Let Your Storage Engineers: Design Integrate Sell
Engineers helped turn RedBridge Technologies, Inc. from an unprofitable hardware reseller into a profitable $30 million storage integration company.
Sometimes things that seem blatantly obvious can still take a while to sink in. A case in point is reseller margins. It's almost a no-brainer to say resellers would be better off selling a given dollar volume of equipment at a 20% to 30% margin, than selling twice that dollar volume at a 5% margin. Yet many resellers continue to move commodity products while struggling to turn a profit. RedBridge Technologies, Inc. (San Carlos, CA) was one of those companies. "We had one year when our sales reached $30 million," says Mike Chapman, director and VP of sales at RedBridge. "The problem is we weren't making money."
Chapman had nine years of experience in the reseller channel when he came to RedBridge, and he knew the company could not make a profit selling commodity items (e.g. servers). "The operational costs of selling low-margin items were more than what we were making selling the products," says Chapman. But to turn the company into a solutions provider and generate a profit required knowledge his sales staff did not possess. "Sales reps with no technological expertise can't intelligently recommend products and services to IT professionals," he says. "Storage technologies have gotten way too complex. It's tough for salespeople to stay abreast of all the new technologies that are coming out, much less the applications and different customer environments they have to deal with."
Changing The Paradigm
So Chapman made the decision that would turn his company around. He decided that instead of having 30 sales reps and 6 engineers traveling around the country making sales calls, he would have 5 or 6 sales reps and 20 to 30 engineers. "We have dedicated, hardworking salespeople," he says, "but they are no longer expected to master every technology. We now include an engineer or two in every sales meeting. The engineer's job is to explore the customer's environment and recommend the best solution."
The new focus required a fundamental change in the operations at RedBridge. The engineering department is no longer a designated profit and loss center. "We believe engineering is a cost of doing business," says Chapman. "Engineers understand customer needs and must therefore take part in every aspect of the sale. They design architectures to fit customer needs, insure compatibility of products and environments, and eventually install the solution. To do all this, the engineering department cannot turn a profit. Even if we could charge for the whole experience, it would not be enough for the department to make money."
Hire Engineers With UNIX Experience
Chapman's next chore was to hire more engineers. "I look for engineers who have at least three to five years of experience, not someone who is just out of training," says Chapman. He also requires his engineers to know at least two operating systems, typically one in the UNIX world and one outside it. He believes engineers with knowledge of just one operating system do not add a lot of value to the business anymore. He also insists that new engineers have experience in storage technologies and, more specifically, backup software.
Instead of hiring engineers who had only been in the reseller business, Chapman decided to bring in IT professionals from end user companies as well. "I wanted integrators who had taken a business plan and found the technology and infrastructure to support it," he says. "That's something you can't teach. The engineers we hire from end user companies have a better understanding of the needs of companies than people who have not worked in those environments."
Get Certified On Storage Technologies
Hiring educated people is one thing. Keeping all of them trained and certified on the latest technologies is another. "It's tough," admits Chapman. "Your sales reps schedule sales calls and installations that your engineers need to go on, but if Brocade comes out with a new switch and your engineers need to be certified on it, you have to find the time to get all of your people trained."
Chapman has found that the best way to get engineers trained is to certify a few of them on certain products, and then conduct cross-training in-house. Later, as time permits, the engineers who were cross-trained are sent through the certification program. "It's really kind of a juggling act," he says. "We make sure at least one guy is always trained on any new technology and play catch-up with everyone else when the opportunity presents itself." One RedBridge engineer might have expertise and certification on backup and storage, while another has certification on new switch technologies. Engineers going on sales calls are teamed up in such a way to make sure the needed expertise is always available to customers.
Cold Call To Find Pain Points
Of course, to get engineers in front of potential customers, RedBridge's sales reps still have to find prospects. "Initially, I thought we could go back to all of the customers we had sold servers to and offer them storage solutions that they had been buying from someone else," says Chapman. "But it was a lot tougher than I thought. Our customers had already labeled us server resellers, and they could not picture us providing storage solutions."
Chapman's only alternative was to make cold calls. He went to some of the vendors RedBridge had worked with and requested lists of end user companies that were not active accounts. "We took a bunch of those lists and cold called every company on them," he says. "I told our sales reps that their only job was to get our engineers in front of the customer." Using this technique, RedBridge engineers were soon involved in 10 to 20 appointments per week.
When calling end users, Chapman finds it best to get the company's CTO on the phone. After convincing the CTO that RedBridge has value to offer, the sales rep will ask for the appropriate IT person to contact. By the time that person is called, the rep will have already spoken to their boss, which makes scheduling a meeting easy. On that initial call, the RedBridge sales rep will identify the company's IT pain points. "Identifying a pain point and proposing a solution is the easiest way to schedule a meeting with a customer," says Chapman. "If we can't find any pain points, we offer to send over one of our engineers for a day or two to talk to them about their environment. There is no charge for the consultation. If that approach doesn't work, the final option is to bring up a new technology, such as disk-to-disk backup, and see if there is any interest. One of these pitches will result in an appointment 90% of the time."
RedBridge's goal is to be independent and unbiased on the products they sell. Although it can be tough for a salesperson to sell that concept, Chapman believes getting an engineer in front of the customer will take care of the sale. "Our engineers will talk to their engineers and, using a white board, will diagram the entire environment," he says. "The demonstration shows customers that RedBridge understands their technologies and their environment, and that makes us look like a partner. From there the sale is easy."
Thus far the engineering focus seems to be working. RedBridge has made money in both the first and second quarters of this year, an amazing turnaround for a company that never made a profit for two consecutive quarters. The new philosophy has also enabled RedBridge to sell into huge accounts like MSN Hotmail and EVault. Although revenue will be down this year, Chapman expects his company to be two to three times more profitable than last year. "I can proudly say that we finally get it," he says. "The value VARs provide today is in their solutions and expertise, not the product price or availability. To be profitable, resellers need engineers that can sell that expertise."