Dicker Data is powering ahead with plans to build a software empire in Australia and New Zealand (A/NZ), creating a multimillion-dollar business based on enhanced partner services and an expanding vendor portfolio.
A deep-dive into the distribution giant’s financial reports highlights a $595 million software business during FY21, spanning January to December 2021. Specific to recurring revenue, renewable and subscription business represented $520 million at a year-on-year growth rate of 19.7 per cent, while perpetual transactions came in at $75 million at 22.9 per cent year-on-year growth.
Fast forward to the first half of 2022 -- 1H22 spanning January to June 2022 -- and such growth is accelerating with the software division reaching the $365 million mark at the halfway mark, up 48 per cent half-over-half compared to $334 million in 2021. Also, perpetual business dropped two per cent half-over-half to $31 million.
During FY21, software represented 24 per cent of total revenue for Dicker Data, and now accounts for 25 per cent during the first six months of 2022.
“We expect software and services to increase to 40 per cent of revenue by 2025, and 50 per cent of revenue by 2030,” said Vlad Mitnovetski, COO of Dicker Data. “We are continually evaluating the market and are always looking for new vendors and technologies to support our partners and help us remain at the cutting-edge of the industry.”
Central to such efforts is the launch of a new range of software services for partners, which will either be fulfilled directly by Dicker Data or indirectly via a pool of “trusted and vetted” suppliers.
Services span level one (L1) and level two (L2) technical support alongside firewall remote installations and implementation services for software solutions. This is in addition to deal conversion support, cloud migration expertise and post deployment optimisation services, plus technical environment audits, inclusive of best practice solution recommendations.
“This is alongside our other distribution led services like pre-sales, training, certification, enablement, proof of concepts and demonstration services that we have always delivered,” Mitnovetski explained.
From a technology perspective, Dicker Data’s software division spans the end-to-end spectrum of solutions and services, notably cloud, security and networking, to data management, collaboration and digital workspace offerings. This is in addition to specialised products such as back-up and disaster recovery, end-user compute, artificial intelligence (AI) and Internet of Things (IoT), plus computer aided design (CAD), speech recognition and telephony.
Key vendors within the business unit include Microsoft, VMware, Check Point, Commvault, Nutanix and Trend Micro, alongside Veeam, Dragonfly, Carbonite, Webroot and OpenText. Exclusive distribution rights also cover Autodesk, Citrix, RSA and Veritas.
“These relationships are extremely unique, in which both the vendor and our organisation work as a true extension of one another,” Mitnovetski outlined. “Many of these relationships are long-standing and we continually invest into the success of these partnerships.”
Leadership of the distributor’s software division in Australia is divided in two, primarily based on the size of the portfolios and the focus required to consistently deliver growth.
Sarah Loiterton -- general manager of Microsoft and VMware -- runs two strategic vendor partnerships while Pennie Stevens -- general manager of Software -- holds responsibility for all other software vendors represented in Australia, with the combined group housing 97 employees.
In New Zealand, Lisa Muir -- general manager of Software -- is tasked with running the entire software portfolio in the local market, backed by a team of 41.
“These three leaders bring extensive experience and expertise in building software solutions for channel partners,” Mitnovetski said. “They have a deep understanding of how to drive software success and play an instrumental role in leveraging their experiences to help Dicker Data’s partners develop their recurring revenue streams and software practices.”
According to Mitnovetski, the focus of each software team is to help partners build practices around specific technologies, supporting the ecosystem in “designing, configuring and deploying” software solutions as well as providing L1 and L2 support on behalf of select software vendors, such as Microsoft.
“The majority of the resources in these teams are highly-experienced technical and licensing experts,” Mitnovetski noted. “Our success in software is due to the great people we have working with us and their knowledge is what sets us apart.
“Their ability to navigate vendor programs, to help partners scope, design and deliver solutions and their commitment to delivering the best outcome for our partners and their end-customers made us the go-to distributor for software.”
Capitalising on market demand
Heightened focus on software comes as IT spending in Australia surpasses the $111 billion mark in 2022, with the software market predicted to grow by 19.1 per cent to $4.2 billion in the process. Meanwhile, investment in New Zealand is expected to increase by six per cent during the next 12 months, reaching $17.6 billion as software once again takes centre stage for customers.
In weighing up the market potential for partners within the software space, Mitnovetski cited multi-cloud as a “reality” that is “creating complexity, but also opportunity” for the ecosystem.
“Helping end-users define what hybrid cloud means for their business is also key,” he outlined. “For example, helping them understand how they combine their infrastructure with public cloud to deliver consumption models across their entire environment, all billed monthly.
“We work closely with partners and vendors to reduce the risk of moving to the cloud via our cloud migration proof-of-concepts. This is achieved by using vendor tools, completing risk assessments and providing predictive cost modelling which enables us to reduce the time to market for partners and provide a clear roadmap on what’s required.”
“The almost weekly headlines on data breaches is making businesses acutely aware of the risks and is motivating them to ensure they have the correct policies and security protocols and postures in place to prevent a breach from occurring in their business,” he said.
“The complexity surrounding security continues to increase and with most IT environments playing host to multiple vendors, there’s a need for detailed auditing and understanding of the security solutions required to protect them.”
In addition to cloud and security, Mitnovetski acknowledged that businesses are becoming increasingly aware of the amount of data generated within an organisation, and the subsequent value of such information.
“There’s an increasing appetite for analytics and AI solutions to help customers utilise that data to make informed decisions and extract more value,” he noted. “Most businesses also have various sources of data which is driving demand for solutions that can act as an overlay or single pane of glass to simplify access and insight generation.”
In response, Mitnovetski said customers are increasingly preferring subscription billing with scalability and flexibility often cited as key factors -- creating new opportunities for partners to “continually educate” end-users on consumption models in the process.
“Lifecycle management and customer success practices are also key to ensuring continued software growth,” Mitnovetski advised. “The partners that are working with their end-users to ensure they’re utilising the software solutions they’ve purchased and are extracting maximum value from them, have the highest chance of securing renewals.
“These partners also have a higher propensity to expand the offerings to include more adjacent technologies and products. Utilisation data is often overlooked, yet this can be a key creator of opportunity.”
Supporting software-centric partners
In assessing the software distribution landscape on both sides of the Tasman, Mitnovetski acknowledged that what was considered value-add 6-12 months ago is now “table stakes” or a “baseline expectation” for both partners and vendors.
Instead, the distributor is focusing efforts on a platform play to meet evolving ecosystem demands.
“We view our platform as a constant evolution that is always growing and adapting to the needs of our partners and our vendors, particularly as the complexity of ordering, invoicing and tracking software and cloud solutions increases,” Mitnovetski said.
“Our platform provides transparency to our partners and enables them to easily report on their commitments, their end-users and renewal opportunities.”
Mitnovetski has spearheaded “significant investments” into automating and integrating the distributor’s platform with a large number of software and cloud vendors, with the aim of simplifying the order and fulfilment process for partners.
“This automation also extends to partners, with hundreds who have integrated their systems with Dicker Data via our open APIs,” he added. “The end-user facing side of our platform has been received well by our partners.
“Providing a 'partner-brandable' front-end that their end-users can access to manage their own licensing requirements has helped partners reduce their costs and streamline the way their customers interface with their business.”
Delving deeper, L1 and L2 technical support is now also a distribution-led service, particularly as software and cloud vendors seek to extract more value from the supply chain.
“We’ve created L1 and L2 support services locally in A/NZ that are now solving thousands of partner-lodged support tickets each month across a number of vendors,” Mitnovetski explained.
“Our teams are available 24x7x365 and the feedback from partners has been overwhelmingly positive. We are now working with our software vendor community to activate L1 and L2 support services for more of them, based on their individual requirements in the local market.”
To fuel further growth in this space, Dicker Data rolled out a new Partner-to-Partner (P2P) portal approximately 18 months ago targeting “selected software opportunities”. The move was designed to create a network of verified partner organisations capable of stepping up to assist other partners in project delivery, whether addressing issues out of scope or a lack of internal resourcing.
“We’ve seen many examples of partners closing deals and sharing opportunities on our P2P platform and the best bit is that it’s completely free for partners to use and to list in, provided they meet the correct level of certification and specialisation,” Mitnovetski added.
Building on the need for additional technical expertise is a commitment by Dicker Data to “actively partner” with companies capable of supporting market expansion, notably Dragonfly which enables the distributor to sell security services via the channel.
“We’ve been recognised on the global, regional and local stage by our software vendors for our operational excellence,” Mitnovetski noted. “This is a critically important area for software distributors, and it has in turn helped us to deliver a superior customer experience to our partners.
“Efficiencies and operational excellence enable us to offer better SLAs to our partners and in turn assist our partners to offer faster turnaround times and a better experience for their customers.”
Within the context of software distribution, lifecycle management and renewals are also viewed as key measures of success, added Mitnovetski.
“We place a large focus on supporting our partners to secure every renewal opportunity and this process is backed by a team of experienced renewals specialists,” he said. “From providing logical upgrade paths, to helping partners convert renewals into refresh opportunities and assisting them with objection handling, we have become a key pillar in the renewal process for our partners and our software vendors.”
At the heart of the distributor’s software approach is a commitment to provide enablement, training and certifications to keep partners up-to-date and compliant with vendor program requirements.
“We now have a number of on-demand content libraries available allowing partners to up-skill, such as our Microsoft Ascend platform, which is a learning portal that educates the channel on key sales plays and various Microsoft technologies and solutions,” Mitnovetski stated.
In looking ahead, Mitnovetski said growing value-added services to meet the needs of vendors and partners remains a key priority, with strong opportunity around marketing in this space.
“We piloted a marketing offering for partners with our Microsoft business and it was received well,” he added. “We are now looking into how we can expand this offering to support more partners in growing their business."