Softcat CEO on 5G, cracking £2bn revenues, US operational plans and why the channel is winning

Graeme Watt tells CRN he sees 'no end in sight' for current digital transformation investment cycle as he declares that the market is as 'good as he's ever seen it'

When Graeme Watt took the reins of Softcat last April, few would have foreseen that its growth would accelerate.

The Marlow-based reseller's revenues swelled from under £56m to £832m during previous talismanic leader Martin Hellawell, and some questioned whether Watt's predecessor had moved into the chairman role just as Softcat was nearing the ceiling of its potential.

At some point in the future, it will become tougher to grow market share, and we've got other options in the locker. Good companies do things in parallel.

But under Watt (pictured) - a trained accountant and seasoned CEO - the opposite has occurred, with the FTSE 250 firm topping every target before it.

Having broken the £1bn revenue barrier last year, first-half 2019 growth accelerated to 28.5 per cent, comfortably ahead of expectations. This was followed by another positive trading update last month.

'I've never seen it so good'

Talking to CRN, Watt claimed that Softcat is far from fulfilling its potential at a time when the investment climate is more buoyant than at any point in his 30-year career (see video above).

Softcat's fortunes have been bolstered by a digital transformation investment cycle that has "no end in sight", as well as buoyant spending on hybrid cloud and software-defined, according to the former Tech Data and Bell Micro bigwig.

"I've lost count of how long I've been involved in the IT industry, and I haven't seen it as good as this," he said.

"We talk about digital transformation and the investment cycles associated with that, but the word ‘cycle' suggest it's coming to an end, whereas I see it just giving and giving.

"It doesn't matter what sector it is, people are digitising their businesses just to remain relevant and competitive."

The UK's first 5G consumer mobile network went live in six UK cities on 30 May, and Watt predicted that the technology would spur another wave of investment around edge computing and IoT.

"I think 5G will make the ability for people to instrument the environment much easier," he said. "As we know, that drives data, which drives the strong need for an infrastructure that can support all the needs for that data - the storage, the security, the compute, the analytics - which is our sweet spot."

Advantage channel

Despite misgivings in some quarters that some vendors, including Microsoft, have increased their direct engagement with end users, neither is Watt concerned that the channel is falling out of favour as a route to market.

There's a theoretical concern, particularly around software, that the channel may be disintermediated. I don't see that.

"The view that we're being given by the vendors in the main is that their channel business is growing faster than direct business," he said. "I can't think of a vendor where that isn't the case.

"There's a theoretical concern, particularly around software, that the channel may be disintermediated.

"I don't subscribe to that for at least a couple of reasons. One is that the vendors don't have the capability to sell their technology. We are their sales arm, and they continue to invest in us to do that. And secondly, the customers want to buy IT solutions. They don't want to have to go to 10 or 15 vendors to procure that. Who's going to help them put it all together and optimise it and tell them that is the right stuff to buy? That's what we do.

"For those two reasons alone, I don't believe that they are motivated to do that.

"You also hear from time to time that it's going slightly wrong at companies like Dell - who have a kind of direct heritage and are still changing the model and trying to work out how they can maximise leverage across the whole desktop, Dell Technologies piece with VMware.

"But I encourage my team to look at the bigger picture and say ‘actually, I trust them'. Every company has some rogue behaviour from time to time. It's not driven by a hidden agenda. If you look at the bigger picture, we're growing like hell with Dell and others. If there's an individual deal that steps outside the expectation, Dell are ready to address that together with us.

"So I don't think there's been a shift in sentiment or reliance on the channel. I don't see that."

Headroom for growth

Softcat's growth has been built on rapid expansion of its network of regional sales offices across the UK and - more recently - Ireland.

Watt revealed that Softcat has no current plans to open further satellite locations after it cuts the ribbon on its Birmingham office later this year, but insisted it has the headroom to continue growing by winning more customers and selling more to existing ones.

"You publish the CRN numbers, and you have us down at 6.9 per cent of the top 100 and 5.6 per cent of the top 300. So it's hugely fragmented. We think we've got a lot of runway there to go after," he said.

"The other major conurbations are serviced from other offices. But this doesn't stop us from growing. We're probably addressing less than 20 per cent of the customers by number and less than five per cent of the revenue. There's a huge market to go after, and we can do that from the existing infrastructure.

"Getting deeper into existing accounts is definitely a focus for us. We're going to keep on recruiting roughly 600 new accounts a year to fuel mid- and longer-term growth. We've got a simple model. I think we're driving it effectively. We don't see any barriers to continuing that growth."

Although international sales offices don't currently feature in Softcat's growth plans, the firm has been busy setting up an operational capability abroad to oversee the requirements of its multinational customers.

Softcat now has operational presence in Singapore, Hong Kong and Sydney, with the US next on the agenda, Watt confirmed.

"But they are operational, not sales resources," he clarified. "And they are focused on meeting the needs of our UK enterprise customers. We're not expecting them to sell to new customers in those markets."

The Watt way

Watt said he would be disappointed if Softcat's growth into a FTSE 250 firm with nearly 1,500 staff - with all the trappings that go with it - meant it has become a less fun place to work.

At some point in the not too distant future, we'll go through £2bn [revenues]

"Are we able to do quite the frequency and extravagance of the trips we could do when we were a 20-person firm? When you're a 1,400-person company, obviously not. But if there's one element that was the focus of both Peter Kelly and Martin during their tenure that I will continue to have during my tenure, it's making sure we have a standout culture. In a market where it's difficult to differentiate, that is our number one differentiator."

Watt said one priority is keeping pace with the expectations of the new generation of young sales staff entering the business, particularly around flexible working.

This year, the firm has "slightly" reduced working hours to be in line with the rest of the market, and has also introduced the ability to flex those hours in the morning and evening.

"That went down very favourably - we were probably a bit averse in that," he admitted.

While Peter Kelly built Softcat's culture and Hellawell doubled down on that culture while expanding Softcat beyond its software heritage and taking the firm public, Watt said his job is to build on this while developing its "multinational/international" strategy.

"What am I bringing?" he said.

"The Irish decision had already been made but the multinational/international focus is new. Not because we are running out of runway in the UK and Ireland. But at some point in the future, it will become tougher to grow market share, and we have other options in the locker. Good companies do things in parallel."

Building Softcat's management might well be another priority for Watt as the firm heads towards its next billion in revenues (or - strictly speaking - gross invoiced income as Softcat now refers to it).

"We're very good at putting a lot of time and energy into our teams, but historically we haven't done that at the very highest level," he said. "I'm very conscious that we've just gone through the £1bn mark, and at some point in the not too distant future, we'll go through £2bn. We need to make sure our team has the right leadership in place to keep growing.

"The other thing I bring is some experience of running big companies. Softcat has become a big company. I came from roles at Tech Data, Bell (see Watt in his younger days, above), running big organisations on a multi-country basis with all the people and systems requirements that need to support that. I come with that experience."