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A Thing

Industry Leader:
Scott Rutledge

A strong and independent spirit

Some people are meant to be entrepreneurs. They are independent thinkers. Dissatisfied with the status quo, they forge new paths. Scott Rutledge, President and Chief Executive Officer of The Phoenix Group, is one of those people.

Rutledge's payments industry career began in 1990 when he was a sales rep for Stonewest, an equipment distributor based in Wisconsin. Stonewest was an independent company that held a Midwestern distribution territory for VeriFone.

In 1994, he joined The Horizon Group as Vice President of Sales and Marketing. It was purchased by Hypercom Corp. in 1998. Rutledge stayed on until November 2001, when he founded The Phoenix Group.

Five fabulous years

Rutledge uses his independent status to benefit both his customers and employees. "One of the benefits of being independent is that I can treat employees as I've always wanted to," he said. "I can treat customers as I want to; and I can grow the business as I want to."

In five short years, Rutledge has created the market's largest independent POS equipment distributor. Phoenix is one of the few POS distributors to hold agreements with Lipman, VeriFone, Hypercom, Ingenico, MagTek and other major POS manufacturers. It is also an authorized repair facility for Lipman, VeriFone, Hypercom and Thales.

Phoenix sells between 230,000 and 240,000 terminals each year. Being independently owned allows the company to be flexible and responsive. Such traits enable Rutledge to customize services and form personal relationships with customers. "The Phoenix Group has one owner and one direction," he said.

Anyone who owns a business knows such freedom comes with a healthy amount of risk. Rutledge understands this risk and credits his customer-centric philosophies for his company's success.

"There are a lot of people who have tried and failed," he said. "We are extremely financially stable. We have grown to be a formidable distributor because we treat our customers right."

Chay, chay change

Rutledge thinks rapid shifts in POS technology and the industry's maturity are two of the biggest challenges ahead. "Both of those bring possible paradigm shifts that will leave some companies and business philosophies behind," he said. Rutledge believes even more growth and advancement are on the horizon. As many in the industry know firsthand, as soon as a new piece of equipment hits the market, another is on its heels. Each new terminal has more functionality than its predecessors.

Rutledge cited the examples of wireless solutions and expanded memory options. "We can do things now we didn't even think of doing before," he said. "Wireless is going to change faster than people can expect. It's a breakneck speed."

Rutledge predicts we will soon see a multitude of new developments from equipment manufacturers. "Considering the pace at which technology is changing the classic countertop terminal, there is an enormous amount of churn happening in the market," he said. "The next 18 months will be unlike anything we have experienced in the 16 years I have been in this industry."

With increased functionality come regulations. For example, as technology has kept pace with security demands, the compliance requirements associated with payment terminals have become more rigorous.

Rutledge gave the example of encryption standard changes. But, he and his company work to make such requirements easy for ISOs to meet. "We are certified," he said. "We stay on top of it so customers don't have to."

Phoenix also anticipates industry changes, preparing itself and its customers, large and small, to remain viable in the market. "We are looking 19 months, two to three years to the future to see where the market is going," he said.

Opportunity still knocks

Due to the age of the industry, Rutledge understands the recent consolidation and predicts there will be more to come. Consolidation is "inevitable in this industry, given where it is at," he said. "There will be fewer of the smaller players in distribution and more consolidation in the ISO world."

Rutledge thinks ISOs prefer the ease and simplicity of just one or two sources for equipment. "This industry is relatively young. I see the market getting much more vertical in the next few months," he said. "Then they can spend their time doing what they do best, which is selling."

Rutledge knows that consolidation and change, in general, are unnerving for a lot of merchant level salespeople (MLSs) and ISOs. They are concerned about their survival. But he disagrees with those who believe we are working our way toward an industry with only four or five ISOs left standing.

"As long as there are opportunities for individual ISOs, and as long as an ISO can stay ahead or stay even with the technology curve, which is where I come in, then that guy has a chance," he said While Rutledge does not think increased consolidation and technological advancements are nails in the coffins of ISOs and MLSs, he does foresee a changed industry landscape.

"I think there will be more ISAs [independent sales agents] rather than ISOs," he said. "There will be more agents of larger companies than independent guys just starting out." He also believes it may become harder to get started in the industry. "The barriers to entry will be more prevalent, but that doesn't mean ISOs will go away or there isn't money to be made," he said. "It's a very bright future, so we will have to see."

Phooey to free terminals

Free equipment is a hot topic these days and there are about as many opinions as there are such programs. "I don't like it," Rutledge said. "It hasn't affected our business. If you look at the deals, it's not free. Nothing is free."

In Rutledge's experience, customers ultimately decline free terminal deals after scrutinizing the details of such programs. He doubts the frenzy will continue. "I am not sure it will survive until early next year," he said.

Steps to success

Rutledge is certain that to be successful, people need a clear idea of what's important to them. He, for example, is proud of his family and heading a company that lives up to its promises. "If you don't know who you are, what your guiding principles are, forget it," he said. "This industry will eat you alive."

He also pointed out the benefits of surrounding yourself with positive influences. The industry has its share of people who are less than reputable.

He advises newcomers to associate with respected, high-standing companies and individuals. "There are a lot of truly great people in this industry; hang with the good guys," he said.

Rutledge also thinks success entails building a solid business, rather than looking for immediate cash or instant wealth. "The days of a quick buck are gone," he said. "It is a great business to be in. With the technological changes comes enormous opportunity."

Come on down

Rutledge and his employees work to exceed customer expectations as they strive to be the premier POS distribution and service center in the country. Their focus is on building long-lasting relationships based on trust, quality and exceptional service. "We are a great consultant, a reference source. You are not going to get the runaround," he said.

Article published in issue number 060802

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