Selling Storage By The Book
$11 million VAR Neartek, Inc. generates repeat business and services revenue by providing customers with a storage infrastructure portfolio.
Years ago, when I was still in the financial services industry, I worked for a company that sold customers financial plans. Although we also sold stocks, bonds, mutual funds, and annuities, the plan itself was always the first pitch we made to a prospective client. The plan sold for around $500, a fraction of the revenue the company could earn from customers over time by managing their investments. So why the big push for it? "It's the leverage the plan provides," I was told. "Once you work with the customer putting the plan together, you become their personal investment consultant. You are the person they keep coming back to for all their investment needs."
It seems to me the plan could be successful in other industries as well. If a mechanic put together a binder containing everything the owner could possibly want to know about his car, few would consider taking it to another repair shop. And what about storage? A VAR could certainly prepare a book proving they are the most knowledgeable person regarding a customer's storage infrastructure. So could this philosophy also be applied in the storage industry as well?
If the experience of Neartek, Inc. (Lakeville, MA) is any indication, the answer is "yes." A few years ago Neartek's systems integration business developed a storage portfolio for its customers. The company calls this portfolio a run book, and Matthew Lanagan, VP of storage integration, admits the book was originated to get future service dollars and sales from customers.
"We align ourselves with customers that can give us annuity business," he says. "Around 60% to 70% of our revenue comes from services and additional hardware and software sales we make to existing customers. Therefore, it is critical that we build upon and strengthen the relationships we have in place. The run books we develop for customers allow us to do that."
Build A Storage Resource For Customers
Every customer Neartek performs a hardware or software installation for will receive a run book tailored to their environment. A Neartek project manager, who spends most of his time during the deployment at the customer site, creates the book. The book (a binder actually) discusses the solution that was installed and provides pertinent information about the customer's storage environment. "Customers find it very useful," says Lanagan. "It is a living document for those customers who choose to come back to us. We continually update the information in the book."
Work on the run book begins during the presales process. A Neartek salesperson will show a sample of the book to prospective clients and try to sell them on its benefits. However, Neartek will not start crafting the customer's actual book until a purchase order has been signed.
Storage Information The Customer Can Use
The first section of the run book contains basic administrative information, such as a summary of all of the people involved in the installation. Like a sticker the heating repairman slaps on your furnace, there is contact information for the key employees at Neartek, which the customer can use if there is a problem. Neartek also includes vendor contact information, equipment serial numbers, renewal dates, and customer numbers for maintenance.
Section two is a pre-engagement planning checklist. "This is where we assure the customer that the solution we designed will work as advertised," says Lanagan. To complete this section, Neartek must gather information about the customer's storage environment. This information includes layout of the environment, LAN characteristics, HBAs (host bus adapters), and other storage devices on the network. This information is used in the design of the storage solution. This section also contains details about the customer environment, including the host name, location of hardware, IP (Internet protocol) addresses, operating system revisions, and more. "Having this information documented helps our engineers ensure the hardware they are installing will interoperate with all of the hardware and software already installed," says Lanagan.
Detail The Work To Be Performed
It is important that both the vendor and the customer have a clear understanding of the work to be performed. Section three of the run book spells this out. This section is an agreement between the customer and vendor, detailing what tasks Neartek has committed to perform for the customer. "It ensures there are no surprises," says Lanagan.
Section four of the book ties into section three and is simply a detailed project plan with the anticipated times to perform each task. Time lines are set based on customer deadlines and expectations, and this section is a detailed time line that starts at hour one and goes through the end of the project.
"With any installation, our goal is to develop a close relationship with the customer," says Lanagan. "We want this to be the best service engagement the customer has ever had, because that is what results in repeat business. To ensure everything goes smoothly, we have a project manager on-site to make sure what we set out to do each day is accomplished." While section four shows all of the project goals, section five maps out what actually happened each day of the installation. Oftentimes things come up that were not planned for, such as integration issues and dead hardware.
Each day, an e-mail is sent to everyone involved with the project to update the status. Neartek will also document if they are ahead of schedule for some reason. Section six is a sign-off sheet that everyone involved with the project will sign as steps are completed.
Create A Custom Owner's Manual
Section seven is the meat of the run book. "It is basically an owner's manual for the install," says Lanagan. "It is the thickest section of the book and contains documented procedures, retention policies, and procedures for generating reports." If a customer forgets how to do a query, they would normally have to go to the administration guide and flip through hundreds of pages looking for the answer. Instead they can just flip to page three in the run book and find the information they need.
"It also has tips for troubleshooting problems," says Lanagan. "It is basically a custom owner's manual of the hardware and software we deployed. Each end user will typically have an individual in the IT department responsible for performing and maintaining the daily backup and recovery. But what happens if that person leaves the company? He is the one that has always performed that function. With our run book, if that guy ever leaves, his procedures are right there in writing."
Drive Service Revenue And Additional Sales
In the first three years after developing the run book, Lanagan saw his profits double each year. The last two years saw growth slow because of the recession, but the company still saw double-digit increases. Lanagan attributes the growth to additional sales and services revenue from existing customers. "One of the things we do is regular health checks for the customer," he says. "They provide an opportunity for us to go back to existing customers, fine-tune what was already deployed, and generate a revenue stream."
The health check will optimize the customer's environment, check on additions or subtractions from the network, and recommend changes (upgrades or new hardware or software). Health checks can be performed quarterly or semi-annually, and they generally lead to more business. As new issues come up, such as e-mail or new regulations, that means additional revenue. The health checks cost between $5,000 and $20,000, depending on the size of the company.
Service revenue now accounts for about 18% of the integration revenue for Neartek, and Lanagan would like to increase that figure to 21% in 2003. Health checks account for about 30% of the total service revenue.
The charge for the run book is wrapped into the total cost of the installation, but Lanagan notes the company does not try to make money off the book itself. "It is a tool for generating additional revenue and increasing profits," he says. "It is what allows us to get close to the customers and keep them calling us back for more opportunities. A customer can go to the integrator that knows their environment, or go to Joe VAR who knows nothing about them. The book convinces customers that we are the ones to call for any storage needs."