Softcat CEO on WFH policy, the metaverse and defying profit expectations

Graeme Watt talks to CRN following H1 results which saw the firm post profits ahead of expectations

Were there any clear growth hotspots for the six-month period?

Graeme Watt: The market is growing at around six, seven or eight per cent, or something of that order - that's what the analysts are saying and we're clearly growing ahead of that. So our strategy of pulling in new customers and going deeper with existing customer is really working.

Where's it coming from? We had double-digit growth in enterprise, double-digit growth in SMB, double-digit growth in public sector and it's the same across software, hardware and services so it's pretty broad based. We think the demand around workspace and the security associated with that, and then demand for cybersecurity as well as on-premise datacentre and all the various cloud services and hybrid cloud infrastructure in a multi-cloud environment, all of those are drivers of growth.

We quote CRN quite a lot on our analyst calls as well as outside of that because you're a great reference point, so from our perspective, reaching that number one VAR position that we've got to, is something that we're very pleased about. The fact that we believe we've only got four per cent of the market just shows that there are really, really great opportunities in the market for further growth and share growth. I think it's a really strong, broad-based growth story for us.

Your operating profit grew again over the six months, even against strong profit growth last year. Do you see that as a good sign considering that a lot of costs have perhaps come back into the business as a result of Covid cost savings starting to disappear?

We've definitely seen some of the costs come back into the business, but they probably came back into the business slower than we anticipated, just because the impacts of the pandemic continued for longer than anticipated.

But we do see costs related to our incentive recognition and reward costs coming back in, as well as some of the lunches of the quarter that we do. At a bigger scale than that, we've got three half-year incentive trips running in May and we've got a full-year incentive trip running later in the year. We've got our kick off this year, which will be the first time in three years so I'm very excited about that. So costs have come back into the business and will continue to come into the business as we grow headcount and resume those recognition and reward-type events, which are important to us and our people.

Softcat's hybrid working policy came into effect earlier this year. How is it going so far, and do you think more office-based working will have a positive impact on how the business performs over the next six months?

We took our time in implementing it. We didn't want to rush people back because we sensed that not everybody was up for rushing back. When we put out the policy and our employee engagement survey in the November timeframe last year, we had over 80 per cent of people agree with the policy. Of the small percentage that had some comments of disagreement, about half of those thought we had gone too far and the other half thought we hadn't gone far enough. Further proof that we can't keep all the people happy all the time.

We had a false start in returning to offices in November before the omicron variant emerged in December, so we really started to go for it in January. People are back in much larger numbers, which is great. We're meeting partners, customers and vendors face to face. I think the biggest impact for me is around the culture point. The culture is front and centre of how we deal with each other and third parties too. The office is helpful for everyone, but for people coming into the business, you want to learn the business, you want to learn the culture, you want to build relationships. Then you want to get recognition for achievement, you want to have fun, and you want to build friendships. All of those things lend themselves to being in the office and I think people know that. And what that means is, for our new staff to get those benefits of being in the office, our existing employees have to be in the office too to provide that learning and give them the benefit of their experience as well.

So we're very positive about it. We were operating effectively remotely, and I think we're operating even more effectively now. By the way, we've big fans of hybrid working - including myself. The fact that I can work from home, save on the commute and work on stuff that doesn't need other people, just to get your head down and focus is great, and I think we are all benefitting from that.

Accenture's global CTO recently said the metaverse was ‘the next evolution of the internet'. Do you agree? And can you envisage it ever becoming an opportunity for the channel?

It's difficult because were so focused on providing the infrastructure that allows the Metaverse, or edge computing, or AI, or RPA to develop that it's perhaps not our area of focus. We're providing the infrastructure that supports those developments. I think the answer for me is I honestly don't know whether it will be transformational in any way. I don't think it's going to impact what we do. We're going to continue to help our customers provide the infrastructure to support the transformational things going on in the industry, and I don't see it shaping what we're doing in the near term, no. But we obviously keep an eye on how things develop and what that rhetoric is in the marketplace and how things could change, let's see.

In the results commentary you claim the supply shortages haven't got any worse but haven't got any better. How do you see supply issues developing this year?

It's in a pretty steady state, and it has gone on longer than anybody had anticipated. It's not material and it's manageable but we don't expect it to unwind any day soon. But when it does, we expect it will unwind over time probably in the next calendar year.

Any closing thoughts?

We're very pleased. You'll notice in the results we said that our outturn for the year is ahead of previous estimates and we're pleased with that against tough compares having seen that run of 66 consecutive quarters of organic year-over-year growth both in income and profit is an achievement we're very proud of.