John Murphy revisits Photonic Solutions, a UK distributor that has continued to build on its early successes
In the early days of lasers, people were happy to buy a few pieces of equipment and bolt them together, hoping it would all work. But the laser business has grown up. The companies that use lasers, whether in their R&D or as part of a larger solution, want to be able to buy a working laser as easily as they can buy a working car.
They are spending a lot of money sometimes and don’t want to spend it with a company that is going to run out of money next month, leaving them high and dry without spares and consumables.
Photonic Solutions has emerged to meet those needs. It takes away as much of the risk as possible by carefully selecting financially stable and technically proficient suppliers, and then standing by what they sell. Maybe the sticker price is more than some outlets, but if you are talking to a sales person who actually knows the market and knows the applications, they can often find a much lower cost way of delivering what the customer wants. Does this mean the laser market has come of age?
Douglas Neilson founded Photonic Solutions in 1999, specialising in lasers for research and light industrial applications and focused on the UK and Ireland. He had formerly worked for Edinburgh Instruments, a laser manufacturer. He says: ‘In research, people buy one or two instruments for their system, or something that can be configured for their application. The light industrial market is different in that what the customer wants is something that is very well defined, repeatable and reliable, but those systems into which those lasers are being built were at one time research devices. So the markets are very closely related – even though it may not seem so to the end user.’
Since then the company’s turnover has grown by about 30 per cent per year, and there are now 10 people on the payroll. Half the staff have PhDs and four of them are technical and support staff. The number of manufacturers it represents has stayed about the same but, over the years, the line-up has changed. On the one hand it represents the commercial laser division of JDSU, while at the other it has companies with two or three staff. Larger client companies tend not to be set up to deal with research orders of a few devices, while at the other end the companies are too small to have any sales coverage outside their home market, so distribution helps.
From the customer’s point of view, Photonic Solutions aims to be more than just somewhere to buy what they need. It wants to be somewhere where customers come for advice about what to buy and that being on its list of suppliers means something.
Neilson says: ‘We only represent in the low 20s of companies, and we will not represent any more. We like to think that everyone here knows something about every company with whom we partner. Also many of the projects that are coming forward are increasing in size. We are now getting involved in projects worth more than £500,000 and, at that level, people are looking to reduce risk. They do not want to buy something from someone who either will not deliver or, worse still, will deliver and then go bust. They do not want to be left with something that is unsupported or design-in a component that becomes unavailable.
‘One of the things we do is work only with companies that have been going for many years. You can work with new companies, but you might end up selling people something that is not available in a year’s time. We want stability. ‘A lot of companies start with a research group that makes a laser. The problem is when they need to scale up and start producing something for customers who need a reliable supply. That is where they come unstuck. What we are doing is offering lower risk to our customers. Since we started, only about two people have ever left our company. If you phone up some of our competitors, you are often talking to a different person each time. The low staff turnover means that our customers are usually dealing with the same person from day one, which means that when they phone in, that customer knows the person and what they are doing, rather than having to go through a process of introduction.’
One of the biggest changes Neilson has seen in recent years is the number of large tenders that are coming the company’s way. In the early days, sales could be made over a telephone conversation, but now it can take five days just to complete the paperwork. He is nearly at the stage where he has to employ specialists in tender paperwork. He says that sometimes the paperwork is not scrutinised with as much care as it is prepared, and he can recall cases of contracts being awarded to companies that have gone out of business.
He says: ‘We are formed as a PLC so that our customers and suppliers can easily check out our financial position. These days financial security is becoming more important, because customers are getting very nervous about the financial stability of a company when the tenders are getting to the value of £250,000. Customers are much more careful about checking out companies, where a few years ago they were not.’
He says that one of the reasons that tenders are becoming larger and more complex is that while the market for laser systems is growing, the number of people who are technically capable of putting them together is not growing at the same rate. The other reason is that customers want to shorten the time to completion. By using a company like Photonic Solutions, they are saving considerable amounts of time against putting a system together from components themselves, even if they had the technical capabilities in house. Neilson says this does not mean the company is becoming an integrator.
He says: ‘Integrator is too strong a word. We are putting together a system from subsystems, but we are not going to the end customer and integrating it into the applications. We are just putting together subsystems into larger systems.’
Another way that Photonic Solutions adds value is when it comes to advising customers. A pure sales shop would be delighted when a customer asked for a nice expensive piece of kit, even if something much cheaper, maybe something new to the market, could do the job just as well. Part of the problem for many companies and researchers is that not only do they not have the staff or expertise to put together systems, but also they do not have the time and expertise to constantly monitor the market and get to know the capabilities of everything that comes onto it. Neilson believes that while in the short term the company may lose a valuable sale, in the longer term it is gaining a valuable customer.
He says: ‘We take a medium- to long-term view that the customer will remember that we gave them advice and they got something cheaper that did the job better. What we have is knowledge across a wide range of technology. Our people are qualified and in a good position to give customers advice, and help them to select the best laser for their purpose. ‘There are circumstances where customers cannot be completely open with us and we respect that. But for customers, time to market is crucial and, if there is a way to save time, then that can be very useful. Some of the more go-ahead guys who write tenders these days write the documents in a very open way and allow companies like us to be creative. Tenders should never be written around a specific piece of equipment. They should be written around a specification of what they actually want. We have won tenders where the user got something completely different from what they imagined they wanted, but which did the job.’
A selection of products available through Photonic Solutions
Photonic Solutions has always focused on the UK and Ireland, largely because that is the area covered by the terms of the contract with its suppliers, but Neilson sees evidence that there could be a demand for a company like his in other countries. Its web shop is open to all comers and on occasions customers used to dealing with the company, but who have moved to other countries, come on the phone because they are not happy with the service they get from the local representative in their own country.
Neilson has considered expanding into other countries where there are clearly opportunities, but he says the main problem is getting a group of the right sort of people together so that he can guarantee the same level of service as is delivered in the UK and Ireland.
He says: ‘There is probably room in each major market for two or three companies like ours; after that it would get rather confusing. So, there are some opportunities if the right team could be put together.’ This was particularly true during the telecoms boom, when Photonics Solutions got going. Neilson knew nothing about telecoms, so he decided not to get involved in that market and had a lucky escape. At the same time other companies believed they were going to make so much money from telecoms that they turned away non-telecoms customers into the hands of Photonic Solutions.
The telecoms boom also meant that a lot of money was put into fundamental research of lasers, and that is spinning off into the general laser market. One of Photonics Solutions’ most important suppliers is JDSU, which on the one hand supplies lasers by the truckload to telecoms manufacturers, but also leverages its fundamental research into the general laser market.
Neilson says: ‘There was a lot of investment in photonics because of the telecoms bubble and today you are getting spin-offs into other areas that would not have been possible, because of the investment in R&D. There are new lasers that are now becoming available because of that research, which can do things that could not be done, or could not be done economically, with the previous generation of lasers. Obviously the wavelengths are different, but they have modified telecoms technology to be able to make the lasers in the same way that they make telecoms components by the tens of thousands.’ The last new company that Photonic Solutions took on was the German manufacturer APE, which makes ultrafast diagnostics.
It is a small company but it has been going for many years with its equipment badged by some larger suppliers. Neilson took them on because their equipment works with lasers from other companies that it represents.
He says: ‘What we try to do with our companies is that we try to distil them into higher quality every year. When we add a new company we try and let one of the weaker ones go so that the portfolio gets stronger every year. At the moment I am very happy with the suppliers that we have, but a few years ago we had to drop some of the companies that were just not delivering high enough quality. We are not actively pursuing anyone at the moment, but we do have many suppliers interested in us. The first thing we usually do is make sure that there is not a conflict with an existing company and they have something unique. We then investigate the company very carefully, financially, by visiting them and by taking up references. It usually takes about four months at least. We do sometimes miss out on opportunities but, in other cases, our due diligence has prevented us getting a few nasty surprises. What this means is that we are saving our customers a lot of grief down the line. It is a very conservative approach, but we think a sensible one. We are protecting our customers.’
Neilson believes that the growth of his company will continue with this approach to about twice its current size and then the market sector will be exhausted. He has no plans to change in the short term but, ultimately, he believes that there might be opportunities outside the target markets of research and light industrial use. Those new markets might be hard to find, but he believes that new markets will emerge that suit his business model.
The problem will be, as with other chances for expansion, finding the right people to support the new product lines.