Every witch way

Dave Evans walks through the wardrobe, turns right at the lamp postand enters Azlan's magical kingdom

Picture this. A brain-storming session in a pub one evening where a bunch of Novell specialists are debating how to rename their business, its original ADT name snatched back by one of the firm's founders who wants to keep it for his car auction business. 'I know!' pipes up a brother-in-law of one drinker. 'Call it Azlan,' he says, alluding to The Lion, the Witch and the Wardrobe, which happened to be wowing a TV audience of kids at the time. 'Eh? Azlan - the A to Z of Lans. Geddit?'

More than a decade on and visitors to Azlan's Wokingham headquarters are greeted by a metal plaque of a lion adorning the reception, while carpet motifs also bear testimony to the mythical C S Lewis beast.

Azlan has come out of the wardrobe. No longer is it a whim, though its meteoric rise as a distributor - predicted to trade #300 million this year, with half-year profits of #6 million reflecting a 75 per cent increase in turnover - might just as well be a fairy tale.

In short, Azlan is distributor king of the networking jungle, some 3,000 resellers hanging on its golden tail and, now, with even mighty IBM remodelling parts of its distribution strategy on the company. But Azlan isn't stopping there. It's still on the acquisition trail, despite the fact that it is represented in virtually every European country except Spain and Portugal, though there's always manana.

Sitting in the Azlan boardroom, MD Ed Arnett exudes a breezy confidence as he admits the company has become one of the darlings of the City since it floated in 1993. 'We're what's described as glamour stock,' chortles Arnett, doubtless appreciating the irony of how a company that devotes itself to such pedestrian products as hubs and routers can be considered in pin-up terms. Another irony is the fact that what the City probably finds so sexy about Azlan is its no-nonsense approach to making profits, de-void of any testosterone posing.

'We're not a macho business. When we decide on something, like an acquisition, we do it strictly with a view to return on investment,' says Arnett.

Macho or not, Azlan put distribution rival Persona's nose out of joint when it acquired Rotterdam-based Akam International for a reported #30 million, further strengthening its grip on Europe and effectively stalling talks between Persona and Landis, another Dutch networking specialist - both UK companies at the time sharing the same objective, namely to get in first and dominate. That said, he admits a 'healthy respect' for Persona.

Arnett says that the paranoid survive, paraphrasing Intel boss Andy Grove.

And for a company that denies it is given to machismo, there was another clash a few weeks ago - albeit on a smaller scale - when Azlan was slated for purportedly selling IBM hubs at marginally above trade price to office supplies giant 3M, thus competing unfairly against resellers.

Arnett dismisses this criticism as the spleen-venting of just one Var, 'pissed off that he didn't get the business'. He adds: 'Life is like that.' More significantly, he says it's also a reflection of the fact that as IBM strives to expand its networking business - overlooking the fact it is already the world's biggest vendor of networking products - the more it is likely to adopt a two-tier channel of distribution to large corporates rather than rely solely on direct sales or authorised partners with specific business connections.

'Some of IBM's legacy or heritage relationships with resellers will need to be migrated,' predicts Arnett. 'But in the instance of 3M, all we did was help one of our resellers in a creative way. It got the deal and then invoiced us for margin.'

That margin was just three on a hub that would normally cost Vars 690 from Azlan, but at least the victorious reseller didn't have to stump up its own money for the hubs.

Azlan invoiced 3M direct, and though it says it didn't make any profit above its normal distributor margin, it sure helped bond its new relationship with IBM. But this is why we are sitting round the table, to discuss Azlan's links with IBM. Also present is Richard Charnock, the distributor's main contact at Big Blue, and Steve O'Meara, Azlan's IBM business manager.

Outside the door scores of young sales staff are beavering away, harvesting the fruits of this relationship. Working busily upstairs are the Vars and their clients embarked on training courses, the Wokingham centre being just one of the 90 Azlan training rooms scattered throughout the continent.

Azlan training courses, it transpires, are also a nice little earner for resellers - offering typical margins of 25 per cent to 30 per cent, compared with half that on more tangible products. 'The other bonus for the Var is that it ties up no capital,' says Arnett.

Back at the table, O'Meara is talking. He reveals how a few weeks previously he had been IBM network's guest of honour in New York where the bond between Azlan and the world's biggest IT company was officially cemented when Azlan won a special channel accolade - the first time any such award has gone to anyone outside of IBM's immediate network products empire.

The ceremony had a secondary purpose of dispelling wide rumours that IBM was getting out of the networking business. Even more importantly, it spelt out a radical rethink by IBM in how it gets its networking wares to market - a rethink that has ramifications for the channel as a whole.

'Before we started dealing with Azlan two years ago,' admits Charnock, 'IBM had a history of selling directly to large corporates. Our networking division didn't even have a complete product set in terms of Lans or Lan connectivity.

'At that stage we were only just getting to grips with what a reseller was and how the channel works. Working with an independent distributor was very new to us.'

Such has been the success of the experiment that IBM's other, once autonomous, divisions might now adopt the Azlan model as a way to get wares more quickly to market. It's a rethink that underlines the fact that IBM, having been ravaged by the recession, is beginning to realise the world has moved on and that customers no longer expect to source all their IT needs from a sole manufacturer.

Put simply, the days of the one-stop proprietorial shop are over. But it's a change of culture which also puts many resellers under strain as - in keeping with their customers' new mix 'n' match procurement ethos - they too have to source IT products from a wide variety of vendors.

This is where Azlan, with its wide buying power, enters the fray. 'When we made that award to Azlan in New York,' says Charnock, 'we were saying that IBM recognised that the two-tier distribution model is the best way for us to take products to market.' He predicts IBM's change of direction will help Vars enormously.

'Obviously, we have a knowledge of competing products, but there is no one as good as Azlan at helping Vars integrate products from multiple sources.' He adds: 'IBM has often been described as the most successful selling company in the world. But I have never seen anyone as efficient as Azlan at managing business relationships.

'The level of support it provides resellers, over and above pure technical support, is second to none.' The lion, as someone else might say, goes from strength to strength.

But then the winds of fortune favour both IBM and Azlan at present. Despite the laying off of armies of workers in recent years, IBM is now firmly reasserting its market position, but this time based on the new network-centric paradigm. But it's a subtle metamorphosis reflected in small things like the changing of the mainframe division's name to server division.

Whereas mainframes once underpinned IBM's colossal fortunes, nowadays they are only part of the picture - servers, in all their guises, are the new paradigm, especially when discussed in the context of the Internet.

And with Azlan as one of the biggest, if not the biggest distributor of networking products in Europe, the partnership with IBM is an ideal symbiosis.

It might be for this reason that Azlan insists it has no plans to enter the US distribution market, treading on some precious toes. But, says Arnett: 'We don't know of any UK distributors that have tried to tackle the US and succeeded. We've got bigger prizes to win in Europe.'

What that all boils down to is that Azlan now accounts for 60 per cent of IBM networking's channel business in Europe, though there are some products like mainframe software that IBM has too much investment in, and for the foreseeable future will continue to sell direct.

As for rival IBM network distributors, though there were four others, this has now been whittled down to just two in the UK - begging the question of whether those that departed were pushed or jumped of their own accord.

It could be that as Azlan flexed its European muscles, rival distributors concluded they were not in the same league. As it is, Azlan's City pals stumped up #40 million to fund the Dutch purchase, while on tap from the banks is a revolving pledge of a further #50 million if needed.

Whatever the reason for Azlan coming up trumps, IBM seems to have taken the two-tier model of distribution to heart. 'This form of distribution is pretty much set in stone for IBM's product businesses,'says Charnock.

'It's a difficult model to apply to services though I think the will is also there.

'But by comparison with products, a service is not something you can stick in a cardboard box and leave on the shelf until you sell it.' He adds: 'We are moving away from the old idea of an IBM product division choosing any number of channel partners and working with them. Instead, we are working towards a concerted approach where we mesh the need to get a product to market with the need to present a consistent face to the channel, treating all resellers on equal terms and not over distributing.'

So, given its success with IBM networking, will Azlan expand beyond this domain, absorbing a wider range of products? Arnett denies this firmly.

He insists: 'We are still learning about how the networking business is evolving. As that unfolds, we will set up other focus divisions, for example, as we did with high-end storage which we identified last year as one of the faster growing sectors.

'But what we won't go into is high-volume, low-margin products like PCs.

We have very little scope to add value in these areas, and therefore we won't do it.' The lion has roared.