Last issue, Australian Reseller News reported on Ingram Micro's new partnership with Brisbane-based Q*Soft to distribute computer products throughout Australia. But who is Q*Soft and what are its plans for the Australian marketplace?
At 33, Douglas Heath has put together a group of six companies that outsiders might view as strange bedfellows. There's an air charter firm, a commercial print shop, several distributors of hardware and software products and a repair company. But Heath sees more synergy than diversity among the members of the family-owned group. He's just tapped into a lot more synergy by teaming one of his distribution companies, Q*Soft, with US distribution giant Ingram Micro.
The deal turns Q*Soft into Ingram Micro's Australian distribution partner and at one stroke opens a potential path to the top table for a company that, until now, has been a bit player in the market. While Heath is conscious Q*Soft's new muscle can earn it a seat at the table, he's not interested in starting a price war to get there.
"We aren't in the business of stealing market share because that will just drive down everyone's margins," Heath said. Q*Soft plans instead to exploit the depth of Ingram's inven-tory of 25,000 products, which gives it access to hardware and software that nobody else in Australia has, according to Heath.
"We believe we can be successful through having the right product at the right time in the right place. We'll compete in the mainstream with our major competitors, but we may not even be selling competing products," he said. "We'll be breathing new life into the Australian market by bringing in Ingram products that haven't been seen here."
Q*Soft is a Queensland company with a rollercoaster past. Launched in 1985, it got off to a fast start by becoming Microsoft's first Australian distributor. As recently as five years ago, it continued to enjoy exclusive Queensland distribution rights for Microsoft products. It was also a large Epson reseller and was handling NetComm and Aldus products, Heath said.
Taken together, those lines of business left Q*Soft well in the comfort zone but its growth had reached a plateau, and founding directors Margaret and Ross Calder decided the time was ripe to pursue other interests. Heath had strong reasons for jumping at the chance to acquire Q*Soft. Firstly, another company in his group had formed strong customer and supplier relationships with Q*Soft. "We couldn't risk a hostile takeover of it," he said.
Mates with Microsoft
Q*Soft's association with Microsoft was the second reason for his interest. "We could see the writing on the wall and it said if you're in software and you aren't a Microsoft distributor, there's not much of a future for you in this country," Heath said.
Since buying Q*Soft three years ago, Heath has pushed it up a steep growth curve, adding Canon, Compaq and Banksia products to its stable, and lifting turnover by 200 per cent. Heath says he has no intention of allowing Q*Soft to slide back into flat growth. The concept of critical mass is pivotal to his business philosophy, and critical mass in Heath's terms is an annual turnover of $50 million. He says only organisations that achieve that level of sales are able to command credibility in Australian financial markets and those who fail to achieve it are doomed to stagnation.
The Total Group, of which Heath is managing director, is dominated by companies headquartered in Queensland and focused on the computer industry. However, it also includes a Sydney freight airline.
Besides Q*Soft, the group's member companies include:
Basair Australia, which operates a fleet of 14 charter aircraft out of Sydney. Its light aircraft, headed by an 11-seater Piper Chieftain, are hired out for freight and training services and are also used by other companies in the group for ferrying sales reps around the country.
Intellitron, a distributor of what Heath describes as more esoteric product lines than the flagship offerings of Microsoft, Compaq, Canon and Epson.
Q*Print, a commercial printing company and mailing house that also functions as a service provider to the group.
Q*Service Australia, primarily a printer-repair centre, particularly for Canon and Epson machines.
Total Computer, the 14-year-old parent company of the group and basically a holding company.
Each company in the group is headed by a general manager with an equity interest; how-ever, sole financial control of the group rests with the Heath family. Revenues of the Total Group should reach the $50 million mark next year, according to Heath. That still leaves a huge disparity with its new partner, whose group revenues are nearly $15 billion. However, there are telling similarities between the two groups that helped seal the deal with Ingram, Heath said.
Both are family-owned, both have diversified into transportation and both see distribution as the common denominator among their various companies. "They looked at us and liked our style of business. They saw themselves 30 years ago," Heath said.
Ingram has not bought equity in Q*Soft, he stressed. "We'll run this for awhile as a close partnership, but Q*Soft will still operate autonomously in its own right while using the Ingram name and logo on its letterhead and representing them as a distribution channel."