Sealcorp Australia is moving away from its distribution-centric business model to focus on services to small-to-medium businesses (SMBs) and has renamed itself Brocker Vendor Services.
The rebadged version of the old Sealcorp will become just one of four pillars in the local operations of its Nasdaq-listed parent, Brocker Technology Group (BTG). Under a reinvention of local operations announced last week, the organisation will aim to more closely resemble its parent, with two new business units being cranked up and the fledgling Pritech professional services arm given a booster shot.
In a frank interview with ARN, Chris Spring, BTG's Australian director, conceded its current business model was unsustainable in the long term. As a commercial organisation using IT as a vehicle of growth, it needed the addition of complementary and more profitable revenue streams to its distribution, he said.
The group of companies will ignore the enterprise space, choosing instead to focus on SMB opportunities which have been its strength and where Spring feels there is the most growth potential.
"There is just not enough margin and nowhere to add value for us in the enterprise space," Spring said. "Vendors are handling more of the sales process themselves and only need distributors for fulfilment.
"But in the SMB space, we are extending vendors' reach by acting very much like them for the channels without sufficient revenue stream to be serviced directly."
Spring said the move into services and application development is essential to sustain growth and avoid possible future oblivion.
Pritech, a services division launched in 1998 and currently accounting for 8 per cent of Sealcorp's revenues, according to Spring, is now to be called Brocker Professional Services. New business units will be ramped up in the form of Brocker Online Services and Brocker Application Development.
Brocker Online Services is aiming to be up and running by Christmas, with SMB-focused applications hosted and available for resale by channel partners. Brocker Application Development will be focused on developing and marketing intellectual property and is looking to deliver packaged e-commerce solutions to SMB resellers.
Flush with funds from its recent Nasdaq listing, BTG is on the acquisition trail in Australia. However, this "will not be in distribution", Spring said.
"Very few of the major distributors in the world today are just distributors," Spring said. "They have other businesses attached to them, offering much higher margins than standard distribution.
"For us to survive, we had to find ways of achieving that in a channel-friendly manner. If we didn't take the steps now to change, particularly as a niche player, it would be too late."
Despite a claimed 100 per cent plus year-on-year local revenue growth for three consecutive years, the old Sealcorp Australia organisation is now a subsidiary of a commercial vehicle at the mercy of Nasdaq investors. Therefore, the local operation needed to broaden its horizons into other revenue streams, according to Spring.
Spring said business has been good recently for what is now Brocker Vendor Services (BVS). Sealcorp, 1World and Qsoft are all profitable, he said, but he also acknowledged it was a finite window that could slam shut if change was not embraced.
Spring also hit back at recent reports of its losing supply arrangements, saying "The only official announcement that we are no longer distributing product is Novell, the rest is rumours."
A comment by IBM's software group about a "review" of its distribution agreement with Sealcorp was representative of "negotiations about a change in the relationship", but Spring clarified that "it doesn't mean we are ceasing distribution".
The three arms of Brocker Vendor Services are distributing for "12 or 15 vendors" and it is happy with that number, Spring said.
"We are not looking to reduce that number, but we are certainly looking to change some of them," Spring said. "We can see the old mix doesn't work anymore. It doesn't make any sense distributing product if you can't add value to it."