network's announcement two weeks ago that it is encouraging all its 4500 registered resellers to carry banners on their websites linking users straight to the IT Network product comparator, which so far carries about 10,000 product specifications, is certainly a start. However, Wirszycz admits this assumes that reseller websites are capable of handling large volumes of traffic. He also concedes that the wide range of products carried on IT Network may be too broad for some resellers. How many resellers would be willing to risk losing a sales lead because they have passed a potential customer to a rival with a more extensive portfolio of services?
Wirszycz's task is to convince IT Network resellers that rather than having an IT Network banner as 'just another link' on their sites, it should be viewed as a tool that can generate sales leads. This is also crucial from a vendor's point of view, as vendors currently provide the most revenue to IT Network through advertising and the use of micro sites. This is where its Bladerunner software, purchased as part of the Cromwell deal, could prove to be crucial.
Bladerunner is a web application platform technology that provides the technical infrastructure and the software components necessary to conduct business over the internet. As well as powering IT Network, Bladerunner is also the basis of Ideal Hardware's ecommerce system, Boris.
Wirszycz claimed that the preference information gleaned from monitoring activity on IT Network will be passed on to resellers, allowing them to improve their customer service.
A big impression
Bladerunner not only monitors the number of page impressions on a site, but also records a user's progression through a site, taking details such as which products are compared, preferred manufacturers and preferred specifications. Wirszycz said a case study by IT Network on the notebook market using Bladerunner had produced some interesting conclusions. A key finding was that the most searched criteria of a notebook was its processor speed. Weight is the most rarely specified attribute, suggesting a shift towards corporates replacing PCs with laptops. Spotting such trends early on could prove invaluable to all companies in the supply chain.
Bladerunner is clearly the real value of IT Network, and will be the basis of its drive into other niche markets, with the pharmaceutical and financial services sectors outlined as initial targets. The acquisition of pharmaceutical and health-related portal Pharm Web earlier this month for £20m proves it is serious about quickly taking Bladerunner to key markets.
The final transformation at InterX will come at its extraordinary general meeting on 6 April, when it expects to be in advanced negotiations with a buyer for Ideal. Then the fun will really start.
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