From the garage to $9.5M in sales, this VAR knows it when it hears it over the internet
By Mark Larson
Gia McNutt is sitting in her office at Special Order Systems in Rocklin’s Atherton Tech Center, thinking about the old days. She met her husband Lawrence in Los Angeles in the late ’80s while pursuing an acting career. For a day job, she found work selling computer equipment and eventually built a $2 million account with a Fortune 500 company.
After another sales stint at another computer hardware reseller, she and Lawrence, who she describes as “a visionary” and “a maverick,” started their own business. Not in the garage of their Tujunga home, but in the basement and the garage, where their office shared space with racing motorcycles, says Gia.
But the cost of living was high in Tujunga. Then there was the big earthquake in Northridge in 1994. They decided to move to Sacramento to set up shop, where their two employees could afford to buy a home. The Sacramento Area Commerce and Trade Organization made it clear their business was welcome. So, the McNutts packed and moved.
Such was the birth in 1994 of Special Order Systems, a company known in the information technology industry as a VAR — value-added reseller — of technology made by industry giants Cisco Systems, Microsoft Corp. and NEC. It has local and regional clients in the Bay Area, Central Valley and Reno. National clients include Trader Joe’s, Cycle Gear and Vegas.com. It specializes in VoIP (voice over internet protocol) or less formally, digital phone systems. While SOS competes with the big phone companies, its customers tend to be mid-sized, from 75 to 1,000 phone and computer users.
At What Cost?
After the company took a hit in the wake of the tech-market implosion of 2000, and the 9/11 attacks a year later, the McNutts were wondering whether to continue on with the business.
“The world got very ugly — much uglier for IT firms,” says McNutt. From 2000 to 2004, she says they often asked each other, “What the hell are we doing? We can make more money doing something else.”
But they stuck it out. They didn’t lay off staff, but flattened out their management from five to two, and made one of their engineers a working manager. By mid-2004 they saw a small upturn in business.
“Things got better,” says Gia, “there was more business optimism.” The orders for VoIP phone systems started flowing. So much so that the McNutts decided to focus on supplying as much VoIP demand as they could. And they also decided to have children along the way, and now have a two- and a four-year-old.
“The kids have been a tremendous clarifying catalyst,” says Gia, noting with kids there’s never any time to waste on unproductive moves at work. “It’s given me a no-B.S. approach on what to focus on.” Gia is CEO and Lawrence is director of professional services, managing design engineers, and pursuing his vision of how best to serve customers. “We’ve been involved in management planning together,” says Gia. “We’ve evolved very well in the last few years.”
Things Get Hectic
One morning Gia asked her staff, “Where’s Lawrence?” “At a meeting in L.A.,” she was told. “Oh, OK, good to know,” she replied. But all that drive and focus has generated a steady path of growth for the company, as it pursues VoIP and other promising business avenues.
Last year the McNutts hired a director of sales. And the business will move to a bigger space — from its current 8,000 square feet to 12,000 square feet just off of West Oaks Boulevard in Rocklin by year’s end.
For fiscal 2005 ended in January, SOS had $7.5 million in revenue, $8.7 million in fiscal 2006 and $9.5 million this fiscal year, yielding a gross profit of $3.8 million. For the upcoming year, SOS has a gross profit goal of $4.75 million on revenue of about $11.5 million.
The company’s calling card is its customer service. It sells phone systems, but it also customizes, installs and maintains them. And even though they have competitors such as AT&T and Quest, they have no problem getting customers. They may start doing a small job for a client, but those accounts often turn into big ones, when those clients are happy.
Kevin Bender is one of them. He’s CIO of American River Bancshares in Rancho Cordova. He initially hired SOS to put in a traditional PBX phone system as well as a VoIP, and handed off the office’s information-technology job to another vendor. But the vendor wasn’t responsive enough, and he decided to give that job to SOS. He liked the company’s commitment to service. “You have to earn it,” says Bender. “They’re a lot like us. We thrive on personal relationships with clients. And that’s how we like to do business with our vendors.”
Calling All Call Centers
This year SOS will open a new office in Phoenix, Ariz. to chase call center telephony business. Phoenix has a high concentration of call centers. And in the next few months, SOS plans to hire three or four more staffers; a sales person, and a pair of engineers to set up and run a formal help desk for clients.
Ken Wasmer is a Louisiana-based telecom industry consultant. He says SOS started out like many others in the industry, primarily selling hardware. But technology changed the market, and he figures SOS has survived by helping client companies become more efficient and profitable.
“Lawrence has really delved into the type of technology they sell,” says Wasmer. “He really, truly understands how to develop a true solution for the client, instead of selling a pre-packaged technology.”
Such customization is big for a company with its own set of needs, says Wasmer. “Everybody talks about solutions,” he says of vendors. “The difference is SOS actually does them. There aren’t that many like that out there. That’s why they’re growing.”
The VoIP market, he says “is far from mature, it’s very much in its infancy.” He predicts it will continue with robust demand for at least the next five years. Business will continue changing over to VoIP phone systems, he says, because they can do so much more than the traditional phone system.
“I can take my phone to Boston, plug it into the internet, get my phone calls,” he says. “I’m not tied to the telephone line in my office.” And VoIP lets him get his voice mail over email.
“The power of a VoIP phone system is phenomenal,” adds Wasmer. “It’s the difference between computers and calculators.”
Gia McNutt sees a growing demand coming over the next five years to help businesses make the most of available technology without much of an IT staff. The niche, called managed services, provides blanket IT support for a fixed fee.
“People need predictability of expenses and productivity,” she says. Other emerging telecommunications business she sees include:
• Technology enabling “find me/follow me” connections with one number
• Dual mode phones that can be switched back and forth between office network and cell phone providers to keep a lid on costly cell phone minutes.
• More sophisticated internet protocol communication systems that put a client’s full purchase history on a screen for better customer service.
• Call centers. McNutt says most domestic call centers these days have 50 people or less and need phone systems for “virtual agents” that can be anywhere — including home — while answering customer calls. They’re linked to promotional websites and family-owned businesses wanting strong customer service for relatively low cost.
Beyond that, SOS has industry white papers on its website, an attempt to be an information source while marketing company services.
These days, the McNutts have no plans to sell their business. But Gia qualifies that. “I’m not going to lie,” she says. “If an amazing offer comes around, yes. But we’re not looking for it. We’re so well poised, if we don’t reap these benefits, we’re selling ourselves short.”
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