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“We will acquire a company within the next 12 months”
 John Paget, Global President of the $7.95 billion Avnet Technology Solutions, is responsible for leading the strategic direction of the group worldwide. On his first visit to India—after the acquisition of Ontrack Solutions and the start of their Indian subsidiary—he spoke to CRN Executive Editor, Dhaval Valia.
Everyone here has been asking one question: why did Avnet acquire a systems integration company to launch its operations in India?
Avnet Technology Solutions focuses only on the value-added distribution (VAD) business. We don’t do simple box-pushing at all, hence we were on the lookout for a company that had strong solutions and services skills. What we found in Ontrack was a high quality of technology skill-sets and a strong customer focus.
Besides, acquiring systems integrators to expand our VAD business is not new to us. We have made such acquisitions in Asia and Europe, and the strategy has worked well for us.
How did you identify Ontrack for acquisition? Is it true that IBM played a match-maker?
We began working on our India strategy almost 18 months back. IBM being one of our key vendor partners, we had discussed our India plans with them. Then a year ago, at the IBM global partner summit, I was listening to a panel discussion of IBM’s global Beacon Award winners. G Bala was on the panel, and as I heard about some of the work they were doing in India, Ontrack came across as a company having great technology skill-sets with a strong solutions and services culture. It took almost a year to sign the deal with Ontrack.
We hear you are looking at more acquisitions and have been in talks with a couple of Bangalore-based systems integrators.
I can’t comment on which companies we are talking to. It’s an ongoing process. However, I can say that India is a strategic market for Avnet, and we are looking at more acquisitions to ramp up our business over the next couple of years. To be more specific, and if things go as per plan, we will acquire one more company within the next 12 months. Our premise for acquisition remains the same as in the case of Ontrack: we want companies that have a strong solutions model.
Overall, we have outlined huge investments for India, including the setting-up of a technology excellence center for conceptualizing and configuring innovative IT solutions for our partners’ customers around the world. The center will also be equipped to provide remote managed services.
It’s been just about a quarter for your Indian subsidiary, yet you already have IBM on board. What are your plans going forward?
The OND quarter is the investment and ramp-up phase for us. We have already hired 10 people for our India operations (exclusive of the Ontrack team), and plan to add 30 more in the next quarter. We are deploying our SAP system here, supporting 12 billing locations across the country.
On the vendor front, we plan to grow and consolidate the IBM business, and expect to sign up with at least one additional vendor during the quarter. We are talking to all our top vendors to extend our global partnership to India. They have shown good receptivity. However, the decision regarding India has to be taken by the local team based on local dynamics.
Who are your key vendors worldwide?
Avnet Inc recorded global revenue of $17.95 billion in the last fiscal, of which $7.6 billion came from the Technology Solutions Group and the rest from our electronics and digital components business. Our revenues from the IT VAD business grew by almost 27 percent. We are the largest enterprise distribution partner for Sun, Oracle and IBM, and are HP’s largest enterprise storage partner. We are the No 1 or No 2 distributor for all the vendors we work with.
How will you compete with well-entrenched rivals like Ingram and Redington?
The primary difference between volume distributors and us is that we don’t do any box-selling. No PCs, not even peripherals such as printers. Instead we have a program called SolutionsPath, whereby we help partners develop a solid solutions strategy backed by a portfolio of services, programs and expertise to accelerate their time-to-market and increase their profits with minimal investment and risk. We help them determine which high-growth opportunities are right for their business, enable them with the right combination of training, sales & marketing and partnership opportunities, and help deliver the best possible solution to their customers. We also have a unique services offering for our partners under OneTech Connect ranging from consulting to integration services, and implementation services to post-sales support and even managed services. This explains our reason for acquiring Ontrack. We will utilize Ontrack’s strong technology solutions deployment and services skills to provide these services to our partners.
What partner services and programs you have launched, or plan to launch in India?
We believe we have already launched services for partners in the virtualization space, messaging solutions space and network management. Ontrack is a strong partner for VMware and Citrix in the virtualization space, and has strong skill-sets in Lotus Domino and Tivoli. Leveraging on their strengths in these areas, we have rolled out a bunch of services. These services will be offered to partners to assist them in deploying such solutions with their customers. Soon we will also launch our channel loyalty program.
What do you reckon will be the impact of global financial crises on IT distribution?
Usually, distribution is counter-cyclical. In a recession or slowdown, vendors tend to outsource more to cut costs, hence I see vendors working more closely with their partners in times of crises. India’s GDP has been growing at 8-9 percent, and even with the slowdown it is still likely to grow at 7-8 percent. IT consumption in any economy is known to grow at a rate that is at least twice the growth rate of the national GDP. We see India as the fastest-growing market for the next five years. |