SCC's James Rigby on full-year results, growth hotspots, and why he's cynical about big acquisitions
SCC yesterday unveiled record FY 2018 results. We sit down with its affable CEO to discuss topics ranging from offshoring, to SCC's growth ambitions, to why its own cloud platforms aren't always the answer
Birmingham-based reseller and IT services powerhouse SCC yesterday unveiled record results, with group revenues for its year to 31 March 2018 up nine per cent to £1.8bn and UK revenues rising three per cent to £591m. Operating profits were also up.
James Rigby, CEO of the privately held firm, talked us through his growth plans and views on the market in the aftermath of the results.
Hi James. Overall, do you feel more or less positive about the state of the industry than 12 months ago?
More positive. There are two key things for customers. They have to digitise their businesses. You see lots of businesses trying to catch up on that. Like retail, for instance: the old world of bricks and mortar is dying. They have to go online and they have to invest in their businesses in the digital workplace. And the second thing is hybrid IT. They have to take cost out, so that means putting applications in the cheapest, most secure, most efficient place. So the appetite for investment in technology is very strong; they have to do it. Of course the unknown for all British businesses at the moment is Brexit. But again the need for businesses to transform and become more efficient and digital will power through even that. The climate for the industry is good.
How would you assess your financial performance for the year, both in the UK and EMEA?
It was another record year for us, both at a European level and in all the individual countries. We saw particular strength in our French product business. In the UK we had very good growth in our service business particularly, whereas for product it was a year of two halves: we had a relatively slow first half due to various project delays and so forth, but really strong growth in our second half. In our last quarter, product was up by 24 per cent in revenue terms and we've seen that continue into the April to June period. Revenue growth has been particularly strong in digital workplace - in desktops, laptops and networks.
Could you break out the UK numbers?
UK revenue was £591m versus £573m the prior year and operating profit was £17.1m versus £16.7m [this does not include print arm M2].
You've made it clear you're not interested in expanding beyond the UK, France and Spain. Why is this, and does this contrast with some of your peers, like Computacenter?
We believe there is enough opportunity in territories we are in already to make them bigger and better. We have no ambitions to become an international player and service global clients - that's not us.
Certain peers like a Computacenter are dealing with those very large global corporates, so perhaps they need to have that international multinational footprint. We are not dealing with those types of clients. We are the midmarket or enterprise-level clients that tend to be domestic. We are content in the markets we are in and see lots more opportunities in those markets without biting off another country.
Continue to the next page for Rigby's thoughts on acquisitions and why SCC's cloud platforms are not always the answer...
SCC's James Rigby on full-year results, growth hotspots, and why he's cynical about big acquisitions
SCC yesterday unveiled record FY 2018 results. We sit down with its affable CEO to discuss topics ranging from offshoring, to SCC's growth ambitions, to why its own cloud platforms aren't always the answer
SCC has been relatively acquisitive in recent years. Should we expect more M&A, and if so where?
As always, we're alive to acquisitions. They won't be big ones. I'm quite cynical about big acquisitions. They can be very disruptive and throw you off track, and you can often be disappointed. But what we will do is niche acquisitions that bring us new capability. You might have seen we bought a managed print room business called Hobs a few weeks ago, so it's that type of boutique specialism that we will look to acquire.
It will probably be the UK and France, because they're 95 per cent of what we do. But there may also be something in Spain to lift that business. We are alive to all three.
SCC has spent years aggressively expanding into the cloud and datacentre space. Do you feel you've made the right calls in the cloud space so far, or have you made missteps along the way?
I think we've done the right thing. To me it's not binary. It's not all on-prem or all public cloud or all SCC cloud - it's all of the above. The amount of information in the world is doubling something like every four years so there's enough to go around in my view for all of it, and we are seeing good growth on our platform. The differentiator for us is not the platform itself, it's the service we provide and the security, and as long as we continue to invest in those things I think there is a place for British service providers and cloud providers with onshore services, and I think that is a differentiator for certain applications.
UK-based cloud provider UKFast recently launched a partnership with old foe AWS, in recognition that some of its customers did not want to buy all UKFast. Have you come to a similar conclusion regarding SCC?
I would definitely echo that sentiment. A customer has so many different applications these days, and different environments will be right for different applications. And if you want to put your arms around that customer on a more general, or on a more managed, basis, you have to have the capability for what's right for the customer. I'd love it all to be SCC's cloud platforms but that's not the real world; they will be right for some applications and not others and if we are to be a trusted provider to them we've got to make the right decisions for them and the reality is it will be all of the above - reselling, cloud provision and public cloud. I don't think anyone in those markets should be particularly worried because information is all powerful and it's growing.
In public cloud, are you throwing your weight behind one of the hyper-scale giants in particular?
Our job is to be independent and make the right decision for the customer, so we won't align ourselves to any particular vendor. That may be AWS in some cases or Azure - it may be IBM cloud.
Click onto the next page to read about Rigby's stance on nearshoring and growth plans for the next three years...
SCC's James Rigby on full-year results, growth hotspots, and why he's cynical about big acquisitions
SCC yesterday unveiled record FY 2018 results. We sit down with its affable CEO to discuss topics ranging from offshoring, to SCC's growth ambitions, to why its own cloud platforms aren't always the answer
Last year you launched an offshore software development centre in Vietnam, adding to your presence in Romania. What's the customer feedback been like?
The feedback has been really good. Romania tends to do more frontline, level zero and level one customer contact stuff, and we've had very good feedback there. Vietnam has much more technically competent skills. The education system there is amazing. They have I think seven or eight IT-only universities in the city we are in so availability of skills is fantastic - the English language slightly less so. They focus on different things but they've both been very successful for us. We have and we will put as much production offshore as we can to stay competitive.
The big thing actually these days is automation. Rather than throwing more people at the task it's removing the tasks in the first place through simplification of technology and automation, so that's a big focus for us at the minute in terms of AI on our service desks and in terms of automation.
Where do you draw the line in terms of what you offshore?
You've got to be 100 per cent sensitive to the client. There are some customers where we still do onshore desks, as they don't want offshore or there are security implications. And there's also a mix on AI: some customers don't want to press buttons and talk to a robot. It's always technology plus the human rather than all technology or all human. There's a balance where you can take some cost out to be competitive but you can also offer that flexible level of service and human interaction.
On the AI front, is there anything you've just rolled out or are rolling out now?
We use ServiceNow very heavily for our service desk and we have introduced AI into that platform. And our experience thus far is it's taking out about 20 25 per cent of the tasks.
You just completed a three-year plan focused on building your services business. Are you changing direction at all with the new three-year plan that kicked off on 1 April?
We've just finished it internally. It's not fundamentally different and relies on four key planks: growing services; improving productivity; innovating; and cross-selling into long-term customers. [For the UK], we are looking to grow from £591m to £684m by the end of the period and also want to take profitability from £17.1m to £26m.
We're not going to stop doing anything or start doing anything. Some things will become ever more important. Obviously the whole hybrid IT play. We already do on premise, we already do our own datacentres and cloud platform, but public cloud is becoming more prevalent so we are constantly recruiting in that area. That hybrid message is one we are taking out to customers with that end-to-end capability as a managed service. Security and edge networking are also growing very fast. Some areas will grow faster than others, but fundamentally there is no change in strategy.