ARN: As a co-founder, why did you start the Westcon Group?
Dolan: We started 15 years ago as a reseller and within the first year became a wholesaler - a distributor - and did that on the basis of enjoying the business and liking the opportunity to work with other businessmen [as opposed to end users] in our industry on a day-to-day basis. Fifteen years ago, when I predominantly worked accounts between Washington D.C. and Boston and would go in to accounts, they would give me this great revelation that you can't make money selling hardware. And, of course, you can't make money selling yesterday's hardware with the simple solutions that everyone already knows. So we evolved pretty quickly into the philosophy of focussing on an area where you can add value and be ahead of the market. And that's been thematic to our growth ever since.
Explain the global picture for Westcon GroupDolan: . . . What we're really working at now [is] trying to find out the structures we can put in place, [and] how we can take the talent that exists in one place and allow the talent that exists in another place to leverage off it.
Marc Smith: Plus, from a group perspective, we're looking to diversify ourselves. There are probably three market types in the world. There are your major markets - US, UK, Germany. There are your middle markets - which is where we put Australia, and then there's your emerging markets - which would be places like South America. One of our goals was to diversify our business across those markets. Australia is really the leading middle market because you have a strong economy. Economies go up and economies go down and you have a reasonably stable currency, which as an Australian company you might not look at relative to the US, but compared to Brazil, for example, you would. You are politically stable and those represent the opportunities for us because those [middle markets] are your next potential major markets. So we felt we had to diversify ourselves and have operations in the major markets, the middle markets and in the emerging markets, to diversify ourselves for economic risk.
How do Westcon Australia and LAN Systems in Australia fit into the global Westcon Group picture?
Dolan: It's been five years since we opened Westcon Australia and we've had some success and also some issues with our ability to keep our expenses in line with what they need to be, from a logistics and a back-office perspective . . . We feel strongly that we need to have a dedicated sales and marketing effort focussed on the Cisco market place and a separate one focussed on the Nortel market place. So we continue the [LAN Systems] and the Westcon divisions to do this . . . We can have separate sales and marketing efforts and have a consolidated warehouse, consolidated finance department. We can support one MIS system and e-commerce system [which] allow us to get some of the leverage out of the systems we have in the US here and be able to afford it from a support standpoint.
Marc Smith: In Australia, having that consolidated warehouse and consolidated back office allows us to invest more in the separate sales and marketing arms. You therefore don't need two chief financial officers or two independent warehouses, and really we find that the money we invest to pursue the business is more focussed when we only have one set of infrastructure we have to support.
Dolan: We have separate warehouses today. There's a real estate plan which will evolve in the next six months when we start to move people around . . .
Do you see LAN Systems and Westcon Australia as a reach into the larger Asia-Pacific market?
Dolan: We're measuring ourselves on our market share in Australia right now, we're focused on that and we think we have some gains that we can put in place. So right now the scope of our plans is to increase our market share in Australia.
Marc Smith: Again, we look at Australia as being one of those middle markets which is important for us to have strong market share and strong growth in. There's a strong indication that Australia is one of the potential next major markets in the global economy . . . We don't look at Australia necessarily as a peripheral or a stake in the ground for the rest of Asia - we have a business in Singapore. It's [also] not unknown news that we decided to shut down our Westcon business focussed in China. Again, as we're a bottom up company, we look at the return on investment to determine where the risk/reward ratio lies and where we should be making an investment. We weren't comfortable in China from a global US company perspective. . . . it would have meant diminishing some of the other investments we were making where we saw a greater return on investment or risk/reward ratio.
Where do you see Westcon Group in the future?
Dolan: Let me start by saying that we're committed to our role in the channel as a company which sells to resellers, value-added resellers and a new group of folks that we call communication solutions providers. We see extensions of that model that we plan to implement, one of them being professional services, which we have learnt from our subsidiary in the UK. We've rolled them out to some extent in the US where we have a variety of services that our customers can partner with us on and resell from us to their end customers, allowing them to get into larger and more sophisticated opportunities.