SCC boss: We will buy our way into voice market

James Rigby ready to make voice acquisition after full-year results show fall in sales but rise in profits

SCC will acquire a voice services outfit this year as it looks to build on its recent purchases in the datacentre and WAN connectivity space, chief executive James Rigby has told CRN.

Speaking as Europe's largest privately held IT group unveiled its annual results, Rigby said voice represents the next big opportunity for SCC following its recent acquisitions of Fluidata and SSE's Fareham datacentre.

SCC's numbers for the 12 months to 31 March 2015 showed revenue falling but profits climbing, in the UK and across the business as a whole, as services became a bigger contributor to SCC's business.

"The next obvious area that is moving from legacy technology to new technology is voice," Rigby (pictured) said.

"It's moving away from those big old PBXs to a rack in a datacentre, and we see a lot of opportunity to build a business in that area and will look to acquire those capabilities during the course of the year. We've got 500 or 600 clients we can take that to."

He added: "We could probably have a bash at building it organically but voice will be a new area and it would take longer to build it than acquire it. But what we don't want to acquire is a legacy voice business; we want a business that knows how to provide voice services in the internet world, and that is not a long list."

Sales down, profits up

In the UK, SCC saw EBITDA rise 25 per cent to £19.4m even as revenues shrank 13 per cent to £662m, reflecting its decision to exit from some "low-calorie" product business.

Adding in the contribution of France, Spain and Romania, total EMEA sales fell nine per cent to £1.55bn but EBITDA rose 10 per cent to £35.2m, meaning SCC's strategy to reach £50m EBITDA by 2017 is on track.

Services contributed more than 50 per cent of UK gross profit for the first time as services revenues generated on its home turf rose 22 per cent to £159m.

Rigby said SCC had chosen to step away from pass-through business where there was no strategic relationship with the vendor, stressing that it is still making good money from its top vendors such as IBM and HP.

"The big story for us this year was the transition towards managed services and the move away from some of the very low margin pass-through product business, which is why our revenues have dropped," Rigby said.

"The star performer for us this year was the datacentre services side. We have spent a lot of money on increasing our asset footprint in datacentre services over the last five years and that is really starting to come through now to the bottom line."

He added: "We still have a big resell activity and we make good money out of that but our datacentre services business finished the year with a run rate of £34m and we think it will do £40m next year. That's a big datacentre services business and if you look at our competitors in that business, for instance Attenda, that's as big as they are – and that's all they do."

'We're all finding our niche'

Asked to name his top five competitors, Rigby said large SIs such as Atos and IBM Global Services are increasingly in his cross hairs as SCC looks to grab services business from them in the mid-market.

"In the traditional channel model, we're all finding our niche," he explained. "On the reselling side, Kelway and Softcat are really good at what they do, and all credit to them. We are becoming quite a force in datacentre managed services and you've got Computacenter in desktop managed services, and they are very good at what they do.

"But in terms of our own competition, we are more and more coming up against the SIs. Our real focus is on the mid-market – customers with 500 to 5,000 users – where we can be strategic to them. They don't particularly want to deal with the very large SIs because they're not competitive enough or don't really care about the mid-market.

"Equally, at the other end you've got small MSPs that don't have the capability of SCC, so in that mid-market space, SCC is a really good fit for them. Our competitors these days are those SIs that maybe had those contracts in the past but are now more focused on large accounts and we can take these mid-sized ones off them."

SCC's recent datacentre acquisition spree means it now has a rack capacity of more than 1,900 and 14Mv of power and Rigby said – aside from its ambitions to crack the voice space – future acquisitions will be about adding to its existing capabilities.

"This year we will try to do voice and then I think we've really plugged all the gaps we wanted to plug. If there are other acquisitions that come along, they will be in areas in which we already have capability," he said.

For full-year 2016, SCC expects UK product revenue to stay flat at £500m and services to grow double digits to £200m, with cloud ending the year on £55m.