‘We’re seeing stronger growth in the mid-market’: Avanade CEO

Chris Howarth talks New Horizon strategy, worldwide expansion and acquisitions

When Chris Howarth took the helm of Microsoft specialist Avanade in February, he inherited a business in the midst of a strategic shift towards the mid-market.

Speaking to CRN, Howarth explains that the plan, called New Horizon, is beginning to reshape the business after the company added around 600 new mid-market customers over the past year.

Avanade now serves around 1,800 mid-market customers, while the segment has grown from around 20 per cent of revenue to roughly a quarter of the business, with enterprise customers accounting for a smaller share of the mix.

“We’re seeing stronger growth currently in the mid-market.”

The CEO says his priority is not to rewrite Avanade’s direction but to continue executing the three-year transformation already underway.

“We’re 18 months into what we felt was a three-year pivot,” Howarth says.

“I didn’t have the luxury of coming in and saying, ‘I don’t agree with the strategy or I need a new strategy’.

“I was already an architect of how we were evolving the company.”

Avanade’s mid-market strategy gathers pace

The New Horizon plan was launched to expand Avanade’s presence in the mid-market while continuing to support Accenture’s enterprise customers through the pair’s long-standing Microsoft partnership.

Enterprise customers still account for most of the revenue but that balance is beginning to shift.

Former CEO Rodrigo Caserta told CRNlast year that enterprise customers represented 80 per cent of the firm's client base. Today, they account for 75 per cent.

The business has also adjusted how it serves those accounts, with more mid-market organisations now contracting directly with Avanade rather than through Accenture.

“As we hoped for, we now start to see the direct business, which therefore is a proxy for mid-market business, accelerated.”

APAC expansion creates fresh opportunities

While the New Horizon strategy is global, Howarth says it is being adapted to individual markets depending on customer demand and growth potential.

One of the biggest opportunities lies across APAC, where Avanade has expanded into Indonesia and India, acquired Total eBiz Solutions in Singapore and strengthened its New Zealand presence over the past year.

“We see the mid-market opportunity to be larger in APAC,” he says.

India, in particular, represents a major opportunity following Avanade’s domestic launch in the country.

“The mid-market opportunity was for us a reason to open the geography in India and to expand in India, and we’re really, really excited about that.”

Elsewhere, Brazil remains one of the company’s strongest operations, serving both domestic customers and acting as a delivery hub for North America, while Poland continues to support clients across Europe and the US.

The UK also remains one of Avanade’s strongest performing markets.

An active M&A roadmap

Expansion will not rely solely on organic evolution.

Howarth confirms Avanade is currently progressing two formal acquisition processes, alongside two exclusive negotiations, despite ongoing uncertainty surrounding valuations across the M&A market.

“We absolutely do [intend to make acquisitions],” he says.

“We are in the middle of two formal processes and two sole-source processes at the moment.”

The company continues to target Microsoft-focused partners that can either boost its geographical footprint or add new capabilities.

While location remains important, capability has become an increasingly significant consideration as Avanade expands its presence in the mid-market.

“We are looking at a couple of organisations who have much heavier product mix to services than we would have historically looked at,” Howarth says.

The CEO adds that mature Microsoft resellers are becoming increasingly attractive acquisition targets as Avanade evolves its commercial model for mid-market customers.

“We’re interested in organisations where they’ve got proven ability to work with these very mature resale models that Microsoft has in the market.”