If anyone wants proof positive that storage is a strong growth industry, they need look no further than Commtech. “The storage piece has become a very large part of our business,” says managing director Justin Owens. “We’ve seen huge growth in storage.”
It helps when you have the exclusive contract to distribute EMC in Ireland, especially when EMC has been busy opening up its direct business to the channel and adding more potential customers as it acquires other companies
“EMC has moved into a pure channel model over the last number of years and it’s been really good for us and our partners,” Owens states. “Overall EMC storage market growth has been in excess of 20% but we’ve had the benefit of that and the benefit of growth into EMC’s direct business. We’ve tripled our overall revenue since 2010. We had the best year we’ve ever had in 2013 and I expect that to continue this year.”
The distributor has always sold kit and product into the UK and it took the decision to set up a proper operation there about 18 months ago. It has grown so quickly that it now contributes about 20% of Commtech’s business and Owens expects it to grow to between 25% and 30% this year. “We expect it to grow over time,” he says. “We have good people over there, a good strong team with local relationships into suppliers and resellers.”
Commtech has around half a dozen people in the UK and is currently hiring with plans to add even more later in the year and into 2015. “The UK is potentially a very good gig for us in the future,” Owens comments. All administration and fulfilment is being handled from the distributor’s Dublin base.
Rapid expansion
He admits it can be difficult getting ‘A level brands’ to distribute into the UK. While the strategy in Ireland is to focus on A brands because it is hard to make money on those that aren’t in a small market like Ireland, Commtech is concentrating on emerging technology in the UK, in areas such as Flash. “We have a decent portfolio over there now,” Owens claims. “It’s taken a bit of time because it’s tough going from a standing start, but we doubled our business there last year – and we’re profitable.”
He sees the UK market as an opportunity for Commtech because there has been so much consolidation over the last few years in distribution there that a handful of distributors, all global players, have most of the A brands tied up between them. Owens believes large distributors are struggling for growth and trying to compensate by acquiring smaller distributors.
“There’s an opportunity because they are all becoming very similar,” he argues, claiming that vendors often see their value add disappear when they are sucked into a larger distributor. “Vendors are asking ‘is this really what we want? Do we get the focus when we’re just one brand among hundreds of other brands?’”
Newer brands want the breadth and fulfilment that global distributors can provide, but they also want what they can get from a more niche, pure value add distributor. As for Tier 2 brands, if they have revenue of €10 million, “that’s only a drop in the ocean for big distributors, so they get very little mindshare, everything is on a rate card”.
While storage is roughly half Commtech’s business at the moment in terms of revenue, Owens is keen on trying to balance it with the operation in the UK and by bringing on some new vendors in Ireland. “It can be a bit scary to have one vendor as a big part of your business,” he admits. But Owens is fairly confident that if it continues to do a good job for EMC, Commtech will preserve its status.
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