Westan, Paragon find synergies with integrator

A new business partnership between the managing directors of distributor Westan and reseller Paragon Systems has taken a 51 per cent stake in one of Australia's largest mid-range IBM solution providers.

Westan's Victor Aghtan and Paragon's Bill Votsaris have formed a new company called Tanion -- owned 60 per cent by Aghtan and 40 per cent by Votsaris -- to give IBM systems integrator Synergy Plus a much-needed capital injection.

According to Aghtan, Tanion was formed solely "to take control of Synergy Plus". It gives both Westan and Paragon the opportunity to expand their existing customer bases and product ranges as well as the chance to develop increased services revenues.

Aghtan said he is not looking to see Synergy Plus as an extension of Westan's and Paragon's white-box PC interests. It is more about trying to build on the IBM focus that has been the strength of the company by adding storage, desktop and networking competencies to Synergy Plus's offerings.

"Synergy is totally IBM-focused," he said. "It has a strong mid-range skill set and significant services revenues. Branded systems and services revenues are areas I have been interested in for quite a while.

"Selling white boxes [through Synergy Plus] is an option in the future but only if it is an opportunity where IBM is not applicable. In the past Synergy has walked away from desktop business that IBM was not interested in -- where it was just too hard or where the margin was too low."

Paragon's Votsaris said in a press release the relationship would bring "extensive opportunities for all parties" as each introduced new products and services to the other. "Synergy plays in a market we don't," he said. "Equally, Paragon is in a space Synergy is not. It is totally complementary."

Aghtan said the new majority shareholders have no intention of cutting any of the 80 full-time and 20 part-time staff in the Melbourne headquarters or the Sydney and Canberra branch offices. The large majority of these are technical consultants generating billable hours for the companies' services teams.

"The company is very capable in software development," Aghtan said. "It moves a lot of IBM hardware but is very much built around supplying solutions.

"Westan is very strong in storage and components. Paragon is very strong in communications and networking, which all adds to the range of products and services we will be able to offer customers.

"[Synergy Plus] was financially strapped. It needed an injection of funds. Improving financial strength is crucial to the survival and growth of channel businesses today. Westan and Paragon were able to bring that capital investment to the table."

Peter Granger, CEO of Synergy Plus, said the last few years have been tough for everybody in the industry and that his company has survived but has not been immune from that contraction of spending. He was very pleased with the introduction of new funds from Westan and Paragon, which will allow Synergy to develop new strengths in desktop and networking services.

"We primarily deal with the mid-range systems, IBM storage and Tivoli software solutions, which is why the alliance with Paragon will be so complementary," Granger said. "We have been doing very little desktop and networking solutions and that is where they are strong.

"We expect to remain very IBM-oriented for the foreseeable future, and Paragon is also keen to introduce our IBM strength to their customer base."

Granger said that Synergy Plus splits its revenues fairly evenly between infrastructure and applications, with both sides of the business generating product and services income.

Aghtan also did not rule out other similar mergers or acquisitions by the new Tanion company to create further economies of scale.

"We will work on this opportunity for the next few months but if others come up we will look at them as well," he said. "Companies like Westan and Paragon have to grow to survive and to continue to be successful."