Picture this. It’s Monday, and you’re
at a construction site selling a secure wireless mobility solution to your customer. On Tuesday, you will be at a produce company selling a secure WLAN (wireless LAN). Wednesday takes you to a supply company where you are explaining the benefits of a WMS (warehouse management system). Thursday and Friday, you will meet with an ISV (independent software vendor) to develop a new application for your latest self-branded product offering. This is just another week in the life of Paul Giobbi, president of Zumasys, Inc.

As you may surmise, Zumasys is anything but conventional when it comes to the ‘typical’ integrator sales model. In fact, Giobbi thinks VARs on that ‘typical’ integrator path are destined to fail. “A typical VAR sells products and services focused on a single technology [e.g. servers, applications, networks],” he says. “We specialize in solving business problems — regardless of the technology required to solve those problems — and we always try to tie a recurring revenue opportunity to each sale.” What does it take to build the recurring revenue sales model that is helping Zumasys thrive? Giobbi is happy to share his business model with other VARs.

Start By Identifying A Niche
Zumasys targets the ‘S’ in the SMB segment (companies with approximately 250 users) and provides those customers with support for their legacy computer systems. In addition, the company provides solutions for warehouse management, disaster recovery, storage and server virtualization, storage consolidation, messaging, collaboration, network infrastructure, and hosted services.

How did Giobbi identify this opportunity? The company began in 2000 when the founding partners saw a need to service customers running their businesses with legacy Pick/MultiValue databases such as D3 from Raining Data and Universe/Unidata from IBM. “We started by identifying a potentially profitable niche market and filled it by offering telephone support for Pick customers in distribution and manufacturing,” explains Giobbi. “That business produces a 50% margin for us.” It was that experience with Pick that propelled Zumasys into identifying additional niche markets such as agriculture and construction. Zumasys adapted existing mobility solutions to address the problems in those markets.

Get To Know Other Technologies
Giobbi has a natural curiosity that often leads to questioning conventional thinking when solving customers’ business problems. It is that thought process that drives Zumasys to integrate different types of technologies to solve customer problems. The company’s vendor partnerships read like a buyer’s guide for all types of technology. For example, Belkin, Cisco, GFI, HP, IBM, Panasonic, Symantec, St. Bernard, and VMware are among the 35 vendors Zumasys calls partners. Zumasys has only 25 employees, so how does it handle all of those product lines? “We have developed partnerships with regional technical specialists for many of those products,” says Giobbi. Zumasys makes a minimum of 30% margin on outsourced services such as custom-designed Web interfaces for mobility applications.

A typical Zumasys installation consists of multiple Citrix servers for remote access, an Exchange server for e-mail/collaboration, a database server to run the customer’s core business application, and a file/print server. Then Giobbi asks, “Why not connect mobile users to these applications? Why don’t we partner with an ISV to tackle the customer’s inventory management issues? And while we’re at it, there is a real opportunity to Web-enable the customer’s legacy system. Why can’t we do that?” They can, and they do. Zumasys offers solutions in all of those spaces — thus the lengthy list of vendor partnerships

Generate Recurring Revenue With Hosted Solutions

VARs are always looking for ways to smooth out the dips in their profit-and-loss statements. One way to achieve that goal is to generate recurring revenue streams — income that is steady from month to month. But, where do you start? In the case of Zumasys, Inc., an IT solutions provider in Lake Forest, CA, the answer was to create its own branded hosted service to generate recurring revenue. TheOnDemandOffice (TheODO.com), is a hosted solution that provides a virtual Citrix desktop for Web-based access to popular collaboration and productivity applications. The base package includes secure browser-based access to MS Office, MS Exchange, MS SharePoint, and MS Live Communication Server (secure inter-office Instant Messenger). Zumasys partners with St. Bernard to provide Internet content filtering using the vendor’s iPrism appliance. TheODO now generates $50,000 per month in recurring revenue.

For VARs that aren’t quite ready to host their own solutions, St. Bernard offers LivePrism — a hosted e-mail, Web and instant message filtering, and archiving service designed to meet the needs of SMBs. VARs can sell this service as their own private branded solution, building customer loyalty. With St. Bernard’s Pro Partner program, VARs can be assured they will be protected once they win a sale. Customers won’t be redirected to buy directly from St. Bernard, nor will they be swept away by another reseller offering the LivePrism at a lower price.

The skill set required to sell and configure LivePrism is minimal. St. Bernard refers to LivePrism as an “MSP (managed services provider) in a box.” St. Bernard offers short online training videos for partners that would like to learn how to sell and install LivePrism. VARs can offer additional value by providing systems administration services for customers with LivePrism.

“If VARs aren’t selling branded products with a recurring revenue component, they may not be around very long,” advises Paul Giobbi, president of Zumasys, Inc. “Integrators live on projects, when they should be living on recurring revenue.” LivePrism is a way for VARs to generate recurring revenue without having to invest a fortune in equipment, facilities, and education. Going forward, Zumasys plans to incorporate LivePrism into its TheODO offering.

www.stbernard.com

Don’t Let Vendors Manage Your Business
Giobbi says great vendor relationships are a key to his company’s success. “Good resellers will find a way to solve a customer’s business problems, and they don’t get distracted by vendors’ objectives,” he says. According to Giobbi, vendors can help VARs survive by engaging with them to help meet VARs’ goals. “Some vendors have demanded that we blindly align our priorities solely with theirs, because that is what they think is best,” he says. “In those cases, we have ended those relationships. We have become more profitable by aligning our company with vendors that have an interest in our success.”

Zumasys’ relationship with St. Bernard, the manufacturer of iPrism Web filtering appliances and LivePrism hosted services, is an example of a successful vendor/VAR relationship. Giobbi says, “As a result of listening to our suggestions and those of other VARs, St. Bernard implemented a new reseller program about a year ago. Since then, our sales of St. Bernard products have increased by 300%. Our margins on St. Bernard products went from 12% to 30%. With deal registration, we can earn up to 35% margins on the hardware.” Zumasys sells iPrism appliances to perform back end Web content filtering in nearly every network installation it performs.

Adapt Solutions To New Vertical Markets
By having the fortitude to learn and integrate new technologies, Zumasys is able to adapt many of its solutions to other vertical markets. For instance, Zumasys was working with a customer to support its legacy software application, and the customer was struggling with inventory management. “We researched the options in the market, and we signed with Motorola [formerly Symbol] and formed a partnership with an ISV to write a WMS application,” explains Giobbi. “We tied the WMS application to the legacy database system and provided the customer with wireless access to the system. Then we looked for ways to adapt that solution to other vertical markets.”

Zumasys took a Motorola MC70 (a ruggedized PDA) that it used in the warehouse project and added WWAN (wireless WAN) radio capabilities to create a field mobility solution. “We closed a $750,000 deal with a construction/real estate company with that mobility solution in 2006,” says Giobbi. The mobility solution gives field personnel the ability to perform on-site inventories of property such as appliances. In addition, employees can reorder parts, enter work orders, and check parts inventories on location.

Zumasys has extended its mobility solutions to other vertical markets such as agriculture, distribution, financial services, construction, and nonprofit organizations. Zumasys didn’t just fall into those vertical markets. There are specific reasons why each of the markets was chosen. For instance, distributors tend to run legacy systems and have many remote sites — two areas of expertise for Zumasys. The VAR has a strong relationship with the largest ISV serving the agriculture industry and can help agriculture customers with mobility solutions. The construction industry also requires mobile access to data. Regardless of the technology or market, mobility is the common denominator for Zumasys. The company has developed relationships with vendors like Cingular, Panasonic, Sierra Wireless, Sprint, and Verizon to deliver wireless mobility solutions to its customers.

Profit Is More Important Than Growth
When it comes to profit and sales growth, Giobbi has some interesting advice for VARs. “Many resellers operate at 1% or 2% net income,” says Giobbi. “They may be growing, but they are often just one or two bad quarters away from going under. It’s more important to be profitable than to grow rapidly. We strive to produce a minimum of 10% net income. We’re willing to sacrifice some growth in order to maintain solid profitability.”

Outsourcing services also help Zumasys to achieve 10% net income. For instance, Zumasys partners with Alternative Technology to provide on-site technical services. Giobbi provides Alternative with Zumasys shirts for their technicians, presenting a branded service feel to its customers. Zumasys adds a margin to those services and resells them to its customers.

To help generate more net profit, Giobbi recently restructured Zumasys’ service contract program. He did this by bundling additional services with his existing contracts. For example, contract customers get dedicated phone numbers, extended service hours, priority service, and a reduced rate for noncontract professional services. By adding additional services, Zumasys was able to increase contract prices, generating an additional $800,000 per year in recurring service contract revenue.

Embrace The Power Of Marketing
Just like Cleveland-based integrator Chi Corporation (see Business Solutions April 2007), Zumasys understands that marketing isn’t just for vendors. All of the technological expertise in the world will not get your message out. “We spend most of our time generating demand through marketing activities, as opposed to performing outbound sales calls,” explains Giobbi. “We have two full-time employees dedicated to marketing. It all starts with having a good database. We spent a year contacting our entire customer database and verifying specific information for each customer. There was significant cost involved in that process. But, every time we send a direct mail promotion now, we know it’s getting to the right person.”

This year, Zumasys will attend at least 12 trade shows and conferences around the country. The company also provides case studies, hosts seminars, and produces a quarterly newsletter to market its products and services. Just how well does it work? By breaking the mold of the ‘typical’ integrator, Zumasys has grown to $10 million in annual sales in just six years. It’s the company’s fearless approach to integrating technologies that has helped it to grow profitably. That’s a business model other VARs should emulate.

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