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Still growing after 35 years

Last year Network Communications Group added IT services to its growing portfolio of communications and network services. James Goulding finds out more from CEO Graham Powling

Celebrating its 35th anniversary this year, Network Communications Group (NCG) has prospered since 1987 by reacting to changing customer needs and expanding its product portfolio with new technology and service offerings delivered via four subsidiary companies: Network Finance, Network Business Call, Network Voice & Data and TECTA Systems.

The Enfield-based business started out as a provider of on-premises communications equipment and maintenance, before expanding into finance and leasing, mobile communications, unified communications, cloud communications, network services & connectivity, CCTV and access control.

Last September, it added a dedicated IT division with the acquisition of Greenwich-based Wavehill, bringing Group revenues to a substantial milestone turnover target and fulfilling a long-held ambition of CEO Graham Powling’s to round out NCG’s offering with a full range of IT services, including consultancy, cyber security and IT support.

“We realised that integration of voice and data was inevitable – it was only a matter of timing. That was a part of the reason why I chose the acquisition route. Acquisitions seemed the most sensible way to do it,” he explains.

“I could build my own tech division, but while that would probably require less money, it would take considerably more time. Acquisition is the ideal way to bolt on those skill sets and bring those products into our group, giving us a complete set of products that services pretty much every requirement in the comms/tech arena.”

Technology convergence

This is a process that many comms and IT resellers are currently undertaking driven by a combination of factors such as technology convergence, hybrid working, digital transformation, the cloud and private equity-funded M&A activity.

Powling adds that the rapid transition to cloud telephony and unified communications driven by the pandemic and new working practices has already had a transformative effect on the company.

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“If you’d asked me two years ago, I would have said that by now there’d be a 50:50 split between the cloud and on- premises equipment because with cloud the cost of ownership is slightly higher than owning the equipment. That is still the case, but the emphasis has changed considerably over the last two years. In fact, I can’t remember when I last supplied a new bit of hardware; pretty much everything we are now doing is cloud.

“In a way, this makes diversification a lot easier for us because it means we need fewer on-site engineers – they are now desk-based; and we need to make fewer on-site visits than we did previously, though obviously we do meet clients via Teams and Zoom. It has changed the way we approach business.”

While these factors are undoubtedly accelerating channel convergence, the reality is that NCG, like many other resellers, has spent the last three and half decades diversifying its offering through organic growth and acquisition as part of its natural evolution. Today its customer base includes SMEs and some enterprise clients, in the UK and overseas, from Ireland to Israel and even further afield in Asia, all at different stages of technology adoption, from legacy customers requiring maintenance of 20-years old ex-BT Meridian phone systems to digital natives who live in the cloud.

“I entered the comms world in 1987 with a digital telephony company and over the years that has developed in different ways as we’ve grown. Sometimes I have used acquisitions as a means of growth. For example, I bought databases from Fusion Four Telecoms and Meridian Options to acquire their maintenance business back in 2014/2015, but I also launched our own finance company when money was not freely available in the lending market for small ticket items in 2008/9.

“We decided we would make it easy for anyone to buy from us, which doesn’t require as much finance as you might think because when a finance company offers financing products it is financing the equipment, the profit, everything, whereas if you’re delivering the product, you are really only financing the hard costs of the equipment, not the soft costs of engineering, nor the profit. In a way it’s far easier to do that than sell pure finance. It’s not an enormous company but it gave us the means to sell more products at a time when it was difficult to sell hardware equipment.”

Monthly billing

Coinciding with the launch of Network Finance in 2008/9, Powling took the decision to move to a monthly billing model for everything, including services and hardware, which NCG prefers to supply on a rental basis.

“We took a big cash flow hit for the first year, but we decided as a company that that was a long-term strategy we should adopt, as it suited the IT managed services style model and the network services model. And if we could monetise the hardware element by giving it a rental that’s what we did, underwriting it ourselves or through a third party finance company. That has been our model ever since.

“We’re currently converting Wavehill out of the mindset that they have to sell services and I think that’s quite a change for them. Among tech companies the approach was always ‘if you’ve got the money, you buy the server’. But you don’t actually need to find the budget; it is about the revenue stream. You don’t need to sell anything these days; you don’t sell services, you rent them. We’ve got the money and we will do the underwriting for you.”

In this respect, NCG is simply bringing the telecoms model into areas of technology that historically have not been as inventive or as successful at monetising the provision of equipment and services.

“The one thing the telecoms industry did right is they monetised it in the
early days – they got the contractual commitment and the financial commitment – and the tech industry is now benefiting from adopting some of those models and monetising the industry a bit more. In comms we knew how to make money and we’re using those methods to make money out of tech.

“Historically, the data side weren’t creative or clever at making money. They were just following price guides. It has been interesting to monetise that side of the business.”

Powling is not just bringing his telecoms know-how to the IT world; he is also bringing it to the CCTV sector through NCG’s TECTA division, another example
of the company’s diversification into new sources of revenue.

“Back in 2018, I decided to invest in setting up the TECTA division with a focus on construction. From the start, we made a big point of selling maintenance contracts on the back of the CCTV installations – copying our telecoms model and only supplying equipment with a maintenance contract. That was quite unusual in that industry and at first we encountered some reluctance, but slowly people started to realise it made sense to take out a maintenance contract and have peace of mind that they are being looked after.”

Integrated processes

As NCG diversifies, Powling has invested a great deal of time and effort in applying common business processes across all Group companies to maximise the opportunities for cross-selling and improve efficiency, with a particular focus on integrated billing.

“For the last six to nine months we have been integrating Wavehill with
other divisions and bringing greater efficiency to client billing. We’re quite structured and process-driven at Network Communications Group, and by introducing the processes we already use for licensing and product billing to Wavehill, we’ve enabled them to take a job that used to take a fortnight a month down to just three days.

“In this instance, we used Wavehill’s own billing system with Sage. Our next challenge is to support cross-selling by putting everything onto aBILLity from Union Street Technologies so that we can bill comms, connectivity and tech products on a single platform across the whole customer base.”

Other priorities for NCG are to move Wavehill customers to direct debit payments – “We collect 90% of money by direct debit because we have a monthly billing model and so far we’ve transitioned nearly 60% of Wavehill’s customers to direct debit”; and to bring more consistency to contracts across the Group, replacing the 60-day rolling contracts offered by Wavehill with minimum 12-month contracts.

In the meantime, Powling will continue to explore opportunities for further acquisitions. He has his eye on a potentially exciting bolt-on acquisition that will add more critical mass to NCG’s CCTV business and boost maintenance revenues in that area, but remains wary of embarking on too many time-consuming smaller acquisitions that can require as much work as bigger corporate deals.

“There’s a lot of activity and a lot of consolidation going on in the smaller end of the marketplace and although I enjoy doing acquisitions, the smaller deals present as many challenges as the large ones,” he says.

https://netcomms.co.uk

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TechnologyReseller: 2021