ASCII Group Outlasts Rivals Through Key Partnerships

http://www.crn.com/it-channel/205921279;jsessionid=0WQCTBQNNZRBMQSNDLPSK January 29, 2008

By Jennifer Bosavage, CMP Channel 2:57 PM EST Tue. Jan. 29, 2008

There has been a large transformation during the last several years, with major computer chains (remember ComputerLand?) going under "- a fact brought to mind lately with the recent "passing" of CompUSA. The list of casualties includes very recognizable companies: Babbages, Compuadd, Egghead, Forsyth Computer, micro age, Packard Bell, Sears Business Centers, Software Etc., Software Galleria, and Walden Software, just to name a few. Through all the industry's ups and downs, the ASCII group, a consortium of 3,000 solution providers worldwide, has made it intact. Alan Weinberger, chairman, CEO, and one of the founders of the organization, talked with ChannelWeb about how ASCII Group has managed to cut it for the past 24 years.

Are we in a recession?
No, I don't think so. For the 1800 North America resellers in our group, sales are up. We're not in a recession, but I think VARs are reconfiguring themselves to be more service oriented. Total software and hardware sales from distribution are not going down.

But many economic indicators seem to be pointing toward a slowdown, at least.
There is still a lot of hardware being sold. We have deals with many vendors and distributors. But, the gross profit with services is much higher: 50 vs. 5 percent. Hardware prices are going down, while the prices of services are going up. Most of our VARs want to do the whole [job], because their customers want to know its going to all work together. They're not going to lose on the deal, if they go through one of our distributors, and then have [the distributor] ship it to the customer. Then the reseller can go ahead and provide the services.

Why do solution providers join ASCII?
We have volume purchase agreements to give VARs pricing power. We've done it for 24 yrs. We operate just like Dell (NSDQ:Dell) and Walmart; it's the same model. We align with manufacturers, like Dell. Our members are selling and servicing Dell products. Like them or not, Dell will do the best for the customer, and a lot of customers like Dell. So, for example, because we have an agreement with Dell, we get preferential treatment from Dell and other companies we have agreements with, like Level Platforms, Synnex, Tech Data, D&H, and so on.

In addition, Lloyds of London has enabled ASCII to provide its members with an opportunity to buy errors and omissions policies at a greatly reduced rate. With this policy, if a VAR is ever sued because of something it did incorrectly, or forgot to do, the VAR is covered. It's like a malpractice insurance. The premium we can offer is 2/3 off normal cost of $1 million policy.

What gives ASCII its staying power?
Our business model. We've stayed with the same business model for 24 years. We charge a fee for resellers to join, but understood there had to be an economic gain for the reseller. We have very large VARs, but a majority are between $1 million and $5 million. We generally charge $100 a month for dues, and we know that if they don't see value, they'll leave.

How do you connect with them?
We communicate through weekly e-mails, and have monthly meetings in major cities, that are generally attended by 150 VARs, and say 30 vendors, likeIBM (NYSE: IBM) and Microsoft (NSDQ:MSFT). We call them "boot camps." There are mini-meetings, and they are trained on things like selling techniques. We also have an e-forum where they can connect 24/7.