'The question is, for how long?' Insight's EMEA boss on traditional resellers still seeing success

Wolfgang Ebermann talks CRN through the US giant's increasing reliance on software development, questioning for how much longer traditional reselling will be viable

US channel giant Insight has no interest in acquiring traditional resellers as it continues to focus more on its own software development, according to EMEA boss Wolfgang Ebermann.

Ebermann told CRN that building its own IP is becoming an increasingly significant part of Insight's business.

"We have been building out our own products and a substantial investment has been put into the business over the last six or seven years," he said.

"It's an investment through acquisitions; if you look through our earnings releases over the last few years you can see we have been acquiring additional capabilities, often in Europe.

"Now, as a company, you could see us as an independent software vendor. We built a product that sits on top of Office 365 and helps organisations to drive and adopt a new way of working."

Last year Insight announced a $10m (£7.9m) investment in its European services operation, a "big chunk" of which Ebermann said will go into Insight's "digital innovation".

He said that Insight's plan is to replicate the success it is already seeing with its IP in the US.

"Do I want to scale this to $100m-plus business as fast as I can? Absolutely in Europe, just like we did in the US," he added.

"The digital innovation go-to-market approach is something we have just started to incubate in Europe.

"We will also add additional offerings because we don't want to become irrelevant to our customers."

Ebermann said that Insight will continue to be acquisitive when it comes to developing its IP further, but scoffed at the prospect of acquiring a reseller to bolster its traditional business.

"What would be the benefit for us to do that, versus growing our relevance across the different stakeholders where there is a big need at our client side to ask for help?" he asked.

"Will that grow our relevance in an area where it's not about price competition, but it's about driving business outcome? If you listen to that, where would you invest?"

Despite many prophesising that resellers would struggle to see success for much longer, a number of global partners are still thriving.

Computacenter recently acquired a US reseller, while analyst Canalys predicted that CDW will acquire a large European reseller in the near future, after creating a £1bn operation in the UK following its takeover of Kelway four years ago.

Meanwhile, Softcat continues to beat expectations.

Eberman acknowledged the success these businesses are seeing, but countered: "The question is, for how long? If you do an acquisition in the same business, you need to look for synergies.

"If you can find the synergies and if you can find a culture complementary, you can do it, but I question the benefit.

"Every president and CEO needs to think about how it affects the company's profile, and how it affects clients' perception.

"We are observing and looking around, but for us there is a very clear criteria on where we are making investments and we are staying very firm on those criteria."

Ebermann's views were supported by Insight's recently reported results, where dwindling hardware sales were blamed for the reseller's sales decline, while cloud migration was picked out as the reason for a drop in software sales.

US comparison

Part of Insight's $10m investment in Europe has been to bolster its cloud services operation.

Ebermann claimed that, unlike in the US, cloud service providers in Europe are generally struggling to move out of start-up mode because of a lack of capital.

"When you look at the market across Europe in particular there are a lot of smaller cloud service providers which have established businesses in the last five or six years," he explained.

"They are 20 to 40 people. The majority of them have specialised themselves, so they went for a Microsoft cloud solution stack or for an AWS stack. You learn when you speak to those folks that they are able to grow their business, but they are not yet able to be profitable.

"They are struggling to build the operational discipline into their business to become profitable, from our point of view. This is a little bit different to what we see in the US, where you see already more mature cloud services businesses with 300 to 400 people that have matured, become profitable and are seeking the next evolutionary step.

"They then either go with an investment strategy, or they go to search for large organisations that are interested in partnering with them to jointly accelerate the business going forward."

He claimed that the next few years will show whether the European market is capable of matching the US' cloud credentials.

He warned that a fairly radical change in approach is needed if businesses in Europe are to successfully make the transition.

"For Europe, my belief is the next couple of years will show how the market is going to evolve," he said.

"For me, it's very clear that the success of partners is very much dependent on acting client centric, rather than vendor centric and selling products.

"If you are not building the ability to make it more strategic and provide intelligent solutions from an early advisory stage, all the way through implementation, with managed service, and if you can't fulfil on that full deck, you run the risk of not being able to survive."

The view from the UK

Insight's most recent UK accounts are for the year ending 31 December 2017, when sales rose 11 per cent to £502m.

Ebermann said that the UK operation has "majorly contributed" to Insight's overall European business, claiming that he remains confident in the region moving forward - despite the ongoing Brexit saga.

"The UK business is super strong and super important for my immediate business," he said. "We have been growing share in the UK market due to the expansion of our product portfolio and I'm excited about that.

"For me it's a little bit unfortunate that we have the discussion at the EU right now but fundamentally, the UK business, from an IT spending point of view, has been healthy over the last few years.

"In the UK, company owners understand that evolving the business and making IT a strategic asset to drive better business outcomes has to happen one way or the other.

"The government market is a little bit more uncertain, but overall, it's very optimistic in the way that I see it spending growth for the moment."

In terms of Insight's own Brexit strategy, he claims that a set of recently launched managed services hubs across Europe means the firm is prepared to serve both UK and European businesses, if and when the UK leaves the EU.

"We basically have this managed service operation," he said. "We have it in the UK, in Spain, we also have it in the Netherlands where we acquired the company.

"We are ready now for any direction Brexit goes in. That was also important for us. We acknowledge whatever the decision is, but we will, as a company, be ready to help our clients to go either way and I think that is important, because we are an international company.

"We want to help UK clients who have affiliate entities outside the UK, either in Europe or in the US, and we want to be the partner of choice."

While Ebermann says Insight has taken great strides to transition from being a traditional reseller to a services and solutions-led business, he admits that there is more to be done.

"If we would stand here and celebrate success today, and just keep that engine going for the next 10 years, then what would happen to us is what happened to Nokia," he said.

"There is no moment where you would declare victory and just celebrate success. We have to stay on the curve, because that innovation in market is accelerating with high speed and we need to participate there. We need to proactively lead. So it's a constant change and that's normal."