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Westcon-Comstor rebuild gains traction, locally and globally

Westcon-Comstor rebuild gains traction, locally and globally

COVID-19 impact still being assessed, but may be less than initially expected

Dave Rosenberg (Westcon-Comstor)

Dave Rosenberg (Westcon-Comstor)

Credit: Supplied

Major distributor Westcon-Comstor lifted the lid on its local and international revival at its New Zealand Imagine conference last week, delivered virtually due to pandemic restrictions.

Dave Rosenberg, managing director of the company in New Zealand, told the virtual audience of over 1,200, said the event was helping to delivering a local IT industry kick-start.

Speaking ahead of keynote speaker Sir John Key, Rosenberg gave a local performance and strategy update while president and COO David Grant did the same for Westcon International.

Rosenberg told attendees Westcon-Comstor New Zealand had grown its top-line revenue by 32 per cent during the two years since the last Imagine show and also returned it to a "reasonably profitable position" after some challenging years. 

In 2017, Westcon's Americas business and 10 per cent of its international business, Westcon International, were sold to distributor Synnex. It also faced disruption from a long and disruptive multi-year SAP ERP implementation and a business process outsourcing drive which has since been reversed and replaced with a shared services strategy.

The Comstor part of the business was up 42 per cent to $91 million while the Westcon part grew 10 per cent to $116 million.

Growth in Comstor was fueled by double digit growth for Cisco in the commercial market, Rosenberg said. 

The appointment of a strong sales and marketing lead combined with moving away from non-profitable relationships while doubling down on the stronger partnerships delivered the turnaround,Rosenberg said.

"Because of that we have very strong foundations and are starting to see accelerated growth."

Westcon specialises across datacentre, infrastructure, collaboration and security, helping partners take advantage of innovations in analytics, AI, cloud, cybersecurity, IoT, SD-WAN and more. Comstor is all about major vendor partner Cisco.

Cloud growth since the last Imagine conference was up 40 per cent to $8 million, spearheaded by AWS, and Rosenberg forecast 50 per cent growth this coming year. Renewals were up 62 per cent to $42 million.

The New Zealand business had also become an innovation hub for the region, with a number of shared services for cloud and renewals and also for regional IT and projects. Rosenberg teased one more project that partners would hear about in coming months, a partner success centre.

Diversity within the business was a lot stronger than in the industry overall, he said with women occupying 41 per cent of leadership positions and 45 per cent over all. Other areas of diversity were also strong.

"The good news is we have done this purely by employing the right person for the right role."

Grant said after the sale of the Americas business, Westcon International, covering all of Europe, Middle East, Africa and Asia-Pacific, found itself spending the next 12 months answering the same question from customers, vendors and some staff: "When are we going to sell the rest of the business."

"Of course, what we realised was absent was we needed that two- to three-year plan," he said.

"We now have a three-year plan that clearly guides us with a number of goals to drive to a place that we believe will give us a much greater level of success."

The goal is US$4 billion in revenue (from US$2.5 billion at the end of FY2019) by the end of FY2023 which, even in the current situation, was "very achievable", given market share with key vendors and growth opportunities.

Another goal was to drive software sales from 28 per cent of revenue to 40 per cent and recurring revenues overall to 50 per cent.

"The reason why we want to focus on driving greater software sales is because firstly most vendor solutions are going in that direction, from perpetual licensing to more subscription billing and also cloud."

That offered the opportunity to both accelerate core vendors and to be well positioned to win new ones. The focus would also improve working capital and drive subscriptions and renewals.

Recurring revenue also delivered more stable income streams for the business.

"Our investment in our digital distribution platform means whether we want to transact hardware, subscription software or cloud, we can manage that for any one of our vendors," Grant said.

Grant said Westcon International grew only one per cent top line in the 2020 year, facing headwinds such as Brexit hitting the UK business, China trade and Hong Kong unrest as well as bush fires in Australia.

The bottom line, though, was strong, with profitability up 1305 per cent off a relatively low base set during the turnaround.

Customer, vendor and partner satisfaction were all up thanks taking back all the work previously outsourced while employee satisfaction had also grown during the year, from 67 per cent to 80 per cent year-on-year.

"Last year we really focused on process improvement and execution excellence and optimising performance of our systems," Grant said. "This year I really want to focus on the entrepreneurial approach and digital transformation."

That would require continuing to move processes closer to customers.

Praising the New Zealand business' leading position in working capital management and accounts receivable, Grant said New Zealand grew by three per cent top line for the year ended 28 February while profit was up 181 per cent.

The Australian business shrank slightly in revenue terms, but also grew profit, by 152 per cent.

"What you will see significantly across the course of this year is real focus on the data and digital first elements of the strategy," Grant said.

The combination of an entrepreneurial approach and digital transformation that would go much further than just platforms and processes, would help achieve Grant's goal for Westcon to be a "big small business and not a small big business".

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