'The impact on revenue can be stark' - ANS CEO on effects of burning the boats

Tom Wright
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'The impact on revenue can be stark' - ANS CEO on effects of burning the boats

ANS CEO Paul Shannon and CTO Andy Barrow will open up on their dramatic transformation at CRN's Channel Conference MSP on 2 October

ANS took drastic steps to transform itself from a hardware and software reseller to a fully fledged cloud service provider.

The shift has been a roaring success for the Manchester-based firm, but did have an impact on the top line.

Revenue dropped 15 per cent to £53m in ANS' most recently filed accounts, but gross profit margin rose from 36 per cent in 2017 to 40 per cent.

Speaking to CRN ahead of the Channel Conference MSP event next week, at which ANS will talk delegates through how it "burned the boats" of resell, CEO Paul Shannon (pictured) said that the gross profit growth is a sign that the transition is paying off.

"Impact on revenue can be stark if you turn off a hardware and software resell business overnight," he explained.

"But profit depends on how much of the services you undertake within your own teams.  If most is done in-house then there is great scope to increase overall gross profit."

Resellers can register to attend the event for free here.

ANS decided to switch off its hardware business overnight in 2017, including a lucrative Flexpod business that had helped revenue rocket over previous years.

The rationale was that a handful of large resellers were starting to dominate the space, Shannon has previously said.

"We could see a cliff edge primarily because we knew there were some really specialised commodity players that were becoming experts," he said at CRN's MSP North event.

"Softcat, CDW - those guys were getting this nailed and they were commoditising something that we had been making a lot of money from.

"We could see that if we didn't change and adapt, we would end up falling by the wayside."

The radical change saw ANS' hardware sales drop 40 per cent to £17.8m in its last reported numbers, but cloud services revenue more than doubled to £1.2m and managed services revenue climbed to £28.3m.

Gross profit shot up in the new areas of the business: 120 per cent in cloud professional services; 23 per cent in cloud managed services; and 10 per cent in managed services.

ANS also reshaped its teams, creating a working culture closer to that pioneered by born-in-the-cloud companies such as Spotify.

Shannon said that good levels of funding are needed to make the changes, particularly at the speed at which ANS has done.

"Cash in the bank or access to cash helps if there is a need to build entirely new teams from scratch," he said.

"Similarly, strong recurring gross profit helps fund this another way.  Either way, transitions on large scales come at a cost that needs to be borne somehow."

Shannon added that businesses going through this journey will end up in better place, if it is managed correctly.

However, he said that it can be hard to know when the payoff will be.

"A company can 100 per cent come out the other side better off financially, but it is difficult to predict exactly how long it will take," he said.

"It depends on a multitude of factors, like customer concentration, churn, speed to transition, and existing contract durations."

Among the other event highlights, award-winning cybersecurity blogger Graham Cluley will be exploring how MSPs can build a compelling narrative around cybersecurity.

MSP bosses will also have the opportunity to quiz private equity experts on how they can maximise the value of their business during a panel discussion.

Former England rugby scrum-half Andy Gomarsall - who is now a director at IT life cycle management outfit N2S - will also be reflecting on the parallels between sport and business.

Click here for the full agenda.

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