To server and protect

To server and protect

It is probably fair to say that not everyone in the IT distribution channel has heard of Melbourne-based Digicor, but if its founders have their way that will change with time.

Digicor has a niche focus on the distribution of networking products and server components and the assembly of high quality whitebox servers. So far it has been a successful formula with the company showing steady growth over the years to the point where it now employs 20 staff. During the 2003 financial year it turned over “around $10 million” according to its owners.

The company is majority owned and run by its two directors, Cathy Gu and Richard Huang. It kicked off in 1996 with the help of a little funding from Taiwanese company, Maximus Technology.

Maximus still owns a small proportion of the company, according to Gu, but it is not involved with the day-to-day running of the company in any way.

Both Huang and Gu are university trained Chinese immigrants — Huang from Beijing and Gu from Shanghai — who met while furthering their studies in Australia.

Huang is an electrical engineer with a post-graduate degree in computer science. He is also currently studying finance at RMIT. Gu graduated with a computer science degree and bolstered that qualification with additional postgraduate studies at RMIT — again in computer science.

After arriving in this country with very little English skills in the late 1980s, Gu and Huang have obtained citizenship. Each has two children who were born here and both now proudly call Australia home.

Huang and Gu share the responsibilities of running Digicor. They each take an active and enthusiastic interest in both the technical and marketing aspects of the business that has become their passion and their lifeblood.

According to Gu, Digicor has found its niche by focusing on the server market for the last six years.

It has some strong distribution agencies and supports product from brands such as Tyan, SuperMicro, Surecom, Maxitron, Chembro, Accusys, Casetek, Chicony, Transcend and Zippy.

“We have two major areas of focus — servers and networking,” Gu said. “[Our revenues] are probably a 50/50 split between those two categories. We sell a lot of server components and build our own whitebox servers and then we also have an exclusive distribution agreement with the networking products vendor Surecom.

“Digicor started life purely as a distribution business but we are now working very hard to build up the value-added, server-building side of the business. We are moving towards being a specialist in whitebox server solutions.”

Both Huang and Gu firmly believe that a business is only as good as its staff, customers and suppliers. It claims to have very strong relationships in all of these crucial areas. The company has two separate teams that look after the server technologies and distribution business, respectively. Its headquarters are in suburban Clayton and it also has a branch in Lidcombe in Sydney’s west.

Each site stocks its vendor partners’ products and has technical and sales operations.

Huang said that Digicor sold both AMD- and Intel-based systems but it was currently positioned much closer to AMD.

Digicor is one of AMD’s accredited server solutions partners and builds true 64-bit solutions using the Duathlon technology

“Intel still has the larger slice of the whitebox server market but we are going to chip away at that,” Huang said. “Intel tends to do a lot of the solution configurations and promotions themselves. With AMD, we have more scope to utilise our technical expertise to customise AMD server solutions to what is required by our customers.

“We are the only server builder in this country that can supply a complete AMD server solution for the Duathlon chipset.”

Huang said that the majority of its customers in the whitebox server market were “resellers who don’t want to get involved in the engineering” side of building and selling servers. Digicor also distributes components to those that do like to tinker and configure and it supplies onsite support to end-users for its own server solutions and for all the brands it distributes.

Its value proposition is clearly gathering momentum in the market place.

“Our rack-mount server or value-added business is growing at about 38 per cent per annum but the distribution side of the business is only showing single-digit growth at the moment,” Huang said. “We are shifting further and further towards the value-added side of the business as distribution gets harder and harder through increased competition.

“Digicor is proud to be at the forefront of rack-mounted server growth and we are working hard to build up that side of our business.”

According to Gu, barriers to much broader uptake of whitebox servers were starting to break down. It used to be that corporations and government agencies would only buy international brand names, she said, but that was starting to change.

“The downturn in the IT industry has been reflected in the budgets that these organisations have to spend,” Gu said. “Whitebox servers are about 30 per cent cheaper than the branded products. Most organisations still have project aspirations but much less budget to work with.

“Technology has improved dramatically and is now much more modular, so more and more customers are prepared to look at whitebox alternatives and they are buying the quality ones. At the same time, resellers are now much more comfortable in demonstrating the case for whitebox server solutions and they are responding well to the demands of their customers.

“It really is a great part of the market to be in at the moment, so we are extremely confident there is a strong future for Digicor.”

Digicor freely admits that it is starting to take its inhouse server technology direct to customers and seeing growth in that business but strenuously denies that this is in competition to its reseller channel.

“We deal directly in some instances but support our customers pro-actively and completely,” Huang said. “Some customers only want to deal direct and even then we don’t do the whole integration process. We bring in our partners to manage that. We never advertise our pricing and would never actively compete against a customer of ours.

“We are looking to grow our reseller business dramatically and will be helping them to leverage our technical expertise in the pre-sales process and the after-sales support function. We have 500-600 active customers and none of them have ever complained about us being in competition to them.”

Increasingly, the company is doing business with ISPs which it cites as the type of customer that wants to deal directly with suppliers but which also needs to engage integration partners as well.

“ISPs store a lot of data and used to deal almost exclusively only with international name brands,” Huang said. “They are a classic example of the type of customer that has expanding data storage and management needs but diminishing budgets to achieve their goals. They are warming very quickly to the whitebox server solution alternative.”

Moving forward, Digicor sees excellent prospects for growth in both its distribution business and its server technology.

“We are looking to expand our partner base and our products range but we will be retaining our network products and whitebox server niche,” Gu said. “We are also negotiating with some new vendors and are looking to expand geographically. We will be opening a Perth office as soon as possible.”

Slowly but surely this enthusiastic contributor to the local whitebox server niche is chipping away at the question that asks “Digi Who?”.

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