Take Servers To The High End

Mom used to always say, "It's nice to be young, have fun, and play games. But at some point you have to grow up." Aberdeen LLC was a company that liked to play games and have fun. For years, Aberdeen sold white boxes (desktop computers) and motherboard upgrades to the consumer market. Although a lot of its customers were savvy computer users, a lot of Aberdeen's specialty boxes went to computer gaming aficionados. Unfortunately, when the consumer white box market started to go away, the company was forced to grow up.

"A couple years ago we realized we were selling a product that could be obtained from numerous sources," says Moshe M. Ovadya, president of Aberdeen. "Companies like Dell, Compaq, and Gateway were suddenly dominant in the market, and we knew at some point our phones would stop ringing. After being very successful in the consumer market for more than 10 years, we reached a point where we needed to change our business model in order to survive."

Aberdeen decided the high-end server market was the right place to be, so the company refocused its efforts on providing server solutions to business customers. "We decided to target the highest segment of the server market," says Ovadya. "We felt it was the best way to distinguish ourselves from all of the 'me too' VARs in the market. When you are pushing boxes, you are easily replaceable. When you are creating value, you make yourself a lot less dispensable."

High-End Servers - Not Just For The Enterprise
Today, high-end servers are not just for the large enterprise companies. That fact makes the server market an interesting beast. Even the most powerful servers today can be obtained for under $10,000, a price even small companies can afford. According to Ovadya, price is not the issue for most companies ... it's the number of servers. While Fortune 100 and Fortune 1000 companies may order 100 servers at a time, a smaller company will order one or two at a time. But every company needs servers, making that market one of the still-growing segments of the IT industry.

Dell, Compaq, and Gateway have set price lists. Customers can scan the list and choose from the available items. Aberdeen is now able to provide customers with servers they cannot get from other server companies. "Our servers feature hardware configurations that meet a specific need," says Ovadya. "We build servers from components to meet specific customer requirements. A request can be as simple as a 1U high server with a sound card, or as elaborate as a 2U server with three PCI [peripheral component interconnect] cards and a three-volt AGP [accelerated graphics port] video card."

Hardware Changes Force Business Changes
In making the move from the consumer to the business market, Aberdeen identified several changes that would have to be made to the company. Ovadya believes the biggest challenge was convincing employees that the changes were necessary. "We were getting into an entirely new market," he says. "In changing our focus, there were a lot of tangibles and intangibles. But above all, we had to tell ourselves, every day, that this is the kind of company we need to be. We had to change the way everyone in our company thinks. Once we convinced employees that this was a change we had to make, we then had to change the way our salespeople sell, line up necessary financing, and change the way we advertise and market the company."

Changing the salespeople was perhaps the most difficult endeavor. Salespeople had to be changed from order-takers to consultants, which was a dramatic transition. In the consumer market, the company placed ads in magazines. It was that simple. Salespeople were used to taking orders and the phones would ring off the hook. Today things are very different. "We recently closed a deal with a government contractor that took us over three months to close," says Ovadya. "For three months, the account executive worked the customer without one penny of commission. Before, salespeople developed no relationship with the customer. Today every sale is relationship driven."

Educate Employees On Selling Storage Solutions
A complete housecleaning of existing salespeople was not necessary. For the most part, Aberdeen has the same salespeople it had before. A few chose to leave the company, but most felt they could make the adjustment and decided to stay. For those opting to make the transition, a lot of conditioning was required. "It took a very cold slap in the face," says Ovadya. "Many were not happy, but we told them we have to make this change. The old market was gone, and we had to make this change or we would cease to exist."

The employees who chose to stay listened to the talks about focus, came to the weekly sales meetings, and took part in the product training from manufacturers. Aberdeen trained them on how to present products to the new markets. It was a diligent effort that required a lot of repetition. "Some people thought the sales would just keep rolling in, but eventually the phones did stop ringing," says Ovadya. "Those who listened to what we were saying, took our advice to heart, and focused on relationship building are still here. Those who did not are gone."

Aberdeen also had to change its commission structure and institute new incentive plans, all of which were developed in-house. The goal was to convince employees that if they stuck around, they would earn more money in the future than they had been making. The company also paid for all of the training and certification programs required for the account executives. The training was not voluntary. Selling high-end solutions to company administrators required an understanding of IT problems. Employees were told they would have to elevate their level of technical expertise or be forced out of the company.

Aside from retraining its sales force, Aberdeen also had to send its key technicians to seminars to be more technically astute. The company had to qualify for the Intel Premier Provider program, which required many hours of training and testing. Four years ago, knowledge of the latest video chip set was important. Today technicians have to know how to integrate dual-teamed server gigabit network interface cards to a single backbone.

Get Your Finances In Order
After making changes to its sales force, Aberdeen next had to make changes in its financial resources. Consumer sales are primarily credit card sales, whereas business sales are primarily on net terms. This can lead to substantial cash flow implications.

"We used to buy motherboards from our supplier on net 30-day terms and sell them one by one via credit card," states Ovadya. "We would pay our suppliers 20 or 25 days later. Now we are dealing with businesses, that place $500,000 or $1 million purchase orders. We have to buy the goods up front at the best terms we can negotiate. But by the time we get the parts, build and ship the servers, and get paid by the customer, it may be 60, 75, or 90 days later. We anticipated that, talked to our bankers, and lined up the necessary credit lines to enable us to do business in this manner."

Finally, advertising in consumer publications would no longer work. Advertising now has to address the IT administrators and MIS managers. Although a lot of MIS managers picked up Computer Shopper, Aberdeen is now advertising in technical end user publications. The company also invests in online advertising efforts. The company buys spot ads on sites like Google and pays to get top search engine placement to drive traffic to their Web site.

Thus far, everything is going as planned. Since instituting the change, Aberdeen has seen a drop in revenue. However, Ovadya notes the drop coincided not only with the change in focus, but also with the decline in the IT industry in general. As the stock market crashed in April 2000 and the IT market hit the wall, the company was already making the slow transition. As demand and revenue were dropping, the company accelerated its plans to switch market segments. Two years later, revenue is still down but profitability has increased significantly. "We are now more profitable than ever before," boasts Ovadya. "We feel we have successfully completed our transition."