Technology Reseller caught up with Exertis UK Managing Director Paul Bryan at the third Plug in to Exertis event, held for the second time at Silverstone on May 16. Two days before the event, Exertis parent company DCC announced its financial results for the year ending March 31 2019. These included a 35.1% growth in operating profit for DCC Technology, driven mainly by first-time contributions from acquisitions but also by good organic growth. In the UK and Ireland, Exertis continued to gain market share and develop its value-added service proposition. Market conditions have been more challenging in the first few months of 2019, due largely to uncertainty over Brexit, but there are still big growth areas, as Paul Bryan explained to James Goulding.
TR: What do you see as the role of a distributor today and how is that changing?
Paul Bryan: The role of the distributor is, number one, to enable an effective supply chain and, number two, to bring together solutions and services that help enable the sale. In a fairly tough climate, certainly in the consumer space, and the distraction of Brexit creating uncertainty in the business area, small to medium-sized businesses are looking to distribution more and more. We have a plethora of services on offer – from first-line to second-line support, man-in-field, pre- and post-sales, solution design, the list goes on. Here at Plug in, we have a services lounge in every
one of our areas – consumer, business and enterprise – and are inviting people to come and talk to us. It may not be a one-size-fits-all, but we have got plenty of experts who can help. So, in short, enablement. And that’s not just for the resellers we sell to; it’s also for the brands that are trying to sell through us.
TR: Is the expansion of Exertis’s services offering going to plan?
PB: We stated two years ago that we wanted services to generate 20% of our income. It’s about 15% today, so we are on the right trajectory. It fits in with our whole strategy of wrapping around services and making us more relevant to resellers so that they can rely on us to win business and tenders.
TR: Offering more services is one way of achieving organic growth. How much of your recent growth has been organic and how much has come through acquisition?
PB: In the UK, we’ve had a really strong year of organic growth – about 50% from acquisition and 50% organic, some of it completely unexpected. We have certain areas we focus on and know are good growth engines, but sometimes there’s a new entrant nothing prepares you for. Huawei came into the market and took it by storm. In one year, it went from a low percentage market share to nearly 20%. Globally, both Huawei and Samsung are now bigger than Apple. Not a lot of people would have bet on that happening in the UK this time last year.
TR: Services and Huawei aside, in what other areas are you growing organically?
PB: On the consumer side, smartphones is a really fertile area for us; our smart home technology business has doubled four years on the trot – we continue to lead in that space and see it growing rapidly, which is why we have a smart home arena in the exhibition; gaming is still a good growth engine, with e-gaming on the rise.
PC gaming requires expensive rigs with a lot of grunt and we are leading the charge there, along with console games, another big category we are focused on. Then there are the platforms that provide digital content on a licensing or a consumption basis. We have a digital engine over in Stockholm – a company called Ztorm – and they enable us to sell gaming content.
We will be looking to broaden that to business markets, working with the likes of Microsoft to build out a digital or cloud marketplace. We see that as another growth driver.
We are also looking at adjacent lines in consumer, like small domestic appliances, medium and large eventually. We have signed up with Hoover and Danby and are looking to extend our portfolios there. We are absolutely sure these devices are going to become more connected so it’s a good place for us to start moving into.
In the business area, Pro AV and AV IT is a big driver for us. Midwich holds the Number One position in the UK , but we are a clear and strong Number Two and see ourselves as challenging to be leader in that market, not just in the UK but globally. A couple of our acquisitions in the States, Stampede and Jam, are very AV- and audio-orientated and the two businesses we have just bought in Europe, Commtech and Amacom, have strong AV DNA. So many verticals are being lit up by AV – education, retail, collaboration, videoconferencing – that we see it as a really strong area going forward.
Security is going crazy at the moment, as the datacentre gets larger, with more storage and more data. There’s probably not a CEO in the land who isn’t paranoid about the security of their data, whether in relation to GDPR or getting hacked. We are seeing double-digit growth there and are going to invest in that marketplace, not just in the UK but globally. Selling into the data centre itself is a growth area because technology is ever changing, and our Hammer acquisition means we are well placed to take advantage of that.
TR: How successful have you been at increasing the enterprise side of your business?
PB: We acquired Hammer and that’s grown quite well. What we call business – B2B – is 50% of our revenues now and enterprise makes up 50% of that business piece. So that has doubled in size over the last two years.
TR: Your acquisition strategy obviously gives you greater scale and breadth, but what are the benefits for resellers?
PB: When you make acquisitions, there are two main things you look at: what brands can we share and take to other markets and what best practices can we share. Tim Griffin (Managing Director of DCC Technology and the Exertis Group) wants to create a spine to the business globally and acquisitions enable that. We work with vendors, we work with services and we share those things so we can bring more to our customers in terms of value. It’s getting more from more. We are bringing best practice services and new brands. Clearly, through all of that we want to be efficient as well, with good financial controls.
TR: What are the challenges or even dangers of such rapid growth?
PB: The biggest challenges we have are: one, getting the contact management with the customer right and not overloading them – how do we orchestrate these very interesting things to the right people at the right time?; and, two, educating our customers in terms of what exactly is on offer. There is plenty of choice, but I don’t think people are particularly aware of it, which is why we run the plug-in event. That’s our biggest challenge.
TR: Have you quantified the value of the Plug-in event?
PB: I have quantified its value on the basis that we are outperforming the market; distribution grew 9% last year and our growth was well into double figures. This year, about 800-900 people have turned up, and 100 vendors. That’s a big increase on last year, which was up on than the year before that. This tells me people are getting value from Plug-in and are recommending it. It’s gained a bit of momentum.
TR: What more could resellers be doing to grab all the opportunities you offer?
PB: We have made a clear statement by putting a services lounge in every area of the exhibition. It’s all very well having products and technology, but we also need to have conversations about how we can help people sell them. Those are the sorts of conversations I would expect to come out of this.
TR: What are your priorities for the rest of 2019 and 2020?
PB: To hit our target (laughs). We have set out our stall pretty well in each of the areas we operate in. Those growth drivers I talked about are our priorities – carrying on investing there and being joined up with the group so we share best practice.
TR: What makes Exertis different to other distributors?
PB: It’s the kind of thing you see here today; the relationship piece. If you looked up the stats, you would see we have many more technicians, sales people, commercial people working with vendors than any other distributor in this country. You might say ‘Isn’t that inefficient and shouldn’t you be more like Tech Data and Ingram?’. My answer to that is no. Because we are a distributor with scale and specialism, it is super-important we have people who bring that specialist touch. The combination of scale and specialism enables us to get more value out of vendors and more traction with customers and I think that’s what really sets us apart from Tech Data or Ingram.