CRN: Hi Scott. Firstly, it is an open secret that Microsoft is slashing rewards for LARs that work in volume licensing in September. As a Microsoft LAR, how do you view this?
Scott Haddow (SH): We view it as a very positive thing. All vendors, not just Microsoft, want to ensure that the partners they work with are doing the best for their technology and customers as well as themselves. So why would you want to gift money to a LAR that does not invest in skills to service the customer and only acts like a parasite living off the back of the vendor to pick up rebate for transacting licenses?
CRN: Your revenues for the year to 31 August 2010 fell by 12.3 per cent to €107.7m. Are you satisfied with the results?
SH: We decided to exit the third-party channel business. That is the reason turnover was down and we planned for it to be down. Our gross margin was up to 10.5 per cent and we were pleased to deliver that while changing our business in a fast-paced and dynamic environment.
We had another year of investment back into the business. So we are really pleased; it is a great result. Our services business contributed 15 per cent of gross margins and that has increased exponentially to the high 20s in the first half of this financial year.
CRN: How does Trustmarque differentiate itself from the other Microsoft LARs?
SH: Without naming names, there are probably two or three services-led VARs that have a LAR division. They do managed services, outsourced services and project services, and scale across Europe.
Below this, in terms of ability to service customers in the infrastructure space, there is only us and one other smaller services player. The rest are in the volume licensing space, so I would say we are considerably ahead.
CRN: Will you have to change your business model as a result of Microsoft's fees shake-up?
SH: No. 18 months ago, we started on a journey to make sure we are the masters of our own destiny and to be dependent on our own customer relationships only, rather than living off the back of someone else's. Call it good luck or exceptional foresight: either way, we have transformed our business model to suit any changes from the vendor community around rebate structures.
CRN: What will the changes do to your bottom line?
SH: It is good news for us in the short, mid and long term. Some of the incentive is being moved to areas where [Microsoft] expects higher quality delivery of service to the customer and we are
already doing that.
CRN: You have revealed aspirations to buy your way into the cloud market. To what extent is cloud just hype?
SH: We think it is very real. The question I would ask is what it is. Is it hosted, or on premise? If you take away the enigmatic badge of cloud that seems to encompass everything now, it is a question of whether you want to buy or rent it, host it on premise or in a hybrid of private and public. When Microsoft and Oracle start banging the drum, it is inevitable that it will permeate and become ubiquitous. But in its truest form, an awful lot of organisations are using cloud without being aware it is cloud.
CRN: Just how tough is the public sector right now and have you had to change your approach to that market?
SH: It is very important to our business, although its contribution to our bottom line is less than it used to be. The trend is straightforward. Previously, engagements were around return on investment analysis and ensuring technology repays over a five-year investment. That does not wash any more and I suspect it never will.
The message in the public sector today is, ‘If it was £100 last year, it has to be £75 this year.' There are a lot of cries for help to assist them in driving cost out of their infrastructure but to keep key services running, and they are turning to technology to enable them to do that.
CRN: How hands on are your private equity backers, Lloyds Development Capital?
They are very supportive, and were pleased with our results. They are happy to continue to invest in Trustmarque and further acquisitions are on the cards if we find the right targets in the coming months.
CRN: Finally, how do you see this financial year panning out?
SH: We expect to have significant growth in gross margins and net profit and to continue to invest in our business and attract more people. We are on plan at the half-way point.
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