Westcon-Comstor CEO: '50 per cent of our revenues are now recurring'

David Grant sat down with CRN's sister title CPI to lift the lid on its impending pilot of Westcon-Comstor's marketplace

"We're not as transactional as some distributors, and that's how we're growing despite Covid and supply chain challenges."

That's the view of David Grant, Westcon-Comstor's CEO.

He sat down with CRN's sister pulication Channel Partner Insight to talk about his priorities for growth, and made the case for technology distribution to grow to encompass more abilities to provide recurring procurement.

Looking to the global distributor's own track record in its recent FY2022, Grant said that the firm's push to offer more subscription business helped insulate it from the triple threat of the pandemic, supply delays and inflationary pressures.

Revenue was up 11.8 per cent year on year to $2.89bn.

"And it would have been significantly more if it wasn't for global supply chain challenges, because our backlog tripled," Grant said.

"But one of the reasons we managed to continue to grow is that just over 50 per cent of all of our revenues are recurring now. So we're not dependent on hardware as some of the distributors are."

He added: "For that reason the whole subscription environment for us in certain scenarios is very important. And that's what's lead us to talking about our own marketplace."

Coming soon: Westcon-Comstor Marketplace

Called PartnerCentral, Westcon-Comstor's marketplace is due to be piloted in the UK, Australia and New Zealand in September, and rolled out globally by the end of 2022.

It will combine the cloud procurement analytics platform it already owns called BlueSky, and a hardware e-commerce platform called Partner View.

In an interview last year, Grant offered a riposte to cloud marketplace challenger Pax8 who had told partners and CRN that its business model was "sounding a death knell to distribution".

At the time, Grant said he was "keeping an eye on" Pax8, but was unruffled by the challenge arguing "the reality is, an awful lot of the vendors still have a device component in their solutions".

Fast forward a year, and he is now taking the initiative on a distributor-built marketplace.

When asked how Westcon's marketplace will differ to other cloud or hyperscaler incumbents, Grant again honed in why he wants to build a business that is "not so transactional".

"Our partners will be able to have several additional capabilities in addition to all of the standard functionality you'd expect now.

"They'll be able to manage their entire estate of subscriptions, by vendor or by customer. They'll be able to look at termination dates and work with us on whether their subscriptions have been activated or whether they need to do co-termination of multiple contracts. Also, they'll be able to build and design hardware subscription solutions, and multi-vendor solutions in a single delivery option.

"That's where we differ. This is more than just about software...And for the partners, I believe that they need a marketplace that offers them real value to do the design configuration from multiple vendors rather than just deliver software."

Headwinds and working capital investment

Grant is clearly excited by the prospect of having the distributor's marketplace become available to the channel.

"I'm impatient. I'd like to have the whole thing available straight away!"

However, wider macro-economic challenges loom. And even though half of Westcon-Comstor's revenue are OPEX, it has not been immune to hardware headwinds.

"I have seen impacts on a country basis," he said.

"For example, our business in China has been down in the last quarter, because Shanghai has been shut because of Covid. But in the Middle-East, with oil prices going up, our business in Dubai and Saudi Arabia has been going very, very well."

And then, there is inflation.

"Obviously, inflationary pressures I think are a problem for everyone in business. It doesn't matter what line of business you're in.

"Combined with that the strength of the dollar is not helpful for international markets because it makes technology much more expensive."

Indeed, Grant has noted that several vendors have already hiked up prices, in some case "by two or three times".

When it comes to the supply chain, clearly distributors are at the heart of helping make stock available to partners.

This time last year, Grant said Westcon was holding an additional 50-100 per cent more vendor stock than it would usually do so due to global supply constraints.

It's a trend that has continued, but in his view, one that has become harder to manage.

"Holding stock has become increasingly difficult, as partners don't always want partial shipping. So we're having to consolidate partial shifting to the channel. As an example, when a vendor has a bill of materials, if they've got say 80 per cent of it, they want distribution to take it. So we're effectively managing the back order for the remaining components or parts until they're available."

To help facilitate this "new normal" in technology, in the last year, Westcon-Comstor secured an additional $400m of working capital funding.

"Now we've got access to about a billion dollars of working capital funding in total, which is really helping us work through managing that supply chain consolidation on back orders on behalf of the partner, validating it and then finally shipping it, which is a big investment for us."

He added: "Our vendors are impacted differently. But certainly, by the end of the summer, we think we'll see some improvements from Cisco, on some of their fastest moving products."