'The only instruction Joe ever gave me was to grow the damn thing' - Alex Tatham on Westcoast becoming UK's largest IT distributor
Less than £350m separate top three in CRN UK Distribution Report
When Alex Tatham joined Westcoast in 2009, the Theale-based distributor was playing catch up to the global broadliners (ranking fifth in a league table CRN compiled back in 2010).
"I think the group reported revenue of about £600m. And it's gone up and up and up," he said.
Tatham was reflecting on Westcoast's growth journey over the last 12 years after the broadliner topped the revenue league table in CRN's Distribution Report. You can peruse the top 40 in three parts here, here and here.
Its UK distribution revenues stood at around £2.72bn last year, putting it a whisker ahead of both Exertis and Tech Data (based on the latest annual accounts we could obtain).
The £3.5bn-revenue Westcoast Holdings - which also includes reseller XMA - is also now the UK's largest privately held IT firm and is on course to be in the top ten privately held UK firms this year, according to Tatham ("largely because we'll eclipse Heathrow").
Tech Data consolidated its position as the UK's largest distributor when it acquired Avnet TS in 2017, but its shift away from volume sales in favour of its Advanced Solutions arm has enabled Westcoast to motor past it in revenue terms, according to Tatham (Tech Data UK made a slightly larger net profit in its fiscal 2020 - £28.8m compared with £28.2m for the entire Westcoast Holdings).
"That probably damaged them during the pandemic as, let's face it, a lot of it was about laptops," Tatham said.
'Relentless growth'
Traditionally known for its strength with HP, Westcoast has grown organically and via M&A, adding a big Lenovo business and snapping up a string of disties including £160m-revenue smartphone distributor Data Select.
Strong PC sales helped it during lockdown, Tatham added.
"There are several things that have happened," he added.
"Firstly Westcoast have just got better and better at all of this. Exertis are very focused on retail, and their retail business will have done very well, but Westcoast just dominates in B2B.
"And I think the other thing that's happened is that clearly we've had a big Lenovo business come in and had a big Samsung business come in with Data Select.
"So we've just got a relentless focus on growth.
"Westcoast are the biggest distributor for every single one of our vendors and yet we don't distribute most of the vendors that Tech Data and Ingram do. Who's executing out here? We don't distribute Cisco, IBM or Dell. But Westcoast are the fastest-growing major distributor in the whole of EMEA, and I think we're going to carry on doing that. We have a growth target this year of 20 per cent."
Further M&A for Westcoast would be about geographic expansion, Tatham said.
"It'd be fair to say that Westccoast are always an acquisitive business," he said.
"We're opening up a new German warehouse, which is a branch of the UK as opposed to a new German company, in order to service some of our German customers better," he added.
Former Bell Microproducts exec Tatham takes his instructions from Westcoast founder Joe Hemani (pictured).
"The only instruction Joe has ever given me is to grow the damn thing," he said.
"And if you look at our accounts going back through the years, you'll see that it just drops through to the bottom line. I liken it very much to going and scoring more goals. Carry on scoring and carry on winning. That's what's happened."
Doubling in order volumes
Tatham said the trend among resellers to pursue more of an MSP model - where they focus on managing IT on behalf of their customers - will play into distributors' hands.
"All the heavy lifting is coming back to distribution to do, which effectively means that distribution will expand, not contract," he said.
"I can tell you that the volume of orders we have shipped this year has doubled. And that's not because we've doubled our business. It's because we're doing more on behalf of the reseller and doing the direct delivery on their behalf."
Market watcher Context claims total UK distribution revenues grew at an inflation-busting 3.6 per cent to £12.8bn in 2020, despite the pandemic.
The volume of orders we have shipped this year has doubled
Distribution is poised for an even better 2021, Context believes, with European IT distribution revenues set to grow by 10, 8.5 and eight per cent in Q2, Q3 and Q4, respectively, under the more optimistic of two scenarios, and seven, three and four per cent under the less optimistic one.
Which scenario ultimately plays out will be determined by several factors, including whether or not supply chain issues ease and whether distributors can successfully capture more share of European cloud revenues.
But talking to CRN, Context MD Adam Simon said he expected the UK to trail Europe-wide growth figures due to tougher comparables with last year when lockdown spurred a huge spike in PC sales.
"A million computers were put out [in UK education]. The UK was the quickest to react, and was far outstripping any of its neighbours in terms of volumes and percentage growth. But that's come to an end. It's a bit like the hare and the tortoise - it's going to be a much longer burn in Germany," he said.