Avnet COO, Rick Hamada, touched down in Australia recently to coincide with the distributor's acquisition of local networking security specialist, ChannelWorx. ARN took the opportunity to talk global distribution trends and local strategy with Hamada and Avnet's country manager, Gavin Lawless.

Avnet is best known as a high-end distributor but has been encouraging its resellers to engage in the SMB market. What progress has been made and how difficult is it to take your model into that space?

Gavin Lawless (GL): From a local perspective, our sweet spot is tier-two resellers offering complex solutions in the enterprise and commercial markets. We are helping partners grow their business by selling solutions that are slightly ahead of the technology curve. We see a lot of growth in tier-twos embracing SANs, virtualisation and niche security solutions. We are working with new partners all the time but our intention is not to grow a new channel. A lot of tier-two VARs don't have the capacity to sell things like blades so they use us to train their staff and engage the vendors. That helps us become more entrenched.

Broad-based distributors are also getting involved in the value distribution market. What impact has this had?

Rick Hamada (RH): We have seen Ingram Micro and Tech Data in the US building solution segments within their broad-based model but it tends to be a subset of their line card and to date it hasn't really affected our overall business. Value-add is a tough model when you are only making 5-6 per cent gross margin. What complex strategies can you afford to invest in? They are good businesses that are run well but their architecture is different.

For a global distribution giant, Avnet has a relatively small business in Australia considering how mature the market is. Why do you think that is and how are you going to change it?

RH: Our original investment in Australia was a systems integrator called Intergrand in 1999. That business then became a master reseller and we have only had 3-4 years in Australia as a pure distributor. We need to make sure we leverage relationships with key global vendors such as HP and IBM.

GL: It took a couple of years to bed down but we have become a lot more aggressive during the last 12-18 months. We have a strategy to grow our technology solutions around four key areas - IBM, HP, networking security, and storage. [Recent acquisition] ChannelWorx will become the cornerstone of our networking security practice. We will continue to look at other opportunities where they make sense. Our HP business has grown significantly and was up 92 per cent in the last financial year. We are becoming well known as a distributor to go to for complex HP solutions. Resellers use Ingram Micro and Dicker Data for entry-level products but our growth is in solution-based sales. We have signed more vendors, and will continue to look at other organisations that complement our business, but we are not broad-based and we never will be.

Are you interested in acquiring Cellnet?

GL: The Cellnet business is not aligned to ours. We have a bigger and bigger industry standard server business, and that's very exciting for us, but we are getting such extensive organic growth that I don't think [buying Cellnet] would make a huge amount of sense. Quite frankly, we are not interested in commodity products.

Are you seeing a trend for major vendors to work with fewer distributors?

RH: Top-tier vendors want to leverage relationships as globally as possible. I don't think we will ever get to a situation where those vendors work with a single distributor around the world but it makes sense to build on existing relationships in other geographies and share information.

What trends are you seeing in the evolution of value-added distribution?

RH: More solutions-oriented distribution is driving IT spending. There are so many choices in technology now that you need to go through before making recommendations. The more the industry adopts industry standards, the more opportunity there is to create value. Some distributors are going deeper into the specialty route, such as wireless and mobility, and others are tackling vertical opportunities. In the US we have just launched HealthPath, which teaches VARs how to sell to the healthcare market. We are all looking at ways to get deeper into solutions. We don't mandate global strategy at Avnet but we share experiences between our business units.

Are you seeing consolidation in distributor numbers around the world?

RH: In the US it's basically Avnet and Arrow in enterprise distribution, and it's shaping up the same way in Europe, but Asia-Pacific is still a wide open space. Azure [which Avnet acquired in April] is only our second enterprise presence in the region after Australia.

What is the biggest challenge to your business today?

RH: Growth. We have great coverage in markets that appear to be growing mid single-digit but we want to outgrow those markets. Increased customer benefit, customer expansion and vendor expansion occupy a lot of my thinking time.