Just four years ago, Axiz set out to build a value-add division that would operate alongside its traditional distribution business.
Industry veteran Jacques Malherbe, already well-known for his prior success in the value-added distribution space, was tasked with the not inconsiderable task of creating the new division from scratch..
“We recognised back then that the complexity of technology and the speed of innovation is running away from the broad-based distribution model,” Malherbe says.
“The reality is that you can’t go to a customer with a data centre brochure as you would with a laptop, so we had to find new ways of working with partners and end users.
“At the same time, the speed at which new technologies are appearing and changing makes it difficult for the traditional distribution organisation to keep pace. The legacy distribution business is also not structured to articulate the value proposition of new technologies and processes to the market.”
As cloud computing becomes ubiquitous, more and more companies are starting to embrace cloud technologies, whether that’s private, public or hybrid.
“When we set up Advanced Technologies, we realised that our value-add strategy had to be built around the data centre since that is the engine room for cloud. If you are moving to a cloud strategy, you have to focus the investment in your data centre.”
With its strategy firmly focused on data centre and the cloud, Advanced Technologies made Cisco the foundation of its endeavours.
“Cisco was the first thing I had to get right,”” Malherbe says. “Because it owns 65% of the data centres in the world, you cannot even speak to an enterprise CIO unless you’ve got Cisco in your corner.”
Having brought on and bedded down the Cisco line-up, Malherbe then set about building up a portfolio of data centre solutions.
Today, Advanced Technologies also offers Oracle, EMC, IBM and HPE products and solutions, as well as both a security and virtualisation practice.
“Over the last four years, this strategy has played itself out – and today Advanced Technologies is a R3-billion business, accounting for half of Axiz’s business.”
But when Malherbe first started building the Advanced Technologies division, he went counter to what is taught in most business schools.
“The say you shouldn’t house value-add and broad-based operations in the same business. But we made the decision to create a bimodal business along the lines of what Gartner advocates for IT.
“On the one side, we are driving very hard to be the best, fastest and cheapest distributor in our Mode One operation,” he explains. “We know that this business will eventually decline. But it can help to fund our investment in the Mode Two operations, where we address the virtual worlds of cloud, mobile, big data analytics and more.
“We believe that the physical business will slowly decline, while the virtual business will steadily grow.”
Advanced Technology also differed from many other organisations due to the fact that is uses structure as a strategic variable.
“Most companies use product innovation, price, place or promotions as variables – but all of these are centred around the product.
“I say that the way you structure your business is the main variable; how you create your Mode One and Mode Two operations.”
Malherbe explains that his strategy was informed by the spectacular failure rate of many bimodal businesses. “The price business always eats the value business, so you are always going to be undermined where you want to create value.
“In distribution, the big people will always try to plunder the value business because that’s how broad-based distribution works.
“This means that the DNA of the two business models is opposed, which is how it should be. But as soon as you try to blend them, you either become too expensive or you dilute the value.”
This is why the structure is key and strategic imperative to achieving Advanced Technologies’ goal, Malherbe says.
“The DNA is what’s important. And its why we hardly employed anyone from distribution; because they have the DNA that says you have to cut costs.
“Instead we brought in new DNA, fresh DNA.”
Arguably one of the most important things contributing to Advanced Technologies success is that it decided from the beginning to concentrate on solutions that offer real value.
“This includes engineering, resources and equipment,” Malherbe says. “We taught ourselves and we know how all our products and services work. If you want to know what we sell, come here and we will show you.”
The rapid growth of Advanced Technologies – from zero just four years ago – is testament to the fact that customers see the value in its proposition. And, as a result, the organisation enjoys a majority market share for most of its offerings – up to 90% in some cases.
“So customers and vendors are working with us because they like what we are doing,” Malherbe says.
Adding value is good business, he adds, with Advanced Technologies and its partners enjoying higher margins than the traditional broad-based business.
“The commercial world would pressure us into a margin decline, but being a value-added distributor retards this process.”
Malherbe explains that the value-add distributor resists the pricing pressures that the traditional distributor endures because it participates in the customer’s primary value chain.
“Every company has a primary value chain, the reason for its existence. To support that there are a lot of secondary value chains. These include things like design, marketing, human resources, accounting and R&D – all of which exist to support the primary value chain.
“Broad-based distribution, offering warehousing and logistics, participates in these secondary value chains.”
Value-added distribution, however, participates in the primary value chain, Malherbe says.
“It is impossible to add more value to logistics, because you are constrained by where you are in the secondary value chain,” he explains. “When the broad-based distributor talks about procurement, logistics and training, those are things that can make you better in what you do.
“But as a value-added distributor we actively participate in what you do.”
Advanced Technologies’ customers, systems integrators (SIs) and value-added resellers (VARs), are looking for a partner that will strategically invest with them in building the future.
“The future is cloud,” Malherbe states. “It is mobility and it is data, in the form of Internet of Things (IoT) or in another form.
“Our SIs and VARs want to buy software from a distributor who is a partner into the future rather than from a distributor who simply sells a product.”
The Advanced Technologies team therefore spends a lot of time engaging with customers on how the company will remain valued and relevant. “We need to understand what kind of technologies and services we must build to best service the end user community.
“And we are prepared in invest and co-invest to build this strategy.”
Cloud is a case in point. “The path we are on is to digitally transform ourselves while we help to transform the channel. Unless the channel is transformed, how will they take cloud or any other new consumption models to market?”
The reason Advanced Technologies can offer these value-added services is because it has a stacked structure. “Users can consume different layers because we have the stacks,” Malherbe says “But we can only do this because we have everything; we have assembled the stack and there is coherence, there are skills and we’ve made the investment
“It seems that this is the reason that we are enjoying growth: because resellers feel safe with the path we have mapped out.”
With the market in transition, and customer buying patterns changing quickly – often for no obvious reason – partnering with a value-added distributor gives resellers confidence.
“We’ve seen in desktops, laptops, commodity servers and more; no-one knows why, but something happens to limit sales,” Malherbe says. “In these instances it’s not easy to guess which products to keep and which to drop.
“We give resellers a degree of confidence because we have invested in skills, and also in adjacencies. We are privileged in that we have a broad product range as well as the skills to build solutions on top of them.”
The future is digital, Malherbe stresses, and all solutions and services must be geared towards that eventuality.
“Cloud will overrun all the other business models of the planet, he says. “It is already happening and it will be faster than anyone anticipates. I would say that we are on the last few metre of the runway and it will take-off any minute.
“Whether it is hybrid cloud, private cloud or public cloud – be it pink, red or blue – the reality is that we cannot service an organisation’s needs out of our own data centre anymore.”
He adds that the needed transformation is for organisations to become data-driven. “The idea of the cloud is that it gathers data – the cloud itself isn’t even what’s important, it’s the data that’s important.
“Once we have the data, we can start mining it, sifting it, sorting and analysing it to get rich information that will help us make decisions, removing intuition from decision-making.”
Applying artificial intelligence (AI) to this data will allow organisations to become predictive, Malherbe says. “In the future, every business will be able to have unique insights into their own data.
“And it is a renewable asset,” he adds. “Every day when the sun comes up, I have new data. We can find out new things, know new things, and find out how to make the world a better place.
“Organisations will become valuable for the data they produce, and the world will be a better place.”
Data and digitalisation will be the foundation of the future organisation, Malherbe says, and Advanced Technologies is gearing up to be the value-added distribution partner of choice is this new, digital world.
“Everything is going to look different,” he says. “To make sure we stay relevant, we are employing processes engineers, data scientists and mathematicians in distribution.
“So yes, we are a distributor, but we are also building a distribution capability in the digital world. We have built our own cloud on top of the business that is able to suck in services from third-party suppliers and vendors, and make them available to our channel partners.
“In this way we are enabling the distribution back-end for our customers.”
Although the services thus enabled are often digital, there is no reason why it cannot embrace the physical world too.
“If the reseller wants laptops we can do that as well. What we are doing is taking the friction out of the analogue world.”
Currently, Axiz Advanced Technologies operates in sub-Saharan Africa, but the company intends to expand outside the region as well.
“Digitalisation collapses time and cost,” Malherbe points out.
“The challenge globally is to transform the channel. So we assist, participate and add value in every country where we operate.”
Speed is the key to gaining market share and gaining customers in new markets, Malherbe says. “It’s no longer about who is first, it is about who can execute the fastest.
“In the digital world, anyone can consume a service from me and, if it’s a trusted conversation, then it is faster and better as well.”