Avnet CEO, Rick Hamada and Avnet Technology Solutions (TS) Asia Pacific president, William Chu, were recently in town to meet with key suppliers and partners. Along with Avnet Technology Solutions vice president and general manager A/NZ, Darren Adams, the three leaders met up with ARN’s Julia Talevski to talk about the next wave of distribution and how disruptive technologies such as Cloud, are influencing the pace of change in the market.
What will be some of your top priorities in 2015?
Rick Hamada (RH): The Avnet team often hears about the three Gs - profitable growth, globalisation and great people. I try to remind myself and the team that despite this overall economic picture that there may be small moderate growth from an aggregate perspective. There are always stories underneath where there are winners and losers, so what we are doing is allocating our resources to make sure that we’re steering to where the good growth is and hopefully taking those resources away from where it’s negative or declining.
Globalisation for Avnet is a major theme around turning global scale and scope into global assets and the benefits that we have into local benefits for the Australian market. For Darren and the team, what can Avnet bring to the party to make them more competitive and differentiate their position in the Australian market? Whether it be our financial strength and stability, some of our global technical resources, great practices or good ideas of growing market segments or certain suppliers and certain customer segments in other regions and we can replicate their success here, or we can learn from our success in Australia.
Investing in our people is key and making sure that they’ve got the tools they need to do their job today. But also helping them develop their careers at Avnet, giving them the skills and ability to build on their own personal inventory of experience to be able to prepare them for future successive and larger opportunities.
How do you see the role of a distributor changing?
RH: What’s happening today is that some of these forces of change are creating new options and opportunities. Take the Cloud, for example, if you say our previous business was all about the provisioning of physical datacentres and moving physical products into datacentres, well they’ve now become virtual - on-premise and off premise. Maybe some of it was capex and now its opex, so what financial options can we bring? The forces of change are creating new elements of the datacentre of the future, which I think is a hybrid datacentre, so now with these new elements, what resources can we bring behind a partner network that is still very relevant as the trusted advisor of the customer base?
Some of the options are changing and some of the choices are changing, but the fundamental value of distribution is focused on what elements of the value chain can we perform at scale versus what elements of the value chain that are being addressed customer-by-customer, by most likely the reseller directly. The things that we can do at scale we can do very efficiently and help the VAR with that efficiency.
Darren Adams (DA): It’s important to keep in mind that this company has been around for 90 years and it has changed a few times over that period of time. This is just another evolution of that reality. It’s probably faster, we have to be a bit more innovative than what we’ve been in the past, but change is the only constant.
Specifically in Australia, through acquisition and organic growth, we’ve now got a very broad portfolio of skills, not only in the suppliers that we have, but also in the services and solutions that we offer around the suppliers and into the Cloud.
The US has invested a lot of money into frameworks, documents, templates and marketing plans around selling storage or virtualisation solutions, but also selling those solutions into specific verticals such as health practices and finance. That’s one leverage point that we’ve used. Another is in terms of intellectual property in the Cloud area where you can aggregate through one portal - provisioning and billing, and do it in a white-labelled fashion.
This market is moving so fast that you’ve got to be innovative and the culture of your company will help you get there. If you don’t have that cultural element as the foundation of your company, then you’re always going to struggle because people make the business.
What will be some your points of focus for Avnet on a local scale?
DA: Our number one priority is our people. The last few years have been about readying our balance sheet and getting a sound business from a process point of view, and beginning the journey from a leadership point of view in the market. Going forward, we’re going to invest a lot more in our people to give them the skills to help our partners.
What’s the future direction for Avnet?
RH:When I talk to the team about the environment that we’re facing today, I talk about a new ‘norm.’ On global, economic and macro level there are mixed signals on expectations for growth, whether it’s GDP growth on a regional or global basis and there are some other indicators that are also important for us - the trends and projections for IT spending, areas such manufacturer indices, purchasing manager index effecting the total Avnet portfolio.
Since the recession, we’ve been dealing with a lot of mixed signals regarding momentum in any direction. If anything, global growth expectations have been slightly down, and then you throw in some recent volatility with currencies. All of this contributes to a very complex multi-dimensional picture and meanwhile, we’ve got to find strategies and ways to have predictable and consistent performance that leads to long term results that we’ve committed to our shareholders.
William Chu(WC): From the Asia perspective, I view it as a journey of transformation. The market is changing quickly with new technology and this transformation provides a lot of opportunities and risks. We look at some of the existing resellers and some analysts have been predicting that half of them won’t be there anymore in next five to 10 years.
We have to challenge ourselves as a distributor, how do we prepare ourselves and our people to be ready because then we can help our partners to transform. It is about participating in all this new technology, services and solutions like Cloud, data analytics and security. Typically, what we want to do is look at organic growth opportunities - looking at expanding our line card. For example, flash storage and not just looking at it as a product, but how relevant is the supplier.
We’re a global distributor for IBM’s SoftLayer, and by participating in that, we’re enabling our partners to participate in this Cloud growth opportunity. Although this may be viewed as a product, the whole transformation enables and teaches them how to sell differently and enable them with the Avnet Cloud tools whereby we actually use that leverage from the US, bring it over to Asia.
Australia is the first country to adopt and go through all the training and now we have the opportunity to enable our partners and use the tools so they can look at all their aggregate billing and know exactly their customer, how much they are spending on SoftLayer, Amazon, and some of these providers, and at the same time they can look at how they can aggregate in terms of getting the volume, pricing or purchasing rebates and things like that.
That is one example on how we can enable our partners through this journey of transformation.
What are some of the biggest challenges that you’re facing as a distributor today?
RH: It’s navigating during this pace of change. I would like to do everything possible to make sure we don’t allow the pace of change outside of Avnet, to exceed the pace of change inside Avnet.
Whether it’s the Cloud, analytics, internet of things, they’re creating great opportunities in the market, but if we don’t maintain our relevance that presents a risk for our business. Staying close to our customers and suppliers to make sure we understand how they’re dealing with this rapid pace of change, what types of transitions and transformations they’re contemplating or implementing in their businesses. The premium on communication, the linkage, collaboration, partnership and teamwork has never been at a higher premium in my opinion.
Recently announced a global distribution deal with EMC’s VSPEX Blue, tell me more about that.
WC: EMC is an important relationship for us globally, but we aren’t an EMC distributor in every country, however with this new model, EMC have enabled us to represent them for VSPEX Blue in every country.
It’s a new way of distribution, whereby they look at a distributor - not because of their local setup or how many people - they’re looking at it as a global distribution deal and the capability that you have. It’s not simple, because you’re talking about 80 countries that TS represents, and for every country you have to workout the nitty gritty, who are the partners that you’re going to market with. The existing distributor for EMC in certain countries will have to put their order through us and we will also support their local partner. This is a very innovative business model that may change the whole landscape and I see it as a very promising opportunity.
DA: Looking at Australia and our role in that, it makes a lot of sense to get that scale and leverage in the US, but there’s an excellent facility here and we already do integration work with reverse logistics and support work in that facility. It’s been designed with the future in mind. As momentum and value picks up, we’re going to continue to think globally and act locally, where it makes sense.
What are some of the hot product areas?
RH: WIth Avnet Technology Solutions, in particular, it’s converged solutions. Whether it’s VCE, VBlock or FlexPods, it seems to be the preferred building block for datacentres today. I would also highlight our partnerships in areas such as networking and security, which continue to be high growth areas for us. Software and services is continuing to grow stronger for us on a global basis. Hardware still offers growth opportunities, but the software and services - their content mix is part of a total solution, is becoming more relevant to the types of solutions that our ecosystem is servicing going forward.
DA: There’s an interesting area of storage that’s developing. Certainly there’s converged and hyper-converged, but we’re seeing a bit of momentum around flash storage. Locally, we’ve done a lot of evaluation in this area and we’ve made a few new bets. We like to get deep and skilled in what we do, but nonetheless we see some good opportunities in the market there.