Westcon Group's NZ MD, Dave Rosenberg, talks to Reseller News on the growth of the firm in the country, its future investments and the changes he sees on the horizon - changes that might lead to consolidation and cash flow problems for resellers and service providers.
Q: How long have you been with Westcon?
Dave Rosenberg (DR): Between Datastor and Westcon that would be 14 years in total. I was part of Datastor's business, which was a locally owned storage and tape backup provider. In 2010 Westcon bought us, and I moved over from Datastor. Westcon was in New Zealand already with around 6 people, Datastor had around 70 odd people. We integrated the two businesses together.
Q: How big is Westcon now?
From a revenue perspective we don't actually publish the results. But I can tell you that we were just shy of $200 million this year. We had around 104 staff at last count. Most of our people are in Auckland. We have one in Christchurch, that is about to become two. We have got five in Wellington. We have always had a reasonable presence in Wellington. We are just investing in Christchurch. We think that is a big growth market for us, with all the changes and the rebuild going on there.
Q: Can you trace the development of Westcon in New Zealand?
We had a marriage in 2010 and it was a perfect relationship coming together. Datastor was very strong with reseller relationships and Westcon traditionally was, and still is, very strong from a vendor perspective. So you had two very distinct facets to the business.
What we did when we merged the two together was that we created two sales teams. So we have got one that focuses on the vendor base and one that focuses on the reseller base. And that is what really worked for us and helped our growth. Our role in the channel, and I have said this quite publicly, is to really understand what our vendors require, what help they need in the marketplace and provide it. And you have to understand that the resellers know the customer business better than we do. So it is about listening to them and understanding what their goals are for the next 12 to 18 months or even two years, and developing strategies to work and support them in their business drive. We have lived by that model and achieved growth in what has been quite a difficult market.
Last year, at Imagine, our large event that we run every year, I said we have seen certain areas of the market change, including the data centre space, which creatted certain challenges. It is quite easy to see why. If you look at the move from one premise procurement to outcome-based purchasing, it has had an impact on the data centre space. You are selling technology to maybe the managed service providers to develop a service, which they are then selling as an outcome based service to the end-customer community. And what it does is that there is a period of time when your on premise revenues are going to drop even though out of it we will have a far stronger business.
Moving forward there are a lot of changes that will need to happen and the reseller community needs to change also.
Q: What kind of changes should they be adopting?
Everybody needs to decide from a reseller community what part they will play in this new outcome-based purchasing. Cloud's a lazy word for it. It describes a whole bunch of things. But the reality is, whether you are providing IaaS or you are hosting or providing email archiving or CRM services or storage or infrastructure - it doesn't really matter what you are providing, it is about what your place is in there.
We are also seeing a strain on some organisation's cash flow because there is a big cash difference in buying three year's up front than, getting payment per month. That has an impact. There a number of changes coming or already in place. We are seeing a lot of our reseller partners make some positive changes in the way they want to be and how they want to play in the space. Some are specialising in traditional IT, some are doing some cloud services. Polycom has been very strong for us in the video space - that is a growth area. So is networking and our work around Juniper.
We have seen that grow significantly because what is happening is as people move into off-premise environments they need better networking infrastructure. We have seen growth in the data centre space. EMC is growing at a rapid speed and we have seen some good growth in that space. IBM as well from a traditional infrastructure space, and Cisco with UCS. So we have seen good growth, but you are selling to less partners who are using them to deliver outcome based services.
Q: How is Westcon enabling resellers to make the changes necessary to tap the market better?
We have a clear Cloud strategy globally. NZ is the first pilot region. We have gone live with that and we have just launched a couple of localised Cloud services. We have a whole bunch of internationalCloud services going in there as well. We are not going to be a Cloud provider ourselves, because that would mean competing with our own channel. We are just enabling cloud services to be purchased.
That is the first part. The second is that we are enabling the managed service provider (MS) that wants to deliver the cloud service. We are helping them build that.
The third area involves system integrators (SIs) and resellers. We are working with them to understand what part they play in all this. There is still a huge amount of opportunity in cloud integration and cloud service integration. I don't think that is going to disappear. I think the way some of these partners have made big money out of building Exchange servers and email boxes are going to be more about how do you integrate those offshore or onshore services into customer environments.
So we are gearing ourselves up for changes in new revenue patterns, ontinue to do our traditional business that's around selling infrastructure to those who still want to buy, and thirdly enable service providers to build the services they want to build. That's the three areas of focus for us.
It is not one strategy. It is not like running a race. In this market you can't have a goal that is all about winning a race. You have to be in multiple markets and multiple purchase environments. Ultimately the business is still about distribution, it just will be different types of distribution. Like, we use digital distribution quite commonly in our business.
And we have got multiple strategies with different vendors, resellers and service providers and different vertical markets. Traditional IT resellers and SIs might not be the one selling cloud tomorrow. Some will be. But I am not in a position to tell our resellers how they should be running their businesses.
Q: How often do you bring your partners together for training?
We have got a strong pre-sales and sales organisation around helping and supporting resellers in training, enablement and seeing what comes next. Westcon heritage and Datastor heritage has been very strong in bringing new technologies to market. We do that all the time.
There is a whole bunch of stuff that we are doing all the time with different vendors around training and enablement. It is a continuous process and especially since our business is quite customised. We are quite different from many of our competitors. We don't have a cookie cutter approach to the way we distribute. Our goal has been to create advocates. Whether these are resellers or vendors, we want everyone who touches our business at these various points to have a great experience, and that is what we are focused on.
To do that you have to develop a model of strategies so that people get value. I don't like the term value-added distributor (VAD) anymore, because it is commoditised. In distribution today you have to provide good logistics, you have to provide good systems -that's the basis of being a good distributor. That is not any value, that's actualy disribution.
Then it comes down to how you make unique offerings off the back of that. You don't design or develop products as a distributor. The only IP and value we have is the stuff that we work around. Westcon does that pretty well both locally and globally.
From a Westcon perspective, NZ and the ANZ region is very strong in the datacentre space, and where we have been very strong traditionally in the networking and security spaces within the datacentre.
Q: How will Westcon's strategy change or be modified in the next couple of years?
That's assuming we know what's coming. There's always going to be things that come that you don't see. There are going to be things that we see as the next big thing that may or may not happen. The thing for us is to identify where we think the biggest opportunities are.
Certainly outcome-based services and cloud are areas that we identified three years ago as big for our business. From a NZ perspective we identified that NZ was going to shift quicker than anywhere else in the world. Some of the unfortunate natural disasters that happened in NZ forced people to move quicker than they would have as well. We as Westcon are very well positioned with a strategy to maximise opportunities and our Cloud distribution platform is a market leader.
Q: How do you see your security business play into the Cloud and datacentre space?
It is two-fold. The MSP wants security. That's about selling infrastructure and it is about how they want to buy it - whether they want to buy it per-use basis or whether they want to buy it upfront. That's just about how they want to transact that business.
And these models are based on whether vendors have programmes around it and sometimes we have Westcon finance. There are multiple ways we can actually do that. That's the first part.
The second part is that once the MSPs have built those technologies what is their route to market and how do they see people buying that. So because we can sell technologies into the MSP, we can also help them develop a market for those who want to resell those technologies to the end customer level.
There are two areas in which it makes sense. Security can be built into an infrastructure at the backend but also sold as an outcome-based service. So security vendors are heavily in this space, and some of them are working out how they want to play in the hosted services space.
The interesting piece there is - and this is a vendor question - once you start developing your own services in the space, you almost compete with MSPs. They have to decide what they want to be. And then you have new disruptive players now coming in like Amazon, Rackspace, which are global services. This is not just about security but potentially about taking dollars from the market.
At the end of the day there is a lot going on in the space. There are certainly people - and I know companies in NZ - who use all those technologies. It comes down to the business deciding how they want to deliver what they want to deliver. Certainly, what we are seeing is that reseller partners are considering how they want to play in this space. That's really what they see as the opportunity around that space.
There is a really good opportunity for NZ-based companies to have localised commoditised infrastructure that sits in a datacentre in the country. There is an appetite for that. And some of the partners are doing that. I suppose that is competing a little with the Amazons and Rackspaces' out there, but they can have a different proposition I think.
Q: How do you think your partners should differentiate themselves in the market?
That's up to the partners to decide. At the end of the day it really does not come down to me - they know their business and customers better than I. Really I am sure they have far better strategies than I could ever dream up.
Once we understand that, and we do spend a lot of time talking to our partners, then we can actually support whatever their strategies are. As I said earlier, our business is not about winning a race to the close, it is about all of these multiple races going at the same time.
Q: What are your investment areas going to be within NZ going forward?
Some of it is quite strategic and I am not ready to talk about all of them. We have got three or four markets that we have identified and vendors that we have identified that we want to invest in. I have publicly said we want to do more with less. So you will see announcements soon about investing in some of our larger partners. You will see us talking about and see that change.
These will be investments with our existing vendor partnerships including the likes of EMC, which is a big investment for us, Cisco in the datacentre space, Juniper, Symante and IBM. These are just some of them, it is not exclusive to them.
We have multiple vendors some of whom have competitive products. We have to ensure that we understand the goals of each of our vendors. We are very good at ensuring that we have walls around each of them so we don't have the competitive pressure. Actually we are pretty good at delivering each of their goals and we are very careful not to deliver them at the expense of other vendors who might be competing.
We are not going to be everything to everybody. We have got 12 core vendors in our business. We have got a bunch of smaller ones as well which might be complementary, which are also very important, but we don't want to carry a whole bunch more of large vendors in our business. We are quite comfortable with what we have got in there.
Q: What shape will your Christchurch investment take? Will it be new resellers, new staff on the ground or something else?
We have realigned and changed our sales strategy significantly, which is why we have got these roles available. What I can tell you is that it is more about driving more value into the partners with vendor focused resources. I can't say too much more. It is quite strategic and we have got a plan around it. The market will catch up and understand what we are doing eventually.
We have started with the investment. It is off the back of talking to our partners. They want more help and resources. And that's vendor level and reseller level. It is about how we maximise at those two levels. That is what we are focused around.
Christchurch is just one area that we have identified. We are also putting some people in Auckland. And it is not just Christchurch, but South Island and not just Auckland but the rest of the North Island.
Q: How might your staff levels be affected in the future?
We have been fortunate in this market. One of my goals is to keep everyone employed. We have seen a number of businesses around us, and it is an unfortunate thing when businesses have to make changes around resources and staff. But I understand it.
It is about keeping the business and keeping the others employed. From that perspective we have managed our people pretty well. I don't see a major change in staff numbers. I can't predict what happens beyond my control -if the market changes or something big happens with a vendor. We have got an aggressive growth plan around the stuff that we are looking to do moving forward from operational perspective.
If anything, at moment, the staff numbers might go up but we are not going to be reckless about it. A lot of our products are specialised. When the good people come up quit often you are competing with the vendors and some of the partners out there to hire them, who generally will pay more. It is a bit of a challenge for us from that aspect.
But now we have a good group of people doing our business. We provide a good environment and they don't get poached often. I think Westcon is a good place to work. I talk to different parts of the business regularly and get their feedback. This has always been our strength.
Q: What do you believe are the challenges facing Westcon in the near future?
We have got a very clear strategy of what we want to be. I am quite excited about where the business is going. Any of the challenges we have got I think we know what our strategy is to deal with them.
There is still going to be a shake up around some of the resellers and distributors in the market here. It is a small market. I think there is more consolidation to come. Credit is a challenge - credit to the partner community. You talk to anyone they would probably repeat that. That is my two biggest ones.
Our value proposition, our reseller base and our vendor base - I think we have pretty well got that under control. The challenge is about taking it down to the market. Someone said to me the market will turn around. I don't think the market is going to turn around. I think the market's the market.
It is not about a market being slow but a massive change in people's priorities, commoditisation of IT and a whole bunch of thing that are happening that is creating the perfect storm. We will come out the other side, but I don't think the market is going to have a magic growth and we are going to see huge growth come back into it.