In this episode, Alicia discusses her role as a hybrid distributor and manufacturer within the Wortmann Group, focusing on Terra branded devices and their distribution of over 10,000 SKUs from various major brands. The conversation delves into supply chain issues exacerbated by the pandemic and the Windows 10 support cessation, and how Terra positions itself against tier-one brands like HP, Dell, and Lenovo. Alicia highlights the importance of future-proofing devices, maintaining robust MSP relationships, and navigating the complex supply chain environment. She also emphasises Terra’s commitment to delivering value and facilitating MSP margins through unique service models and leveraging their manufacturing insights.
00:00 Introduction and Welcome
00:07 Discussing Product Supply Issues
00:49 Understanding the Hybrid Model
01:41 Market Position and Clientele
03:20 Challenges in Hardware Procurement
08:16 Service and Support Differentiation
12:22 Current Supply Chain Challenges
22:02 Future Proofing and Device Specifications
27:44 Margin and Market Strategy
29:18 Conclusion and Contact Information
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Connect with Alicia Shepherd on LinkedIn by clicking here – https://www.linkedin.com/in/aliciashepherd/
Connect with Daniel Welling on LinkedIn by clicking here – https://www.linkedin.com/in/danielwelling/
Connect with Adam Morris on LinkedIn by clicking here – https://www.linkedin.com/in/adamcmorris/
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Transcript:
Dan: Alicia, welcome to the show.
Alicia: Thank you very much for having me. How exciting.
Dan: in Indeed. And, we got into quite an interesting debate at a recent Brigantia event talking about, a topic that’s pretty, pretty dull and low on most MSPs, radar, which is good old product supply and, and the issues with supply. around the, when the pandemic hit, and more recently with the push for Windows 10, support cessation. So, really interested to, to get your thoughts around this topic. and, first of all though, A lot of people get confused by what you actually are and what you do, because you are a distributor and a manufacturer. I using the right words there?
Alicia: You, you certainly are. So, we are most definitely a hybrid model, not just in the UK but across Europe. So we have two, two strings to our bow and both are equally as important. So we have the first string to our bow part of the Altman Group, which is the Terra branded devices. So everything from an Android based tablet right through to a high-end server. we then also have the distribution part, which, you know, the likes of, you know, your TD Synex, your West Coast Exertis. So, so everything from ubiquity, Jabra, Microsoft, we are distributing those brands and it’s something crazy like 10,000 plus other skews. So the scale is big. you know, we’re a 2 billion Euro size organization.
Dan: Brilliant. I’m glad I probably don’t have your sales targets then. and in, in the uk I guess we, we probably know you more for the, for the devices you produce. and, help me understand the actual, like where you sit in the market, against, a hp, a Dell. what’s your typical client look like and are they buying from you rather than HP products, for example?
Alicia: I think so, so to a, so, so, to answer that, that, that question. so, so firstly we are what everyone would class as a tier two brand, a challenger brand for argument’s sake. we’re not an HP Lenovo or Dell. but we have a place in the market and there’s quite a lot of tier twos in the uk. And I think every single one of us will believe and want to deliver value to our customers. and in essence, over the years, I’ve been at Terra now for nearly nine years. And as, and it’s all these acronyms, isn’t it? as SMBs and SMEs have moved to, MSPs, have moved to ITPs, have moved to, are now moving to MIPs. We, we’ll just call them MSPs for this, or
Adam: I know what A
Alicia: get tongue tied. a managed intelligence provider
Adam: Oh, okay. Alright.
Alicia: Yeah.
Dan: this is a, I believe a PAX8 ism, if that is such a thing. I hope it doesn’t become the thing because otherwise I’m gonna have to get new number plates for my cars.
Alicia: Ah, right.
Adam: gonna have to rename our business. I mean,
Dan: Oh yeah. Add rename the business as well.
Adam: more importantly, Dan.
Dan: Oh yeah.
Alicia: and then you have GTIA, have moved from MSPs to ITPs. but yeah, for this And for the sake of your number plates. we’ll refer to the community as MSPs. and we’ve learned over that, that nine years as the MSP community has evolved, that. A, as a vendor, as a direct supplier.
obviously our MSPs buy directly from us. We have to change what it is that we’re doing. It’s no longer, I’ve got a notebook. I’ve got an LCD screen. Do you want to buy it? Thank you very much. Purchase order placed and we ship the delivery. it’s evolved way beyond that and. Whilst, yes, we are selling tin. for argument’s sake, I believe we are selling a solution, a solution. Understanding from the MSP, what are the challenges that they’re facing right now? you know, buying hardware is a pain. No, MSP really wants to be buying hardware, so it’s about tapping into that, understanding what those challenges are and giving us service and support that, yes, we can’t remove the pain of you have to place an order for hardware because your client’s device has gone down or they’ve got a new starter. But for the rest of that cycle, we’d like. We like to think, we believe we, we take that sting out of a the tail. We remove the pain from that process.
Adam: Elisa, could you just put a bit more background into the, the tiers side of it? you mentioned tier one Dells, your, IBMs, HPs, I dunno who else would be up there? who, who defines who? Yeah, who defines what tier one is? is there some external standards around this?
Or do the tier one guys say, we are tier one and the tier two guys say we’re tier two. Who defines this?
Alicia: it’s, it, yeah. I mean, it’s a real mixture and for my sins. Many years ago I worked for Asa, who were a tier one. I’ve still got some battle scars, from that experience. the tier ones are very driven and motivated purely by. Market share. You know, when Aser knocked HP off the number one global spot for market share, you’d have thought we’d have all won the lottery.
You know, it was bonkers excitement. they have that relationship. A, they have the, they have the global reach. Our reach is European. They have the reach into the likes of Intel, into the likes of Google, into the likes of Microsoft. so for example, as a tier two, we don’t get access to Chromebook technology. The tier ones do. the tier ones volume would absolutely dwarf what we are doing because our model is different. and it’s interesting because I still remember. When Terror approached me to work for them and firstly, you know, and I’ve been in the industry a long time, you know, so long I can remember selling single speed CD ROMs. and what really excited me was that they don’t focus on market share. That the focus is on delivering value. So
the. The kind of mantra across all of the European subsidiaries is we would rather sell a hundred devices to a hundred different MSP partners for them to experience the quality and the service and support that they get. Our model is not go and stack the boxes up high in, you know, an Amazon for argument’s sake, or you know, an Ingram Micro or an Exertis. And then, you know, when they start knocking on the door and saying they’re having to provision the stock because it’s 90 days old. Oh, well that’s fine. we’ll write the stock down and flood the market. and what tends to happen in those cycles is they’re not always selling the newest, latest, greatest technology because they’re playing catch up every time. they’ve stocked up distribution is their warehouse. They don’t have their own warehouse, so they have no choice. but to say, you know, take five containers of these, you know, will, well, a, it’s gonna take 16 weeks for those containers to arrive. and you know, going back to something that I said ear earlier, you know about the market is moving and it’s moving so fast. Now, whether that’s cyber, whether that’s SaaS, whether that’s devices, nobody has a crystal ball. I would hate to be in the position where you are having to forecast 16 weeks out, but that you’ve got that committed purchase order from one of the, you know, big Es out there.
For five containers of whatever it might be. but that’s very much, you know, it’s defined by the market share, it’s defined by the global reach and the sheer volume that, that these guys are shifting every single
Adam: and that will make sense. sorry Dan as you just to clear this up then. So, so they’re obviously hit the tier one’s hitting the market with their reach into the vendors. the volume, the choice, And you are coming at it from a different angle, which is around the relationship and the service.
So just tell me a little bit more about what that means in reality.
Alicia: so, so what that means in reality is we don’t sell
via online retailers. and that’s choice. and that is simply because if an MSP is going to. Sell a Terra device. We want them to make margin on that product. the last thing we want is an MSP to say, we’ve tried to promote Terra, but you know what? My customer can go online and get it however much cheaper. You know, that model just doesn’t work. It’s doesn’t satisfy anybody’s requirements. the fact that we don’t chase that market share, which I’ve covered with you, but also when we look at our proposition on service, we give our MSPs a choice that they want to service that kit themselves, and we will pay them for doing that. Because as an MSP, the relationship that you have with your client is you are gonna keep that client up and running. come hell or high water. That is your responsibility that, that is in your MSP contract with that client. Do you want an outside source going into that client, whether they’re from hp, Dell, who, whoever, they don’t know your client. You know, are they sending their best end? Are they sending their best engineer to client site? and again, this is, this goes back to that how we’ve evolved and we’ve been nimble watching how MSPs. Are evolving themselves, what they want from a manufacturer. Not every MSP wants to go out and service, you know, Terra kit, but I would probably say in the most part, eight outta 10 do. and what’s really interesting is, you know, I’ll have MSP sit on a panel, when we talk about our service partner program and how unique it is that don’t expect to get rich. From fixing Terra Kit because it doesn’t go wrong all that often. I’d love to sit here and say, it never goes wrong, but you’d laugh me off. You know, where this technology, it can go wrong. So, so that’s really our point of differentiation.
Dan: And, just, just reflecting on, the way you’ve been describing the market. I guess prob probably, If it wasn’t for the execution of how Dell go to market, they would be the sort of in between, like a tier one and a half to tier two in so far as obviously now more a tier one. But that principle of being able to buy. by current, stock, it’s built and delivered to order. but the direct model conflict and therefore the erosion of margin is of course the challenge that most of MSPs have experienced with, with Dell,
Adam: People.
Dan: they, the MSP community want to be able to sell a product that’s gonna have a good level of support available, to it. You know, we don’t wanna be building and, and buying tier three, four, or five, if there is such a thing. just to be able to configure and buy at the right price. So, so it’s that, that middle ground as far as I, as far as I see it. And, really interested to, to hear about the. the service, the delegated service delivery model as well, because, the points of friction that I always had with product supply were, being able to make a margin, and a sufficient one for the, for the overhead of, selling a product. and, and the natural risk associated with that. The second point of friction was, being able to, to get. support for that product. So I was always advocate by the, the response committed warranty extensions and effectively my clients seeing the device as a free year solution. or a four year, five year, whatever the warranty pack was. because actually I want to ingrain in my client the fact that this is a cyclical purchase. we’re not gonna put this in and hope it lasts 10 years. It’s, ideally a free year refresh, model. so, so yeah, so that, those are the sort of key points of friction that I always experienced. anything, anything to add to that or any other frictions that you are resolving?
Alicia: at the moment, I would say the, that the supply chain right now is. challenging and that’s being very polite ev for all the years that I’ve been in this industry. there’s always something that, that happens, whether it’s, you know, a tanker, you know, gets stuck in the suez canal, which kind of blocks supply of everything. Whether it’s there’s been an earthquake, whether there’s been a flood, there’s always something. but what we are facing right now in terms of a supply chain is, a perfect storm. In a perfect storm, wrapped in another perfect storm. and. asked me just yesterday evening, well, how long will it go on for? and truthfully, it’s probably the first time that I’ve been able to say, do you know, I really don’t know. and I can go into some of those challenges if you’d like me to.
so, so firstly, you’ve obviously had Windows 10 end of life. So that, that saw a steady ramp up through the year. and of course, you know, you saw a lot of it back ended into September and the first week of October. So, so instantly a something as, as big as that is, is going to have an impact on supply. then got, you know, the newer process, the newer processes, the newer generation, the Ultra Books. The manufacturers out in the Far East have moved over to DDR R five manufacturing, but where you have had customers who are going to upgrade their devices, so they’re already Windows 11, but they thought eight gig of RAM was acceptable. And they’ve realized, well, well actually, you know, it’s, everything’s grinding to a halt.
You know, I need 16 gig. it’s running on DDR four, so, so a little bit, you know, a little bit like the beta and VHS, What’s being asked of the DDR five factories is can you scale down on your DDR five manufacturing and scale back up almost from zero, your DDR four? That doesn’t happen overnight. So then you’ve got this big demand for DDR four, and you’ve still got huge demand for DDR five.
It’s the latest, newest technology. You know, we love that, you know, we, you know, everybody wants the new shiny thing. So from a RAM perspective, trying to get hold of 16 gig RAM right now on DD R four is really challenging. I mean, we have orders on with the tier one suppliers out, out in the far east, you know, something like 70, 80, 90,000 pieces. you’ve also then got what that does in terms of price, because if you haven’t got something. The demand for price goes through the roof. So, so a 16 gig stick of ram three, four months ago, 30, 36 pounds, you know, for argument’s sake, you know, now you’re looking closer at 90, you’ve then got wrapped up in that perfect storm is SSDs. start of the year, we knew from seeing memo notes from Samsung, that they had lost money quarter on quarter, and they were gonna start to starve the market and increase the price. we saw that happen really Q4 of last year, Q1, Q2. But now what you’ve seen is the rise in the big data centers. They want the big enterprise drives. So again, you know, if you are Mr. Samsung or Mr. WD or Mrs. Samsung or Mrs. WD, who do you wanna supply? Do you wanna supply a 500 gig SSD or do you wanna supply, you know, a drive for the, for the data centers? So that’s starving the market. You know, they’re chasing the big bucks.
And you know what, if you were in your, in their shoes, we’d probably do exactly the same. Then on top of that you’ve got the traditional education refresh that happens every summer, which is a big pull on components. So that’s the situation that we are in currently. And you know, it was interesting because I was introducing a brand new MSP to, to Terra and what we could do and how we could relieve pressure points. And I actually said on the call to them, you know, now might not be a good time to start this relationship. Even though we’ve been trying to get this relationship up and running for maybe four or five months, and simply because I was saying to them, you know, we have these pressures at the moment. We are building an excess of 4,000 bespoke build PCs every single day in, in our factory in Germany. But there is a backlog of builds because one of our USPS has always been. We can do a bespoke build for you in two or three days. You know, whether that’s a server, whether that’s a desktop, workstation, laptop, we can do that bespoke configuration for you. and right now we are, we’re not able to commit to that. and so it’s frustrating because it feels like one of our USPS has gone, but also it goes back to that understanding the Ms. P community and knowing that they were far more. Far more prefer honesty than, you know, telling them something and then hiding.
Adam: Alicia, that’s really useful to hear. I think four key points, I think you pulled together around the challenges of logistics, for something that people take for granted. I think certainly my experience was that clients and end users in general just take this for granted, right? They can just pop down into them.
You know, the PC world or whatever in town and just buy a laptop, right? So how come you just can’t get me a laptop tomorrow? so, all I was thinking when you were regaling of the us of these stories was, you know, people need to be making notes around this. If they don’t know this stuff already, they need to be writing their stuff down and they need to be building, some education.
points together really to present to their clients, to keep them informed of what’s going on to, to use this as, reasons why they plan and why they need to have a plan. You know, we can’t necessarily just get what you want tomorrow because of all these global dynamics that are outside of our control.
So how about we think ahead? We build it into our plan, our budgeting, and we stand a much greater chance than of delivering, you know, to your needs and to your growth plan. So I think this is a key, just a key, reminder really of, Again, the, you know, the pandemic was a brilliant example.
The Suez Canal, another one, of things outside of control. and actually if we can just get ahead, if we can manage expectations with clients, tell them it’s not necessarily as simple as they think it is or it’s not always as simple as they think it is. Therefore, let’s just get ahead of it. and, I think that’s, I think it’s really, I think there’s some real gold dust there, just in this podcast on that alone.
Alicia: Oh, thank you. I mean, it’s, it is very much that when we, when we’re talking to our MSPs, we are sharing this information as I, I always say we’re, we are at the pointy end because we are a manufacturer, because we have eyes and ears. With the factories in the far East, we know when this is coming down the pipe. Now, of course, when we get in touch with our MSPs, they’re very much, well, we’re not hearing this from anybody else. It’s kinda like, well, no, because you’re buying Lenovo and Dell via distributor. they wouldn’t have this level of intelligence. If you have a relationship with HP and Lenovo, they might not even have that level of intelligence. You know, we, we knew. We were just coming out of COVID and the coal fields in China had all flooded. And so a decree came down from the Chinese government that these factories, that invariably they run 24 hours a day, seven days a week because of their insatiable appetite for coal. And that’s what fuels all these factories. Well, you have to go down to five days a week, X number of hours a day. Now the knock on effect for that was, it was just at the end of Chinese New Year. A lot of the workers weren’t going to go back to the factories because they travel hundreds and hundreds of miles. They were away from their families for long periods of time. We knew instantly that was happening, so we knew the impact that would start to have, but where we could be on the front foot and allow our MSPs to be on the front foot was telling them in advance of it. Start talking to your customers. What does your pipeline look like in 10, 11, 12, 13, 14, 15 weeks? And encouraging that. Don’t just look at short term when it comes to devices because we know they’re down there on that priority list. Be ahead of the curve. If a customer is saying, we need installation here, well, when do we need to be working back
Adam: And the old one was always, oh, we’ve got a new, it’s three o’clock on a Friday afternoon. Oh, could you get a laptop ready for us on Monday? ’cause we’ve got a new starter. You know, that was the, that was the cliched, issue. And, I think this is really good. and, you know, everybody should be setting these expectations.
Dan: quick question on the Ram, topic, that you mentioned. how long ago was this change from four to five? and so how forward thinking, could you have been to avoid falling into that, that particular, and it’s just one example of a supply, constraint. But, like if, are we, are we actually, you know, historically. my view was always three years as a refresh. is that too long? should our forward-thinking MSPs be advising their forward-thinking clients that really you should be, running a device for two years, maybe.
Alicia: that’s a really good question. DDR five has probably been around for six or seven months. and it’s really just to do with the Intel chip set, the future proofing your customers, which, which is a mantra that, that we use very much is. You know, say for example, if we are looking at a high-end CAD machine and we will look at the newest spec that we can provide, we won’t look at, well, to save a few pounds. we’ll use this GPU, you know, we, we will look to future proof. I think that question about, you know, how long do you have a device for? I don’t think it’s unreasonable that if you are spending X amount of pounds on on a device, that you should expect that to last for three months. Three months, sorry, three years.
God, I’d be very rich if it was three months. Sorry, sniff of the tongue there. Three, three years. but I think it’s about. Does the manufacturer that you are working with, does the brand that you are, that you have aligned yourself to, does their warranty cover that period of time? Because, again, from an MSP perspective, having devices at your client’s site with no warranty is. It is even more of a headache than the original procurement of that device. And whether that’s as, as you alluded to, you know, oh, it’s a Friday afternoon, we’ve got a new starter joining on a Monday. You know, drop everything, go and find me a device. so I don’t think it is unreasonable. to expect devices to last three years, even in, in, in the industry where we are now, where things are just moving at such an incredible speed and whether that’s from a SaaS, a cyber, or a device perspective.
no, I don’t think that’s unreasonable.
Dan: and therefore, I mean, future proofing was a term that was used, rampantly, in the, in the, in the early days, but, pr perhaps less so today. but, if we. If we can’t necessarily be assured of being able to buy, upgrade compatible components, does that mean that we need to spec higher in the first place?
So, you said like eight eight gig was the issue and really it’s 16 or more. So, should our MSPs be advising a higher specification in order to provide their end customers some additional, wiggle room so they, they’re then not reliant on. Components being available or appropriately priced.
Alicia: I would probably say in that instance, and I don’t want it to be a blame game, but the tier ones have caused. A lot of this supply chain issue. and you know, going back to, you know, the incredible volumes that they’re selling, we have always gone out to future proof. you know, the baseline device out there is i5 16gb 500. we have had that as our base model for 18 months. But what you have out there, again, going to the, trying to hit a market share point, trying to race to the lowest price possible. You have got a lot of devices out there that are eight gig and 250. Now you can argue 250 gig SSD is adequate, everything’s in the cloud. But for us, that, at the time of manufacturer, the difference between a 250 and a 500 was minimal. So for us. as a manufacturer wanting to, you know, put a stake in the ground and say, this is what we do. we don’t take shortcuts. You know, we don’t use cheap components just to save a dollar here or there.
so it’s the fact that there are all of these devices out, that which really in the first instance should never have been sold. as an 8gb device, honestly speaking, of course some of those 16 gigs are going where there are devices with 16 and they wanna take it up to 32. but the reality is, you know, you can’t just blame the tier ones for it, but you’re seeing this demand, purely through, you know, in my opinion, devices that were. That should have been specked up from day one rather than let’s hit a price point. Let’s get to global market share number one, and to hell with it, you know, that’s some of the behaviour I believe that’s sort of put us in this, it’s another layer of the reason we’re in this shortage at the moment.
Dan: So really what I’m hearing here is that this is, as of all things, there’s a degree of balance. don’t. Don’t try and, make a device last too long or too short a period of time. specify appropriately, go above perhaps what you think the need is, in order to give yourself some wiggle room. and in, in reality, all of these. Global trends and challenges are way outside of our individual control. and therefore we should just be advising a, you know, a, a moderate approach to this with, MSPs and MSPs to their clients.
Alicia: Yeah, that’s, that, that’s a fair assumption. and you know, again, if we see something that requires a minimum specification as a trusted advisor with our MSPs. We ourselves will take that up. We will say, here’s the minimum specification, but here is a step-up option. Again, allow us to be the experts in our field. you know, an extension of an MSPs, whether it’s a technical or sales. Sales. Sales engine, let us be an extension of that. Let you, you do what you are good at, we’ll do what we are good at. and with that, I think we have a, you know, that’s how we’ve built that community that, that we work with.
Adam: just got one eye on the clock and we talked very, we touched on it margin earlier, so I’d just really like, just to dig into that a little bit as well before we clo close the podcast. So, what can you tell us about margin in the market?
Alicia: Mar margin with us, I would say is 20% plus, because of the model that we have. if I see, you know, an HP or Dell, tender and you know, we’re asked a lot of times, look, you know, and the MSP will say, I’ve got no choice but to put HP or Dell in here. I don’t want to, it’s a race to zero.
and that’s the. the word’s coming from an MSP, so we chuck Terra in there to be that point of difference and give the MSP the motivation to promote Terra, because the chances are this end client’s probably got three or four tenders that are gonna come back to them with the generic HP Dell Lenovo device on there. What makes that stand out is, well, it’s a conversation starter who’s Terra? Who are they? You know, the MSP can make the margin. The MSP knows that we are not going to sell direct. we will get directly involved if an MSP wants us to help with a client. and we’ve done that, gosh, numerous times. you know, and we go there to support the MSP. so, so for us, you know, Mar margin has to be king there, there has to be. There, there has to be that opportunity to cover the costs and for us, you know, we focus heavily on how do we make sure our community make margin, because if you’re making margin, guess what?
You’re gonna come back for more. Okay.
Dan: I think that’s probably, probably a great place to, to, to finish the episode, with the aspiration of 20% plus. And I’m sure there’s plenty of MSPs, listening to this that, that, that don’t make 20% and therefore, that’s, that’s really something to, to perhaps think about.
And, yeah, how can I do that and not have other issues or solve other problems along the way? So, if anyone wants to carry on the conversation, how best to do that with you.
Alicia: so they can either email me (alicia dot s at terracomputer dot co dot uk) , or just reach out to me via my mobile. I tend to be out on the road quite a lot at the moment. and I’d be, I’d really welcome those conversations really welcome those.
Adam: Cool.
Dan: Brilliant. Very good. Okay. it’s been a really interesting conversation. it feel, feels like we’re talking about quite a, a historical topic, but still absolutely, relevant to, to today’s, MSPT, S-P-M-M-I-P, environment. So, so it’s been really interesting talking to you.
Thank you very much for joining the show.
Alicia: Thank you. for having me. It’s been a pleasure. Thank you.