Taking aim with Arrow ECS
Sara Yirrell catches up with another chief from the 'big four' distributors, Arrow ECS managing director Steve Pearce
How do you see the channel landscape changing this year?
There is more rapid consolidation happening. Vendors are coming together, and more reseller mergers are taking place - I think it will boil down to between seven and 10 really big [reseller] players in the UK and several specialist providers.
New service providers are coming along, which is presenting some interesting dynamics for the market. The question is: who do they deal with - do they deal with customers directly or distribution? There are tough commercial dynamics going on as these guys get more powerful.
What is Arrow ECS's strategy for this year?
We grew substantially through the recession and we were able to do that because we focused on our core areas of security, virtualisation and storage. You have to have a vendor community that can offer real value in terms of products.
We are now focusing our attention on our top 250 and 300 resellers. We have put a great deal of effort and resources into this, and we want to own the customers. Our strategy is to focus all our high-level VAD resources on partners in which we believe we have enough share of the wallet to get return on investment.
Of course, there are another couple of thousand partners that spend a small amount of money but need a different type of service, and that is why we are mooting an Arrow Light type of service at the moment. This service would give them certain credit terms and access to certain products, and it would operate differently to the value part of the business.
We are looking at all our vendors and all our customers, and trying to segment them rather than use a one-size-fits-all approach. We are putting resources and skills where we get the most return. It has been a constant evolution over the past 12 to 18 months, and we have realigned all our sales people and have been reviewing from the number-one customer down. We are tailoring the business and stripping out the dead wood. You cannot afford to do anything else.
Are you focusing on any particular areas of technology?
We want to have all the key components to help people build datacentre infrastructures. I think that IT spend over the next five years will centre on three main elements: infrastructure, using an edge device such as a tablet, and the network - and everybody will be connected via a collection of datacentres. Everything will be centralised or consolidated into a flexible resource allocation.
I see three main opportunities now: virtual desktop infrastructure, network building and datacentre building. I think there is a tremendous opportunity to offer data management along with environmental solutions and security solutions.
How do you see consolidation in the IT market panning out?
Vendor consolidation is very interesting. In a few years' time, I think there will only be about five or six really big players. In our space - distribution - I think it will end up with the so-called big four: us, Avnet, Ingram Micro and Tech Data. I think all the other distributors will be absorbed. The big boys will play with the other big boys, and the strategy will be very focused on the datacentre.
How do you think the role of distribution will change?
I really do not think that distributors will have to change that much at all over the next five years. There is a major opportunity over this period for distributors to work with resellers - as normal - to sell products and solution elements to help resellers build their offerings. The market will grow three to five per cent, so there is plenty of room for everybody to grow.
In distribution, we just need to keep an eye on the market that is developing. First of all, we aim to target service providers as potential new reseller channels to market. We need to work out if a service provider is an end user or if it is a reseller. My view is that a service provider is a reseller because the benefit of the product passes through them to the end user.
The big service providers are massive players, and they should work directly with the vendors. It is the second tier that will be served by distribution.
What impact do you see the cloud having on distribution?
We feel that there is a blurring of the lines in the cloud. There are two datacentres - one that is run for businesses in a private cloud, and a public cloud offering services. In terms of the cloud, I think we will just back off for three to five years.
Distributors kick in at a certain point when momentum, scale and maturity have built. But if I were someone with a cloud proposition right now, it would be logical for me to deal directly with customers and resellers. We need to understand the cloud and experiment with it and see whether aggregation is something that is wanted.
Fundamentally, distributors are there to provide expertise and support to partners and help resellers fund their businesses through finance provision, and we can make sense of vendor solutions and put them together.
Where do you stand on the argument of broadline versus specialist?
I think there are a lot of products still out there that need broadline distribution. There has to be a mechanism that allows these products through to the end user, and therefore commodity distribution is still needed. We have learned that we have to have a VAD proposition for our key customers, but we also have to have a back end that has broadline logistics - where we can issue, quote, stock, break and build IT, all in an efficient broadline manner.
A hybrid scenario is definitely needed in distribution. You need broadline logistics capability with scale. We feel there is a third layer to distribution, called channel development. That is the next level of distribution; we have to be an extension of the vendor, deduplicating layers. There is no point in a vendor having a high-profile marketing team because we can do that. Channel management is the next dimension: our people in their business.
Will Arrow ECS make any acquisitions this year?
Arrow has the appetite for it, and it is almost inevitable. There is a process that we have to go through in the next two or three years in which everyone who wants to be bought will have been bought. Anyone that we look at has to have the right fit and logic. It might not be in the UK - it might be around Europe - but if the right one comes along, it will happen.
One area where we need to do a bit more is networking. A lot of our products have networking embedded, but we have never really participated on the baseline. And we are also keen to further develop our training and education business.
Arrow ECS launches own-brand productswww.channelweb.co.uk/2039390