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Nick McMenemy: More channel consolidation to follow in 2015

Nick McMenemy: More channel consolidation to follow in 2015

Westcon’s former director of vendor alliances lays out his tips for 2015

Westcon Group's former director of vendor alliances, Nick McMenemy

Westcon Group's former director of vendor alliances, Nick McMenemy

Westcon Australia director of vendor alliances, Nick McMemeny, wrapped up his tenure on December 31, 2014, and took the time to chat with ARN about his predictions for 2015.

Nick McMenemy will be back.

And while he would not be drawn on his plans post-Westcon, he did say he has been offered a number of opportunities – despite his wife wanting him to retire.

“I’m going to enjoy my summer, I’m certainly in no rush. But retirement definitely isn’t happening,” he said.

McMenemy has held a variety of high profile marketing and consultancy roles in the Australian channel via Westcon, Thomas Duryea and Brennan IT. Before this he worked in international roles at companies such as Interoute, BT, AT&T (via Concert Communications), The Telegraph and Apple, to name a few. He wrote a book Cold Calls to Hot Leads and is working on a second.

He survived (barely) the dot.com crash through his own start up, and the GFC drove his Australian wife and family to these shores.

McMenemy told ARN he loved his time at Westcon, where he was good friends with ARN Hall of Fame inductee, David Henderson, and is proud of the team he leaves behind.

“I think I leave behind a good team. They’re capable and they’re credible. They’ve done some really good work. That’s my biggest achievement at Westcon. I’ve had my success along the way – we have pulled in some good deals,” he said.

During his tenure, McMenemy helped snare NetApp from under Dicker Data’s nose - Westcon now shares distribution with Distribution Central. Westcon also oversaw the SAP transition in the Australian marketplace, and won Cisco’s video value added distributor award earlier in the year.

McMenemy was happy to deliver his tips for 2015 – a year in which he believes the industry will see the emergence of the Internet of Things, huge competition on core network infrastructure, and consolidation across the channel.

“The major conversation around Australia is around networks. Whether we’re talking about NBN or Telstra or wireless or mobile. Networking and connectivity is what everyone’s talking about,” he said.

“There will be continued competition on core-network/datacentre infrastructure, from emerging vendors, emerging technologies and the new business models surrounding Cloud. There will be massive competition here in terms of price and performance.”

McMenemy predicts that, rather than there being an expansion in mobile networks, there will be a massive rise in public and private Wi-Fi hotspots. Telstra has already begun installing these on its old phoneboxes, but expect this to take off with new market entrants.

“Being a mobile phone company is very expensive. You’ve got to buy all the gear, put all these towers up, organise lease agreements and backhaul. What you can do instead is put Wi-Fi hotspots everywhere so you can do voice over IP, like Facetime audio. These companies are going to print money. BTs already doing it in the UK,” he said.

“If you’re a carrier, your voice termination revenues are under threat. They have to be with things such ase Facetime audio and iMessage. So where are they all going to get their money from? Where they used to – which is access. Connectivity and ingress to a network. That’s going to be pretty important next year.”

So where does the Australian channel fit in all this? He predicts that it will continue to consolidate in the face of pressure from major multinational vendors. But there is also some funny business going on.

“There’s a lot of people casting fear uncertainty and doubt. They’ve invested a lot of money in Cloud and they want some payback. Those Cloud business models are under threat, because you’ve got Amazon crashing the price, and then you’ve got Google and Microsoft – who I think will win – following suit. That means your three-year model, for a 100-person reseller, now blows out to five years to make a return. That’s what happens when you chase the price curve. I think that’s putting everything under pressure. So I do think there will be some consolidation, I think its inevitable,” he said.

Read more: EXCLUSIVE: Ingram Micro steps up mobility services play

It's not just the resellers feeling the heat, major distributors will also be doing some hard thinking.

“There will be some more distie consolidation, there’s a couple, perhaps one or two, still to go. I think the distribution landscape is going to change. We’ve proved that specialisation in distribution – focusing on knowing what you do well – is key. For the the big guys it's going to be tough, because it’s a low value game. They are really competing against Australia Post and DHL, [their distribution model] is really just a logistics and bank function,” he said.

“You’ve got these small disties, John Walters’ outfit [NextGen] is a good example – small, specialist, and very profitable. There’s nothing wrong with that! It’s a good business to be in.”

Vendor loyalty is also an issue. There will have to be a careful balancing act between using the channel to advance their own interests, and preserving margins – especially for the Cloud-based and software vendors.

Read more: Thomas Duryea's stellar start to FY16

“If you’re a vendor, you want the channel to do as much as they can, as quickly as they can, for enough margin to keep the channel sustainable, but not so much money that the vendor doesn’t make enough money to reinvest,” he said.

“The one thing the vendors don’t want is for the channel to collapse. If the small guys go, or consolidate, you’ve only got a finite amount of guys to place your bet on. You don’t want that, you want breadth of coverage.

“But I can also imagine a time when the vendors, not so much out of desperation, but a need for control, will start to think about more direct relationships, or different types of direct relationships. This may mean they support the channel – or they will look to circumvent it.”

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