Tap Into Converging Technologies To Boost Sales

Most of us remember a time, not that far past, when telephones were a company's most important business tool. The leadership at Nexus IS sure remembers. It was 25 years ago when this systems integrator started its life cycle as a telephone service company. But, just as business tools have completely evolved, so has Nexus IS. Today, the company offers a full suite of unified communication (UC) tools, plus security, storage, and wireless technology products — everything its customers have demanded over the years. Since the decision four years ago to dive into complementary technologies — all based around its initial UC portfolio — Nexus IS has enjoyed steady sales increases, achieving 30% growth for four years running. To achieve that, the company methodically built out its complementary technology practices one by one, then slowly integrated each new practice into the company's overall portfolio to achieve a profitable systems integrator business.

Apply Same Methodology To Multitechnology Installations, New Practices
To widen its portfolio beyond UC, Nexus IS plotted its growth the same way it plans for a typical installation. For example, with each installation, Nexus IS evaluates the existing system and then looks at how to build an infrastructure to support a fully unified communications solution. The company often finds itself reconstructing a customer's storage and network infrastructure to support quality UC service, then tackling security for that infrastructure, and finally, mobililty.

"We started our growth by looking at our existing process and methodologies and deciding how to move those into other areas of technology," says Dave Elsner, VP of sales and marketing for Nexus IS. Each step outward is determined by demand. "Our decisions about [adding] technology first come from our existing customer requests," he explains. Then Nexus IS uses industry growth information such as Gartner research to determine market viability and total addressable market revenue. "We must see a 5-to-1 return on investment from a sales, general, and administration [SG&A] perspective," says Michael Heiman, VP of engineering for Nexus IS. Based on that, the company began launching new technology practices in 2004. First was security, followed by wireless. The systems integrator added audio collaboration in 2005, namely, Cisco's MeetingPlace product. In 2006, video and telepresence was added, with Cisco's WebEx application debuting in 2007. Today, Nexus IS is building a data center practice and preparing for digital signage.

To handle expansion successfully, the company tackles each practice one at a time. "We attack expansion two different ways," says Heiman. "First, we look internally to see if anyone can expand their career path and move into a role with the new technology practice." For example, when Nexus IS launched its telepresence practice, it moved both technicians and engineers who had been involved in time division multiplexing (TDM) services — a dying technology — over to support the new technology. So far, the complementary technology practices rolled out in the past four years have been staffed 50/50 internal vs. external. From there, Heiman starts networking outside Nexus IS. "We go to the industry we are moving into and find out who is making an impact in that space," he explains. "We look for the shining star, and then we start a conversation." Heiman says the company touches base with everyone from VARs and vendors in the new technology space to industry specialists and analysts. The reason is simple, says Heiman: When you are investing millions into a new business practice, you want the best leader you can find. It is quite the investment, and one person doesn't make it or break it, but they are the foundation. After determining a technology is a good investment, Nexus IS finalizes its choice of leadership. "Once that first person is in place, we start hiring salespeople and sales engineers to generate demand," explains Heiman. While that staff is on the street building interest in the new offering, Nexus IS continues to hire and train employees for the fledgling practice.

Weigh Initial Expansion Investment Against Expected Revenue
In terms of investment, the cost to expand into each complementary technology varies. "What it takes to get into that space can be as little as half a million dollars if a lot of the pieces we need for that business are pieces [such as staff and existing technology expertise] we can leverage internally," says Heiman. "But the cost can reach as high as $4 million for a highly specialized practice such as the data center." That is why any VAR considering a move into complementary practices needs to weigh every detail. "We are meticulous in our planning," says Heiman. Nexus IS starts with the addressable market opportunity, then develops a sales and business budget that translates into hiring needs. "We built our entire telepresence practice internally, and it didn't require nearly the investment of the data center," says Elsner. "It was expected to reach $5 million in sales the first year. The data center was a much larger investment, and we expect $40 million in sales the first year."

Nexus IS controls its up-front investment by using two core methodologies regardless of the technology it is adding to the fold. First, the Solutions Management Team develops a plan for how to design, engineer, sell, install, and service the new technology, plus determines the ongoing marketing needed to grow that practice. Next, the company applies its Life Cycle Services methodology, which means planning for each phase of a client project in the new technology, such as preparation, design, implementation, operation, and optimization. "This process allows our associates to take on new technologies without having to recreate the wheel each time," explains Heiman. "You must have processes that are successful and repeatable."

Once each new practice gains a solid client base, it is fully integrated into the Nexus IS portfolio. The time it takes to reach that point allows staff in other technologies an opportunity to watch and learn about the new technology.

Stay On The Cutting Edge To Differentiate Yourself
With the process of building out a new technology practice each year under control, what is the next step for Nexus IS? "I think software as a service [SaaS] and consulting on custom applications are the next big growth areas for us. We already see that need in our customer base," Heiman says. Keeping ahead of the demand curve is one way Nexus IS differentiates itself from the competition. "So often, VARs want to stick to what they do best; they don't want to branch out," Elsner says. "We, on the other hand, are early adopters. We use all the tools we sell. If our vendors come out with new technology, we try it immediately." He says that gives Nexus IS two advantages: The engineers know how to design, install, and service the new technology, and the company's sales staff can share personal experiences with the technology as part of their sales pitch. Elsner cites single-number ring as an example (one phone number that rings through to all phones registered to that number). "We have it, we use it, and that makes it so much easier to talk to a client about its advantages." That approach can be particularly helpful with technologies in which hard metrics and clear ROI are difficult to articulate.

In addition to keeping its finger on the pulse of new technologies, Nexus IS closely watches those verticals in which its complementary technology expertise may fit well. "In the last couple of years, public sector [such as state and local government or public education] and healthcare have been fast-growing verticals for us," says Elsner, who cites nearly 800% growth for Nexus IS in public sector sales over the past few years ($10 million in 2006 grew to $80 million in 2008). He credits that growth to unique issues in that vertical, such as upgrading infrastructure and adding UC and mobility to fuel better service for their constituents. The company expects that trend to continue as those same clients

continue with upgrades, primarily to support archiving and disaster recovery. Most recently, Nexus IS has focused on the healthcare, sports, entertainment, and retail verticals. To support the unique needs of hospitals, Nexus IS augments its unified communications installations with customized Extensible Markup Language [XML] applications that focus on patient and medical staff communications and interactions.

Whether it is growth according to vertical or technology, Nexus IS is an excellent example of how well-planned expansion into complementary technologies can fuel growth for a VAR — Nexus IS achieved $140 million in revenue in 2007. But those interested in following in Nexus IS' footsteps should not lose sight of the foundation beneath successful growth. A VAR must determine market potential in the technologies your customers are demanding, develop repeatable processes for building out each additional technology offering, and then dive into new technology offerings.