“We are always keen to make acquisitions”
On his recent visit to India, Philip Gallagher, Global President, Avnet Technology Solutions, spoke to Dhaval Valia about the distributor’s global strategy, its India plans and trends
How has Avnet Technology Solutions (ATS) performed in India and globally?
Globally, the first half of FY2013-14 has been good for ATS due to stronger-than-expected yearend buying in North America by businesses.
In Q2FY2013-14, ending December 2013, we recorded 8 percent YOY growth, while sequentially we grew by 35 percent.
Storage, software and services have been the key growth drivers for ATS which has grown at 30 percent over the past 12 months.
While we don’t give country-specific break-ups, I can say that India is one of the fastest growing regions in Asia for ATS. Our business in Asia contributed nearly 18 percent of our global revenue of $10.4 billion in FY2012-13.
In the five years of operations here, our business has grown 10 times. We have expanded our distribution and value-added portfolio in India, and have won several accolades from our principal vendors.
Hardware distribution is bound to shrink as the industry consolidates and customers move to a services-led opex model. What is Avnet doing to remodel its business?
Being a value-added distributor, providing services has always been our key differentiator. However, over the past two years, we have strategized to build an end-toend services portfolio that includes the entire bouquet of IT infrastructure lifecycle services. We have also launched Avnet-branded services.
Today, software and services contribute nearly 45 percent of our revenue in markets such as the US and Europe, while in emerging markets like Asia, the contribution has doubled from 10 percent to 20 percent of total revenue during the past two years.
IBM has been the biggest partner for ATS. How will the x86 server sale by IBM impact ATS?
IBM and ATS share a relationship of 25 years, and IBM business contributes nearly 35 percent of our global revenue. This also makes us the largest distributor of IBM.
IBM’s x86 business contributes 5 percent of our total revenue; this amounts to approximately $500 million in annual sales.
“In January this year we rolled out the Avnet Academy in India aimed at providing vendor- and domain-specific training and certification to customers and partners”
So far we have been given to believe by IBM that once the acquisition receives all the statutory approvals and is complete, the distribution contracts will be transferred to Lenovo. This means Lenovo will continue selling through existing distributors of IBM, hence we don’t see much of an impact due to the sell-off.
With Lenovo we have a strong partnership in some countries in Asia Pacific where we distribute their PCs.
ATS has made several acquisitions globally in the past 2-3 years, and most of them have been systems integrators. In India too ATS’ operations were set up by acquiring a systems integrator, Ontrack. Any plans for more acquisitions here?
We are always keen to make acquisitions that help us strengthen our value-added distribution services. Last year we acquired US-based Seamless Technologies, a strong HP partner who specialized in cloud and data center automation services as well as ITIL best practices. We used this acquisition to strengthen our services around HP technologies.
Prior to that we acquired US-based Ascendant Technology which was a leading IBM partner focusing on the cloud, mobility and business analytics. The acquisition helped us to enhance our SolutionsPath practices around the financial, healthcare and retail markets.
Through these acquisitions, we built new services which are now being offered globally to our partners including those in India. Ascendant, for instance, has a 100-member operation in India. ATS India is already working with them to offer value-added services around IBM Cognos.
To answer the last part of your question, we are always keen on an acquisition that fits our strategy and plans.
What are the new initiatives planned for India?
India is a very important growth market for us. We have been steadily expanding our portfolio of products and services. At present, we distribute enterprise products from IBM, HP, NetApp, VMware, Citrix, Juniper, CommScope, Infoblox, SAP, HDS, F5 Networks, Vision and Oracle.
Of these, we signed up SAP and HDS last year. We will be distributing SAP’s HANA and databases, while for HDS we will be distributing their storage and converged infrastructure systems as well as the soon-tobe-launched cloud services.
Last year, we inaugurated our second Innovation Center in Delhi aimed at providing customers and partners tools to create POCs. We already have one POC in Mumbai.
We launched the ISV Accelerator program in 2013, and have signed up 20 ISVs who have market-ready applications for verticals like BFSI, telecom, media, manufacturing, utilities, government, retail, logistics, healthcare and
“We have our own Avnet Cloud Services. Partners can resell an Avnet cloud service, brand the service as their own, or do a combination of both”
hospitality. We plan to expand this program and create an autonomous business that is ISV-led.
In January this year we rolled out the Avnet Academy in India aimed at providing vendor- and domain-specific training and certification to both customers and partners.
As the technology landscape changes, training and certification is emerging as a big focus area for helping partners to acquire new skills and transform their businesses. Last year, we became a Global Training Provider for IBM. Under the Avnet Academy, we will provide all IBM training and certification.
What will the role of a distributor be in the cloud computing era?
As part of our enablement services, we educate partners on how to position various cloud services, how to sell, and how to remunerate their sales representatives.
We have our own Avnet Cloud Services. Partners can resell an Avnet cloud service, brand the service as their own, or do a combination of both. Our plan is to aggregate different cloud providers in a bid to give more offerings to the channel.