Softcat CEO on opening overseas offices, winning UK market share and his first-year highlights

Graeme Watt talks CRN through another year of impressive growth at the reseller

Softcat reported another year of impressive growth, despite you previously stating that a tough comparison last year would make it difficult. Where did the growth come from?

We had good growth year last year and it's fair to say we've exceeded expectations this year. We had some concerns as to whether we'd be able to deliver this level of growth based on last year's tough compares, but we did.

The growth was broad based and in that sense it came across all our key segments, it came across all our offices, it came across all our key technologies and it came across our vendors too.

In fact, our top 10 vendors all grew by double digits so that was pleasing.

The results aren't propped up by strength in one particular way that would make them somehow vulnerable to that falling away in time, which is great.

If anything, very similar to last year, we continue to think the market is good, as people are looking to strengthen security or get their infrastructure fit for the mobility of their users. Cloud adoption is continuing apace and people are digitising their environments to create better experiences for employees and customers.

Do you attribute the growth to good market conditions, or Softcat increasing its market share?

Obviously, all those [factors above] are strong drivers for demand and we think that, based on gut feeling, seven or eight per cent of that growth could be coming from the market.

The rest, that 30 per cent growth we had in gross invoiced revenue, is probably coming from our strong application of our very simple sales strategies, which have been to get new customers and sell deeper into existing customers, which we did very effectively.

GP per customer went up by 17 per cent year over year, it went up by 22 per cent per customer on new accounts and up by 15 per cent in our existing accounts, so strong performance there and along the way we added net 400 customers in the year.

As a very high-level snapshot, it's all been very pleasing. That sales generation is the oxygen, if you like, which allows us to create the gross profit growth of 20.5 per cent year over year, and then the ability to retain 40 per cent of that gross profit as operating profit is very pleasing too, and operating profit has gone up from around £50m to £68m to £84.5m in successive years.

You, and Martin Hellawell previously, have always said that Softcat's focus is on increasing its UK market share, rather than looking to expand overseas. What areas do you see yourselves targeting to continue this rate of growth?

If your question is 'are we going to make some interesting step-function moves into some new kind of adjacent technologies', the answer is probably not.

We're going to continue as we always do to evolve our portfolio, either with direct investments or partnerships, to make sure that we're delivering what our customers need and what they're asking for.

So I don't think you should expect to see any dramatic changes there. We know we've got a modest market share in a fragmented market so we think that the focus on what we're doing now, keeping that relevant and up to date, is the right way to go.

Based on these numbers we just released we had a seven per cent share of your CRN [Top VARs] number last year. I know that will now be updated shortly.

So there is lots of market share to go after, from a net-new customer point of view and also share of wallet in our existing customers, which we think sits at around about 25 per cent.

Do you envisage opening any new offices in the not-too-distant future?

We opened the Birmingham office, so that will get us closer to customers in the Midlands as we grow our account manager base; that helps us to deliver more net-new customers.

We've got to ramp up Ireland. The investment in Ireland last year took us a little while to get set up. The relationships with distributors and vendors and accreditations took us a little while to get going so although we set it up a year ago, we probably only were trading effectively for maybe half of that year.

So we've got the opportunity to get a full-year run at Ireland and some of the things we've talked about multinationally, while those are sales that are outside the UK and Ireland, they're in support of our UK and Irish customers.

We have enterprise customers that see themselves as a multinational and they want to consolidate their design and decision making around technology in the UK, but they want some of it deployed outside the UK.

We've set up branches in Singapore, Hong Kong, Sydney, Australia and Washington, US to deal with that demand. The locations of those branches are purely customer led in terms of customer needs and desires. We've got one person in Singapore to deal with the time zones on the APAC side, one in the US to deal with that, so those are some of the areas that we're looking to grow - market share, Ireland and multinational.

From a technology point of view I'd say largely, but not entirely, more of the same and evolution by stealth based on customer demand.

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Softcat CEO on opening overseas offices, winning UK market share and his first-year highlights

Graeme Watt talks CRN through another year of impressive growth at the reseller

The year you've just reported is your first full year in charge - what have been the highlights?

Just how seamlessly things have gone in the team. The way that the team continues to respond to the challenge where every time we set a high bar, we know we've got to go higher than that the following year and the way the team responds to that and rallies around, and accepts that success sets even higher expectations, has been fantastic.

The culture and the way we work with each other, the way we support each other with the way we work with people outside the company continues to amaze me. That excites our customers.

I think our culture gets the best out of everybody. That's what excites me the most and all the other things we achieve are the icing on the cake. We get some nice awards and recognitions, which is very pleasing. I'm excited about our ambition to be a top-five reseller in Ireland.

It's very difficult to put a number on it, but I think the multinational capabilities that I referred to earlier could be a significant contributor in the future.

So it's nice to be able to continue the success, also with an eye on the future, and make sure that we're doing the right things for the mid-term.

It's been a fantastic few years for the channel and technology industry as a whole, but some doubts over the sustainability of this period have started to set in in some quarters. Do you see this spell continuing indefinitely?

I'm never going to put a time on it, but often when I speak to new starters I say they're very lucky or very clever people because they come into, in my opinion, the best reseller in the UK at the best time for technology.

I bore people with the fact that I've been in this business now for 30-plus years and I've never seen it so good.

But I don't see it ending anytime so I'm not going to put time on it. If you believe that people are digitising their environment, that they're embracing mobility, that they're strengthening security, moving to the cloud, refreshing legacy systems. These areas are going to continue for quite some time

Of course, some technologies commoditise over time and you've got to believe that, over time, while there's a lot of incremental demand created by cloud, it may have some negative impact perhaps on some of the straight server businesses, for example, but new technology is always coming in.

I was at a Michael Dell Roundtable a few weeks ago and he was getting very excited - and I share his excitement - about 5G enabling the instrumentation of our environment and edge computing and creating a catalyst for edge computing.

He reckons that in five years' time - whether it's right or not and I think it's directionally correct - the compute power required at the edge will be more than cloud and datacentre combined.

If that's even only half true, with all the technology updates and the integration that's required around compute at the edge, storing the analytics at the edge, the security at the edge - it's immense.

There's so much innovation out there, not to mention some of the areas of machine learning, RPA and AI.

When we survey our customers, we ask them what's on their mind and they're actually quite low down the list at the moment, but there's no doubt that in time they're going to come higher on the list.

If I were to call out a few things, AI and edge computing are two things coming up the rails fast and will have, maybe not today, a very significant impact on our business.