VARs adding value to the IT procurement process

VARs are finding success -- and profit -- in adding value to the IT procurement process, addressing inventory, warranty, pricing and testing issues.

Ask resellers about their "value-add" and chances are the discussion will focus on IT consulting, vertical-market expertise or the latest cloud offering.

The task of sourcing and staging products for customers, however, may not rate a mention. Indeed, the product side of a solution provider's business has been stigmatized as "box pushing" and relegated to some shadowy corner of an organization. But some channel players still find room to add value to the traditional IT procurement process of the reseller business.

The collaboration between Force 3, a Crofton, Md., solutions provider, and Raytheon Co., a $24 billion defense contractor, provides one example. Raytheon is the prime contractor on the U.S. Navy's Ship Self-Defense System (SSDS) contract. The contract provides Navy surface ships with a system designed to protect against anti-ship missiles. The system, which links with radar and weapons systems on the ship, evaluates the readiness of ship defenses and identifies potential threats, according to Raytheon. Raytheon partnered with Force 3 to overcome a sticky procurement and inventory management issue.

The difficulty involved a key SSDS component, a switch assembly consisting of 22 Cisco switches. Systems integrators working with the Navy often keep an ample supply of components on hand to make sure they can meet the service's production schedule. Raytheon faced the challenge of keeping two years' worth of switches in inventory to accommodate ship refits, in which vessels go into drydock for maintenance and updates, slated to occur during that period. Cisco's standard switch warranty became an issue, however, given the long lead time. By the time Raytheon would take the switches out of storage to build an assembly, some of them would fail to work and the warranty would no longer apply.

We were able to buy from Force 3 for less than it cost us to buy the individual switches.
Peter Springprogram manager for SSDS Production Contracts, Raytheon Integrated Defense Systems

"We'd turn the power on, and if they didn't work, we would have gone beyond the six-month Cisco warranty," said Peter Spring, program manager for SSDS Production Contracts at Raytheon Integrated Defense Systems.

The faulty units couldn't be replaced for free without an extended warranty, but the funding wasn't available for the extra protection. Raytheon's workaround was to tap Force 3 as a supply-chain intermediary. Instead of buying switches directly from Cisco, Raytheon now lets Force 3 acquire the products. Force 3 tests the switches on receipt to circumvent the warranty problem. Raytheon found it more cost-effective to work with Force 3 to handle the IT procurement process; Spring pointed out that Force 3 is an authorized Cisco distributor.

"As soon as we get them, we make sure nothing is [dead on arrival]," said Tami Adams, senior account representative at Force 3. "They are going to sit here for a year and a half, and after that time we can't return them."

Force 3 also maintains inventory and builds the 22-switch assemblies for Raytheon. The assemblies include not only the Cisco switches, but cabling, power supplies and air-conditioning units, according to Force 3.

Spring said the Navy benefits from the improved reliability of deliveries.

"We would have delays ... when we got a switch on the floor and found that it failed," Spring said. "That would put a crimp in our manufacturing schedule, and the Navy is more and more concerned with hitting their shipyard dates."

Systems need to be at the ready when a ship enters a yard for refitting. Any delay has a ripple effect: Ships back up in drydock and penalty fees apply if ships can't be serviced on time. The defense contractor running the shipyard charges a penalty for every day the Navy misses the SSDS schedule.

Improving back-office systems

Other solutions providers have looked to improve in-house operations. Video Corporation of America (VCA), a Somerset, N.J.-based audio-visual systems integrator, has customized Microsoft Dynamics' enterprise resource planning system to fit its internal needs and processes, noted Dave Berlin, president of VCA.

VCA invested heavily on the back-office system, which helps the company tie together opportunity management, vendor pricing, quotes, projects, procurement, vendor purchase orders and tracking into a single system, he noted. That linkage is important because VCA runs hundreds of projects simultaneously with thousands of products against construction schedules that are constantly in motion. The timing of VCA's audio-visual and broadcast solutions must coincide with the various stages of a new-building construction or renovation project.

"Project management, along with procurement and our finance department, coordinate to help drive the supply chain for just-in-time delivery," Berlin said.

VCA's back-office system helps keep customers up-to-date on product shipments. For example, a customer's project manager can sign up to be alerted on a particular part, so he or she will receive an email the moment it arrives at a VCA warehouse.

Force 3's value-add, meanwhile, goes beyond addressing Raytheon's warranty issues. The company's inventory management and manufacturing capabilities represent additional plusses, according to Raytheon's Spring.

"We just buy one part number, a big subassembly with 22 lower-level switches built into it," he said. "We don't have to track 22 different part numbers anymore."

In addition, Raytheon no longer has to receive 22 individual items for incoming inspection. And the company doesn't have to move the switches in and out of storage. The ability to reduce the number of steps involved in handling inventory contributes to cost reduction, Spring said.

Force 3's role in building the SSDS component cuts Raytheon's labor costs. In addition, Raytheon saves money in buying a finished assembly versus acquiring switches directly from Cisco.

"We were able to buy from Force 3 for less than it cost us to buy the individual switches," Spring said.

Force 3 also helps Raytheon maintain a consistent hardware baseline used across Navy ships. This consistency is important since Navy ships may be at sea for years at a time and hardware and software can't be readily updated. Holding on to the same baseline sometimes requires some advanced procurement planning. When a manufacturer announces that it will no longer make a particular part, Force 3 will buy, test and store it before it reaches end-of-sale status, noted Jason Oh, practice director of Borderless Networks at Force 3. That way, Force 3 can continue to support the ship-based systems even after the product is no longer manufactured. The consistent hardware baseline also means that the Navy spends fewer resources training technicians on new hardware.

Product test beds, configuration

Putting products through their paces is another space where solutions providers seek to innovate.

VCA will pilot products on behalf of a customer or vendor partner.

"We have often been asked to develop a test bed for the technology or do a trial of a new software platform," Berlin explained.

Depending on the circumstances, VCA may conduct the testing at its own facilities or at the client's location. Berlin cited the case of Pexip, a vendor VCA represents. Pexip's newly released enterprise video-conferencing software calls for a geographically distributed test bed. In one case, such a test bed is being deployed for a client interested in the video-conferencing product. The client has significant operations worldwide.

Resellers also hone product configuration, a traditional VAR activity. Troxell Communications Inc., a national VAR for classroom and presentation technologies based in Phoenix, offers product configuration services in the education vertical market. Some 85% of the company's customers are K-12 schools.

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The company this month announced a reseller arrangement for Google Chromebooks. The reseller deal is part of Troxell Communications' 1:1 Learning Suite offering, which includes hardware, peripherals, mobile device management and learning management systems, among other components.

Bob Berry, vice president of business development at Troxell Communications, said the company will configure Chromebooks for its school district customers. The company does some configuration work in-house and uses partner facilities to handles larger projects, such as a customer purchasing 5,000 devices. The company or its partner will set up Chromebooks for the customer's wireless network, enroll devices into Google's Chromebook management console, provide asset tagging and place the Chromebooks into protective cases.

The idea, Berry said, is to have the Chromebooks "roll off the back of the truck and into students' hands."

What's next?

Vendors now target channel companies with solutions that may help them offer more value on the product side. BDNA, a Data as a Service company based in Mountain View, Calif., recently unveiled software that supports the task of managing purchase orders. BDNA's Technopedia Normalize for Purchase Orders offering deciphers information in purchase orders' structured and unstructured data fields, providing an accurate view of the purchasing information, according to the company.

Mahesh Kumar, chief marketing officer of BDNA, said his company is in discussions with IT resellers and solutions providers "around them using PO Normalization to support their business processes with their customers."

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