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​Doing business the Dicker Data way

Following another bumper round of financials, the Australian-born distributor is at a crossroads.
David Dicker - Chairman, Dicker Data

David Dicker - Chairman, Dicker Data

It’s been a common occurrence for the channel, forever watching the Australian Securities Exchange (ASX) ticker codes, waiting for DDR to spike.

Otherwise known to the industry as Dicker Data, news of its purchase has been both predicted and expected.

But for those passing by the Sydney suburb of Kurnell, home of Dicker Data’s expanding empire, seldom was a For Sale sign ever raised.

While ownership of the Australian- born business perhaps has come close to changing hands in the past, the future poses a different reality for the underdog distributor.

Well, Dicker Data is hardly a dark horse.

Fresh from reporting revenue of $1.2 billion for the 2016 financial year, the business is no longer the whippersnapper of the Australian channel, rather the wise old head examining its options.

“Our long-term strategy has to be focused on becoming bigger, or we’ll end up screwed,” Dicker Data chairman and founder David Dicker said.

Predictably candid, Dicker’s perception of the market is simple — eat or be eaten.

It’s the law of the channel jungle, a jungle now crammed with overseas predators waiting to pounce. So in response, Dicker is going for the jugular too.

“We need to look to the overseas markets ourselves also,” he said. “I’m working on what our opportunities are currently and examining the possibilities out there.

“Our plan is to look at the UK market or Europe. Asia is complicated and the US is too hard to get into.

“I’ve been thinking about it for a long time but things are still progressing as it will come down to the vendor aspect and whether we can bring vendors across. If so, then it could be viable.”

While no means an admission of European expansion, Dicker is merely acknowledging that action - in whatever capacity - is required for Dicker Data to remain at the forefront of distribution.

In looking ahead to the future, the ASX-listed business is once again building blocks for growth, in a market that lies potentially over 16,000km away.

“If you look at the UK market,” Dicker explained. “Culturally, it’s very similar to Australia. It’s probably the market that is most similar to here.

“It’s a much bigger market and is geographically compact which is a huge advantage over Australia. From my point of view, it ticks every box.”

Despite concerns over the implications, if any, of Brexit, the UK market represents a lucrative opportunity with IT spend currently hovering around the US$180 billion mark, compared to $85 billion in Australia.

Gunning for growth

Renowned as predictable and profitable, Dicker Data has climbed the channel ladder in Australia for over 35 years, now selling to more than 6,500 resellers across the country, backed by a host of flagship vendor brands such as HP, Hewlett Packard Enterprise, Cisco, Microsoft and other tier-1 players.

Behind only global titans Ingram Micro and Synnex in terms of local revenue, the ASX-listed business has become a force to be reckoned with on both sides of the Tasman.

“I think we’re probably still perceived as a bit of an underdog,” Dicker argued. “And Ingram is still perceived as Ingram. In fact, I don’t think the dynamic has really changed there.

“Ingram is 40-50 times bigger worldwide than we are so you have to be realistic.”

Irrespective of perception however, the proof continues to be in the pudding for the business, with Dicker Data winning distribution rights to Hewlett Packard Enterprise in early 2016, taking on and taking out competition from multi-nationals such as Avnet and Synnex.

With 2017 now underway, such momentum continues across the board, as vendors see value in aligning with local distributors, emphasised through new deals with Trend Micro and Seagate.

“We’ve always pushed the advantage of having a local distributor rather than being a multi-national, which I still think is a valid argument,” Dicker said. “The numbers are what matter though. If you are making your number, you’re in good shape.

“If you aren’t making your number, then you’re under threat. On the commercial side in Australia we’re number one, but again, that’s only in Australia.”

But despite plans to continue growth through proactive reseller enablement, Dicker is shrewd enough to acknowledge the turnaround at Ingram Micro and the continued success at Synnex.

Both distributors are reporting over $2 billion in revenue and equally, have strong local ambitions.

“We have to respect the competition,” Dicker added. “That’s the nature of the game. “Ingram has expanded in Australia for 20 years and they have been trying to kill us ever since they started but they haven’t been able to.

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“We have just got to execute as best we can and see where that approach takes us.”

M&A mania

Despite Dicker Data’s strong stance in the face of increased market competition, news of a potential expansion goes against the grain of conventional channel speculation, with many across the industry expecting the company to be snapped up by a global titan seeking entry to the local market.

And it wouldn’t have been surprising, following Arrow Electronics acquisition of Distribution Central, and previously Observatory Crest, alongside Ingram Micro taking control of Connector Systems and Exclusive Networks buying WhiteGold Solutions.

Not forgetting further mergers and acquisition mania with Ingram Micro sold to China’s HNA Group, Tech Data swooping on the distribution business of Avnet and increased speculation that Westcon Group is up for sale.

“Everyone is up for sale,” Dicker said. “We’ve never really been actively up for sale and have never really tried to sell it. Especially being a public company, the dynamic is a bit different.

“In a public company, if someone comes to you and determines the correct price, you virtually have to sell because you have shareholders to consider.

“Say a business offers you a 20–30 per cent premium, you have got to recommend it to your shareholders because you would be damned if you didn’t.”

Potentially hindering future growth is a new player to the Australian market however, in the form of Tech Data, the world’s second largest distributor.

After entering into an agreement to acquire the Technology Solutions business from Avnet in September 2016 — in a transaction valued at approximately US$2.6 billion — the deal represents the tech giant’s first move into the local market, creating channel ripples in the process.

“Well, you would think so,” Dicker questioned. “But historically nothing has ever changed. Tech Data bought Avnet worldwide so they inherited operations in Australia, and it will depend on how they conduct business going forward.”

As explained by Dicker, this is not an Australian motivated deal as such, rather part of the bigger picture as Tech Data aims to significantly enhance its footprint across Asia Pacific.

From a Dicker Data perspective however, nothing stands to change.

“All we can do is operate in the market, hit our number and be important to vendors,” Dicker added. “Cisco is a good example of this, we have spread Cisco through the mid-range market exceptionally well which has put us in a strong position.”

With a portfolio of 55 vendors, Dicker Data has expertise across cloud, software, hardware, networking, security and mobility to name a few, illustrating its reach at a national level.

But in order to create a healthy and thriving stable of products and offerings, Dicker is meticulous in which vendors come through the doors at Dicker Data.

“If a vendor can’t reach a certain amount per month over a period of time, then we will re-evaluate that relationship,” he said.

“And from a vendor’s point of view, if they can’t reach a certain level then they’re not in a position to be serviced in the way they want to be serviced.

“Instead they should probably move to a smaller distributor where they will be a bigger percentage of the business. It’ll be a better outcome for all parties.

“We need a vendor to reach that level because it’s not viable for us to provide the level of service they require otherwise.”

Delivered through sales and pre- sales teams of experienced product specialists, Dicker Data is evolving into a modern day distributor, one that is capable of playing in the volume space, but also now excels through value.

“We’ve become much stronger on the value side,” he said. “So much so that we’re getting better results in the market because of it. We’re not the same distributor as we were 20 years ago.

“Some of our vendors have complicated solutions and as a distributor, you have to be able to support the reseller. I think we do that better than any other distributor which is why we’re still going well in the market.”

In becoming a value-focused distributor, the business has changed with the times, amidst a challenging economic climate and tough market conditions.

Looking ahead, 2017 promises to be as predictable and profitable as 2016, such is the Dicker Data way.

“We’re looking at a few options but we’ve got a projection number for this year and we all know what our result needs to be,” Dicker added.

“The team is entirely focused on hitting their number and I’m focused on the expansion side, and they run in parallel.”

As the industry knuckles down for another year of blood, sweat and tears, the market is advancing at breakneck speed.

Dicker Data meanwhile is at a crossroads, with its final destination currently unknown.