Avnet boss hints at ambitious UK strategy

In his first in-depth interview since becoming the new president of Avnet Technology Solutions EMEA, Achim Apel sits down with CRN editor Sara Driscoll and speaks exclusively about how he sees the company evolving in the months ahead

Sara Driscoll: You have only been in the position for 30 days. What have been your first impressions, and what are your priorities in terms of strategy?

Achim Apel: The [Avnet] business has grown by acquisitions so it’s important that the Avnet-specific cultural elements can be brought under one umbrella. This means we can have one infrastructure, and common set of rules and culture.

The UK is very important to our worldwide business, so I need to be here in the UK to learn more about specifics: the business partners, their expectations of us and where we can create added value for them.

There are three elements that are most important to me, after my first 30 days. First, the perception of Avnet as ‘a premier distributor’. There seem to be some areas where clear frames and frameworks were not filled in. There is a current perception of us that we are very poor in our public relations, which is something that is really important in our relationships with our business partners and the community. We want to be a good member of the channel community.

Second, what added-value can we bring so that business partners can expand their business. What can we do better and more specialised so that business partners see us as the mediator between the manufacturers and their business.

The third thing is how we can expand our business by organic growth or acquisitions. These are the three fundamental things that I would like to concentrate on.

SD: So you have identified three elements to focus on. What are you going to do about them?

AA: I don’t want to put a schedule on what I want to do. The first thing for me to do is to listen to our employees, our business partners and our sup-

pliers. I want to hear advice from all the three major parties in EMEA. I think we know from a global perspective what the suppliers think of our business.

SD: What about the structure of Avnet? Are you looking to change this at all?

AA: Avnet is a $14.25bn company. About 63 per cent of our business comes under our EM [Electronics Marketing] brand, which handles components and semiconductors. The Technology Solutions [TS] arm is about 37 per cent of our business. TS has two major ingredients; computing and solutions.

Avnet is based on two legs and the bigger one is our components leg.

We are one of the major value-add distributors for IBM, for Hewlett-Packard [HP] and for lots of other big brand companies.

If you look at TS, most of the business is based in the US. About one-third of the TS business is based in Europe and 10 per cent in Asia Pacific, so the mix in the business is different than EM, where it is all split equally across the world. Part of my charter is to increase the overall TS business in EMEA.

SD: How are you going to do this and how will it involve the three elements you mentioned earlier?

AA: On the first point, which was Avnet’s image, or how it is perceived, after my first 100 days of introduction and listening to customers and employees there will be a prepared campaign to increase our visibility with all kinds of dimensions. I’m hoping to start in January, so the campaign will be fully under way in the spring.

SD: What do you think the current perception of Avnet is?

AA: It is fragmented. Many of our companies and brands are known because of the components business. From the TS side, in some countries we have a good role in IBM value-added distribution, then we are seen also as a good distributor of Eizo flat panels.

In other countries such as Austria and the Netherlands we have a speciality for driving components in the PC and white-box market.

The perception from the outside is fragmented. I am not expecting everyone on the street to know who Avnet is. But it is very difficult, even in the IT community if you’re asking five

different business partners to give common feedback on what it is like to do business with Avnet.

SD: So are you going to unite the divisions under one umbrella?

AA: We are if you are talking about the image, but that does not necessarily mean the structure. However, there is a strategic plan for the next three years about how we can expand our business, which goes back to the third element I mentioned. So first we need to have our strategy and then when that is in place, we can talk about the structure.

We need to identify what is common and what is unique to our business. There must be a common infrastructure for the back-end support, in terms of orders, support and shipping.

On the other hand, there is the whole IT infrastructure. In the past we have bought different companies with different infrastructure and it causes headaches. We need to make sure there is common infrastructure and IT solutions, as well as processes.

I cannot tell you today what the solution is. But it is very important that in all of the EMEA countries in which we have a presence, we have a better relationship with the business partners and the channel community.

SD: Going back to the three elements you mentioned earlier, how do you intend to expand the business?

AA: If you are talking about growth there are three choices we have:

First, we can grow organically, by doing a better job, increasing the productivity so that our back end is in a better shape.

Second, we have the opportunity to extend our business in countries where we are currently not present. In 10 countries we have IBM [distribution agreements], in three we have HP [distribution agreements], so what does it take to extend this HP relationship to other countries? This could be where we look at our business units and see how we can extend our business relationships across the world.

Third is merger and acquisitions. In general there are the major criteria that you need to follow and check before you acquire a company: the culture of the company, the IT infrastructure, the region in which the firm operates and the management that is in place.

My executive team is looking for potential candidates, so we have a clear plan, criteria and boundary conditions under which we will do something. We have a clear plan on how we want to integrate a company. It is a special culture that we have and we have to take care of this.

The UK is our second-biggest market in Europe and has enormous potential. There is a consolidation shake-out process going on, and we can say we survived. We want people to know that the Avnet brand is helping them. Big customers want us to be more of a global player, and to get the same treatment that they do in Europe in the US, in Africa and across the world.

SD: You mentioned earlier that you have an HP distribution contract in Germany, but you don’t here. Would you look to expand that relationship to the UK?

AA: Absolutely. But the question is not to do it where it makes no sense for us. So if we get an HP distribution franchise here, whether via acquisition or naturally signing them, of course this is something that could be interesting. However, they have to understand that our IBM business would be kept separate from this. It would need to be handled very carefully. You should not mix and match this type of deal.

SD: You mentioned your IBM contract. How do you feel about having such a heavy reliance on just one vendor? Is that something you would look to change?

AA: They are also very dependent on us. If they decide to cut us out, then they will have a major problem too. We see the partnership as a case of give and take. We have been working with IBM for a long time and we have a very good relationship, which is based on confidence and partnership. There have been huge investments from both parties.

SD: How are you going to increase market share and help business partners to grow, over and above the usual marketing support and training?

AA: The difficulty is that the distribution channel is going through big structural changes. There are only a few companies with the capabilities to ha ve a good supply chain and logistics service to business partners, because of the fact that the vendor world is shrinking. Today we have

only half the number that we used to.

But the same effect has not happened in the distributor channel. There are still too many players at a local level in the value space. The shake-out has happened mostly in the volume space. So I do believe there is some forthcoming consolidation to come in the distribution channel.

We need to ask what is the added value we can create to make the business of our business partners better. We need to look at the value chain and see what we can do in terms of traditional distribution, financial services, leasing and creating value chains between global ISVs and vertical business partners. We want to bring the things together that in the past the business partner would have to look for themselves.

We have the task of listening to the partners and helping them to form relationships with vendors and other partners, and looking for opportunities where we can add value in terms of services and solutions.

SD: What kinds of partners are you looking to put together?

AA: Two years ago we were a hardware distributor, a box mover. Now about 42 per cent of our business is software. We try to connect the dots between the ISV, the reseller, the manufacturer and us. It takes innovation, intelligence and business experience to connect these dots.

We are coming in as a supply chain specialist, not just as a distributor. Fundamentally, we are not manufacturing something, we are not inventing new software, hardware, or intellectual property. We are a services company.

SD: What’s the biggest challenge that Avnet now faces?

AA: How we can create a common global understanding within Avnet, supported by the suppliers, to create global thinking entities to overcome this business unit or country focused thinking we have at Avnet.

I am not saying that we want everything the same in every region. Globalisation is sometimes demonised: we are not McDonalds. We still want to hav e all of our local flavours. However, all employees should have similar internal tools, and information flow so that we have more transparency from a global perspective.

SD: What is the biggest opportunity Avnet has right now?

AA: The biggest opportunity is in the time frame we can establish Avnet as a premier value add distributor, on a global basis. It’s not a question of how, but a question of when. We need three years to change perception, create a common infrastructure and make sure that everyone understands what the company is doing to create new areas of added value.