Pressroom
Services Drive AltTech Growth
Services Drive AltTech Growth
June 24, 2003 by Steve Wexler – Although Bill Botti, president and COO of Denver-based specialty distributor Alternative Technology, likes the traction he is seeing with the month-over-month growth of his 13-month-old Canadian subsidiary, he would like to see that growth accelerate. In town this week visiting his Mississauga-based operation, Botti rued that the current market conditions remained an impediment.
"The market has been in neutral, but in the second quarter we started coming out of that and moving forward."
He said it's still a tough market, but he's seeing the scope of projects getting larger as customers start spending more. AltTech currently focuses on five areas: server-based computing, management, wireless, security and technical services and education.
The distributor sees this tight market as an opportunity and has created programs to take advantage of that slowness, Botti said.
"We've had VARs come to us and say they had to let very skilled specialists go because they couldn't keep them fully utilized, and could we help them."
AltTech introduced a number of programs to augment its customers' technical skills, and that portion of its business is up 380 per cent, he said.
"VARs are taking advantage of that to supplement their capabilities. They are making between 20-35 per cent margins, depending upon the business. They will take advantage of that until they have sustainable business to take on another employee."
Canadian GM Terry Sedgley said the program has been very popular with her customers. "We're seeing additional traction with the partner program -- professional services, help desk. They're using our partner program to benefit, to pay for that."
Botti said the frequent flyer program is simple and very attractive to VARs: "the more you fly, the more you earn. It puts between 1-4 per cent back to their bottom line."
While that side of the business is doing well, Botti is concerned about a trend he is seeing in both Canada and the US, something he calls "eating their young." When sizeable deals are put out to tender, there are four or five VARs competing on price for the business.
"More and more VARs are struggling to sustain margins in their business. There is still quite a lot of that [competing on price] going on in the U.S. You can't make it up on volume. The VAR model doesn't sustain that over a long time."
SARS has also hurt the channel, Botti said. It's a trickle-down effect with less meetings going on.
"VARs have been telling me that's been having an impact on their business."
Security and wireless are the two hottest markets, and Botti expects them to continue to grow. "We're seeing significant growth in the security space in both the U.S. and Canada." He attributed a lot of that to the recent Health Insurance Portability and Accountability Act (HIPAA) in the U.S. Botti said the Canadian equivalent, the Personal Information Protection and Electronic Documents Act (PIPEDA - formerly Bill C6), should have a similar impact.
"We're taking advantage of that, and have created a security practice to address that. C6 is scheduled for January in Canada, very similar to HIPAA. It will help drive the same business in Canada. There's lot of movement in that area in the U.S. It overlaps with what we call homeland security in the U.S. I think there's a lot of that overlap here in Canada too."
AltTech is also seeing phenomenal growth in wireless in the U.S., something that he expects will be replicated in Canada. A lot of that activity has taken place in remote areas, with consortiums and associations setting up their own ISPs in things like grain elevators and other physical structures that facilitate line-of-sight networks.
Urban areas should also see good growth, Botti said.
"Wireless is extending line of sight into non-line of sight. We're going to start seeing more deployment in cities where line of sight has always been an issue."