The decision by Com Tech to split into network integration and value-added distribution last year was perhaps the greatest shake-up in the channel since the takeover of Merisel. Wise heads in many quarters estimated the move would be detrimental to the company's distribution business, but all readings now indicate the new Express Data is growing at an enviable rate.
ARN's Brad Howarth spoke to Express Data national sales manager Ross Cochrane about his company's short historyIn an industry that's measured in such periods as Java years, eight months can be a long time. But when it comes to the channel, eight months can also seem like yesterday.
Thus, for many resellers it was only yesterday that Com Tech split its business model, entering into network integration and slicing the value-add out of its distribution business.
Many in the channel (the press included) felt the ill will generated may have irreparably soured the company's reputation as a distributor. At the very least, abandoning value-add may have diminished the reason for a reseller to call on them.
But now Express Data, the distributor that emerged from the transition, is set to turn over $130 million in its first year - a figure comparable to that of the old Com Tech once revenues from training and videoconferencing businesses are taken out.
"They say time heals all wounds," says national sales manager Ross Cochrane. He is not surprised that ED is doing well. "The last six months have shown that resellers are basically good business people. And where they want the best deal and service in the marketplace, they will put the issue of ownership and any conflict as one of the buying criteria, not as the sole criterion."
As Com Tech managing director David Shein acknowledged at the time of the reorganisation, diversification of the business was going to come at a price. While it is true that ED no longer holds exclusive distribution rights on its core products (Novell has signed Stream International, Bay Networks has signed Westcon and so on), Cochrane is confident that ED has maintained a dominant position with most of those vendors. It is still the largest Novell distributor in the Asia-Pacific region, and continues to eclipse Westcon in the Bay arena.
However, Cochrane says ED is watching Westcon closely, and will compete for every percentage point. "I think people like to feel that there is competition over products, and they will shop around. Our focus has been on ensuring the quality of service that we deliver, and to try and outperform them on that."
While ED may have conceded ground in some areas, it has managed to grow in others, through absorbing two new product sets into its portfolio. While the embers of yesteryear may have helped the renewed relationship with Cisco Systems, taking on distribution rights for Microsoft pitched ED into a whole new area of the playground - volume products.
Cochrane believes that since signing on as Microsoft's sixth distributor, ED has climbed the ranks to be number two. The reason - that ED's core strength is distribution, plain and simple.
"We've got the critical mass, and we're turning enough revenue to allow us to invest and put the systems and people and the coverage around the country in place," said Cochrane.
"There's not a lot of ability to differentiate with the Microsoft suite, perhaps other than with Back Office," said Cochrane. "We've proven that by using our core competencies in distribution that we can grow the volume of broad based products in the market." Indeed, ED was recently named Microsoft's fastest growing distributor.
Quality in volume
Indeed, growth is one of the most used words in Cochrane's vocabulary. "Because we changed the model from being value-added and reasonably heavily focused in one sector, to be more broad-based in the products we take to market, and time and place oriented.
"In the big picture, that means we've become a lot more competitive in pricing, and we need to grow our revenue lines in order to sustain the profitability of the business.
"With both Cisco and Microsoft, we've shown that we can grow the business by taking new products to market irrespective of what distribution arrangements they already have in place."
But Cochrane says ED will not race out and sign up everything on offer, and has already turned down offers from numerous vendors. "It's a case of saying we need to digest a product, and that takes time. And Microsoft and Cisco are large products.
ED will pick up new products from where it has regular demand from customers. But Cochrane says it will also look at emerging technologies. "The Internet/intranet space is obviously a big growth area with new technologies, and obviously with Netscape and Microsoft we have the expertise there. And then we'll also look at potentially newer technologies."
It would be wrong, however, to say that value add is no longer a part of the ED model, as it does maintain a complement of seven presales engineers, on call to assist in putting solutions together when resellers need them.
The difference between the old model and the new model is this: "We will not get involved in end-user accounts. The reseller has got to take whatever value we provide them, and they've got to translate that into a value that they deliver to their customer.
"Most of the vendors now are building follow-the-sun support models. And support for them is something they see themselves as having responsibility for," said Cochrane.
ED has been focusing on increasing the knowledge base of its resellers, both through the "Skill Up" training promotion and through a series of sales-based educational seminars. Cochrane says these are designed so that a reseller can walk out with at least the ability to identify opportunities in clients, along with the key requirements needed to put a solution together.