SGI takes an indirect approach

While some companies look for more ways to sell directly to government customers, Silicon Graphics Inc. is taking a different approach to increasing federal sales.

SGI, Mountain View, Calif., announced agreements last month with government resellers GTSI Corp. and World Wide Technology Inc. to sell SGI products in the federal market. SGI sought those deals after EdgeMark Systems Inc., which had a long-standing reseller agreement with SGI, decided to exit the federal market in February.

New agreements with federal resellers should bring a better balance to SGI's federal sales and help the company achieve 10 percent to 12 percent growth in fiscal 2002, which begins July 1 for SGI, said Anthony Robbins, president of SGI Federal.

"We are a dramatically underdistributed brand," Robbins said. "We haven't in the past had a bunch of resellers. For resellers, this represents a new business opportunity."

The combination of World Wide Tech-nology and GTSI gives SGI a broader reach into the fed-eral market than its deal with EdgeMark, Robbins said. SGI products will be offered through GTSI's Science and Engineering Solutions Technology Team. World Wide Technology added SGI's products to its General Services Administration Federal Supply Service schedule.

SGI also plans to increase relationships with systems integrators for the federal government, he said. Federal sales supply more than 20 percent of SGI's annual revenue.

"Our intent is not to go from an underdistributed brand to an overdistributed brand in the same year, but our intent is to increase the availability of our product through the reseller channel," he said.

Robbins acknowledged that SGI's strategy is a shift away from the trend toward direct sales. Dell Computer Corp., Compaq Computer Corp. and Gateway Inc. have successfully moved to more direct sales, particularly online. At the same time, companies such as Unisys Corp., EdgeMark and BTG Inc. have gotten out of reselling information technology products.

Manufacturer Hewlett-Packard Co. still sells most of its products to federal customers through resellers, said Bruce Klein, general manager for federal sales at HP Public Sector. HP plans to get more involved in direct sales but wants to use a model its customers are comfortable with, he said.

"We're not at the point where we're bidding contracts direct," Klein said. "We're going to move into the direct space slowly."

Many manufacturers have a history of relationships with several distributors and are trying to achieve a better balance, he said.

"SGI has been almost all direct, so we're looking for a better balance of having distributor channels," Robbins said. "Both strategies are to achieve an appropriate balance for the business."

Companies like SGI could fare well in the federal market in fiscal 2002, according to projections from Jim Kane, president of Federal Sources Inc., who spoke at his firm's Federal Outlook 2002 conference May 10 in McLean, Va.

Kane said he expects to see an increase in GSA schedule sales, which SGI has gained more access to through its new reseller agreements.

Although there is no drive toward a new type of technology in the federal government, use of software solutions and legacy systems migration will create more demand for high-end servers, Kane said.

Robbins said about 80 percent of SGI's federal business has come from its high-end servers and graphics offerings.

"We have found that the federal government has a big appetite for capable servers and high-end graphics systems," Robbins said. "If the infrastructure is in place, then people will start addressing capacity problems and data storage. High-performance servers are important to answering that equation."