Westcon International divisional report

Westcorn Comstor

A value-added technology distributor

Westcon International’s strategy

Westcon International’s strategy is to be the leading go-to-market distribution partner for vendors in the networking and cyber security market serving international markets in Europe, the Middle East, Africa and across the Asia-Pacific region.


Governance oversight

Divisional board of directors and executive committee

Audit, risk and compliance committee


Revenue by business unit

Revenue by business unit

Product revenue by customer

Product revenue by customer

Product revenue by technology category

Product revenue by technology category

^ Continuing operations.


Performance highlights

REVENUE of US$2.5 billion (FY18: US$2.3 billion)

GROSS MARGINS of 10.2% (FY18: 9.8%)


  • All business process activities successfully repatriated to in-house shared services centres
  • Regaining control of the customer experience and transactional execution enables growth and market share gains, contributing significantly to improved results
  • Internal applications and platforms are stable
Logicalis

Corporate overview

Westcon International is a value-added speciality distributor of industry leading cyber security and network infrastructure, unified communications products, data centre solutions and channel services with a global network of service providers, systems integrators and speciality resellers. Westcon International has operations in more than 50 countries. It goes to market under the Westcon and Comstor brands. Westcon International's portfolio of market leading vendors includes: Cisco, Avaya, Extreme, Juniper, Check Point, F5, Palo Alto and Symantec.


Executive team

Jens Montanana

Jens Montanana

Chief Executive Officer

David Grant

David Grant

Chief Operating Officer

Ivan Dittrich

Ivan Dittrich

Chief Financial Officer

Westcon

Operating in Asia-Pacific, Europe, Middle East and Africa, Westcon provides solutions from a broad portfolio of premier vendors. Westcon has expertise with vendors in the following technologies:

  • Cyber and network security: Arbor Networks, Beyond Trust, Check Point, F5 Networks, Infoblox, Palo Alto Networks, PulseSecure, Riverbed, Splunk, Symantec, Tennable and TrendMicro;
  • Networking infrastructure: APC, Ciena, Extreme Networks, Juniper, Nokia Nuage, Riverbed, Ruckus, Silver Peak, Solar Winds and VeloCloud;
  • Collaboration and mobility: Avaya, Jabra, Microsoft, Mitel, Plantronics, Polycom, Zebra Audiocodes;
  • Data centre: NetApp, Panduit and VMware; and
  • Business productivity: AWS and Microsoft.
Comstor

Comstor is the Cisco-centred business unit of Westcon International, shipping to more than 100 countries. Comstor distributes the full line of Cisco solutions:

  • Cisco security: providing highly secure firewall, web and email threat detection and management services for network and mobile device protection;
  • Cisco collaboration: empowering people to engage and innovate through multiple endpoints and truly collaborative software; anywhere, any time, on any device;
  • Cisco software: flexible software licensing across the hardware estate combined with profitable annuity revenue;
  • Cisco data centre: allowing data to be analysed, simplified, automated and protected for operational efficiency through storage of digital information on mission-critical applications;
  • Cisco enterprise networking: covering SMB and enterprise solutions across core switching, wireless and routing technologies - without the enterprise costs; and
  • Cisco services: providing customer support on Cisco solutions through its global support and solutions team of experts, serving over 180 countries and responding in 17 languages.
Westcon International

Westcon International also has capability practices and specialities, that it offers globally under its Westcon-Comstor brand:

  • Cloud: Amazon Web Services, Microsoft Azure and Microsoft Office 365;
  • Services: supply chain, financial, education, technical support and professional; and
  • Global deployment solutions: logistics, staging, strategic stocking, configuration, project co-ordination, VAT recoverability; global contracting and global credit management.

Strategic overview

As Westcon International restores its business to profitability, it continues to evolve its business model based on one principle: enabling partners and improving their success through focus and value-added capabilities. This principle is core to Westcon International's strategic framework that aims to create value for all stakeholders. The five strategic pillars that define the priority actions are customer engagement; solutions and services; creating a winning team; execution excellence; and digital transformation.

FY19 represented significant improvement over the prior year but represents a modest result and the first step on the overall recovery of the business. Westcon International will continue the model of specialisation for vendor solutions and will enhance the customer and market segment orientation with appropriately tailored propositions. It remains focused on process stability, automation and back office efficiency with an emphasis on accuracy, quality and urgency in all functions.

Westcon International has completed the reverse transition of all previously outsourced functions to its own shared services centres during FY19.

Progress against strategic objectives

         
ACHIEVED IN PROGRESS
 
  FY19 OBJECTIVES   FY19 EXECUTION OF OBJECTIVES       FY20 PRIORITIES  
 
Business restoration
Focus on revenue growth, margin improvement and profitability
 

10% revenue growth, 4% margin growth and US$54 million improvement in EBITDA

   
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Business restoration
Focus on revenue growth and overall profitability
 
  Working capital normalisation and improving cash flow   Cash flow positive; Working capital returning to more normalised levels    
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Working capital improvement and operating cash flow generation
 
  Africa transformation from loss to profit   Africa profitable overall    
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Reduce ongoing central costs to below 1% of gross revenue (central costs target of US$33 million in FY20)
 
  Reduce ongoing central costs to below 1% of gross revenue   Central costs of US$43 million, 30% less than FY18; 1.3% of gross revenue        
 
Customer engagement
Alignment of vendor and partner objectives to ensure profitable and maximised growth through line-ofbusiness structure
 

Line-of-business alignment in Europe is well established enabling the focus required to support growth

   
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Customer engagement
Continue to build strong line-of-business model providing vendors with focus and alignment to their objectives
 
  Development of clear customer segmented support models   Launch of Velocity go-to-market in Westcon Europe targeting SMB reseller base    
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Define/refine customer segmentation and develop go-to-market models, support and organisational capability to maximise success in each segment (including Velocity)
 
  Deployment of customer technology solutions and digital distribution platforms to ensure fast and accurate engagement, quoting, transacting and support models   PartnerView (reseller online portal) launched    
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Drive PartnerView (reseller online portal) adoption with enhanced e-commerce capability
 
  Continued investment in marketing and sales initiatives which focus on partner growth opportunities   Comstor security initiative proved very successful to support Cisco’s objective to be a major security infrastructure vendor        
 
Solutions and services
Continued focus on Comstor-Cisco differentiation
 

Cisco business has grown by more than 12% across Westcon International

   
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Solutions and services
Complete integration and alignment of services organisation and technology solutions operations, and develop compelling offers
 
  Expand security portfolio in emerging technologies   Security portfolio continues to evolve    
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Invest in Global Deployment Services (“GDS”) capability and ensure retained leadership position
 
  Maximise existing distribution sales while continuing to build digital distribution capabilities (renewals, services and cloud)   Renewals capability has been strengthened    
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Develop core solutions to provide differentiated offers
 
  Add strategic software and cloud partnerships   Expansion with existing vendors        
  Portfolio expansion in fast-growing technology areas, for example SD-WAN, with associated services and ECO system offer   Launch with VeloCloud and Silver Peak        
  Continue roll out of Cisco SaaS offers into remaining countries, add new Cisco SaaS offers and drive revenue through software and cloud platform   Cisco SaaS offers are becoming a growing proportion of revenues        
 
Winning team
Continue to develop best talent in all areas while promoting from within wherever possible
 

Personal development and management development programmes offered to staff

   
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Winning team
Continue to develop best talent in all areas while promoting from within wherever possible
 
  Recruit, develop and retain the best talent in every role   Several senior roles fulfilled from within the organisation    
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Create career path framework to enable the retention of the best talent
 
  Maintain an environment where everyone is motivated to do their best to support customers and contribute to company and individual success   Consistent performance evaluation programme now utilised across Westcon International    
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Launch executive leadership training programme for senior leaders
 
  Investment in training and development of all functions and roles   Delivered sales training to sales teams across all regions        
 
Execution excellence
Shared services centres in South Africa and Philippines for EMEA and Asia-Pacific
 

Shared services centres in South Africa and Philippines established

   
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Execution excellence
Process optimisation project initiated – Driving end-to-end improvements to develop “frictionless transactional capability” with emphasis on balancing “front office versus back office” ratios
 
  Reverse BPO to improve customer service and transaction execution   Reverse transition of all BPO activities successfully completed; regained control of customer experience and transactional execution    
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Ensure accuracy, quality and urgency in all activities
 
  Consistent, timely and accurate reporting and management   Launch of SalesView BI – near real time management cockpit to monitor sales and trading performance    
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Drive adoption and utilisation of digital distribution platform tools
 
 
Digital enablement
Deployment of digital distribution technology – Cloud/aaS enabled ERP
 

Continued focus in FY20

   
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Digital enablement
Continued development of digital distribution platform suite in line with customer and market requirements
 
  Leverage technology automation around SAP and customer supplier tools   All major SAP enhancements required following implementation are complete    
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Partner Digital Transformation – deliver phase 1 integrations (foundational and enhanced) utilising application programming interface (“API”) gateway software development kit
 
  Complete SAP last mile items critical for the optimisation of the platform   SAP and the supporting applications are fully operational and stable; benefits are now being realised through improved transacting and superior visibility    
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Accelerate best-in-class enhancement for sales tools
 

Westcon International's value creation business model

Westcon International's business model is aimed at enabling partners and improving their success through focus and value-added capabilities creating sustained value for all stakeholders.

 

01 INPUTS

Financial

  • Net debt – US$110 million
  • Working capital – US$292 million

Human

  • 3 171 employees
  • Employees’ time, skills and knowledge

Social and relationship

  • Partner relationships
  • Customer engagements
  • Stakeholder relationships

Intellectual

  • Technical expertise
  • Strategic partnerships

Natural

  • Energy management
  • Recycling initiatives

Manufactured

  • Warehouses (distribution centres)
02 VALUE ADDING ACTIVITIES
(OUTPUTS)
  • Technology distribution
  • Channel services
  • Market data analytics
  • Digital disruption platforms
  • Advanced technical skills
  • Capital into the channel
  • Improving operating profitability
  • Reduction in net debt
  • Improvement in working capital days
03 KEY OUTCOMES
FOR STAKEHOLDERS

Shareholders

  • 9.8% revenue growth
  • Increased profitability

Financial institutions and debt funders

  • US$14 million interest paid to debt providers

Employees

  • Employee training initiatives
  • Consistent performance evaluation programmes

Customers

  • Successful Comstor security initiative

Vendors (suppliers)

  • Engagement programmes

Corporate social responsibility beneficiaries

  • Causes supported include education, fighting disease, improving health, helping the disadvantaged and community enrichment

Governments and regulators

  • Compliance with regulatory requirements
  • US$3 million in taxes

Performance

Westcon International accounted for 59% of the Group’s revenue (FY18: 59%).
US$'million February 
2019 
February 
2018 

movement 
Revenue
2 544.8  2 316.7  9.8 
Gross profit
260.4  227.4  14.5 
Gross margin (%) 10.2  9.8  – 
Operating costs
(254.8) (275.5) (7.5)
Operating profit before interest, tax, depreciation and amortisation (“EBITDA”)
5.6  (48.1) (111.6)
Net debt
(109.5) (131.8) (16.9)

Markets

Westcon International experienced growth during FY19 with most major markets showing double digit growth. In Europe, the Comstor division recorded strong growth in all countries except the UK which was down slightly from the prior year. The Westcon division in Europe also showed good growth overall with strong results in Germany and Spain offset by flat performance in the UK.

The growth in Africa remains modest as credit and currency exposures are carefully balanced to support the return to profitability while the Middle East grew by 6% for the year.

The Asia-Pacific region experienced another year of excellent growth with contributions from all markets. Sales expansion in China continued and there was good growth throughout the rest of Asia. Sound execution against Cisco exclusivity contributed to significant growth in New Zealand, while Australia has halted its prior year decline recording 10% growth.

The improving financial performance and market share gains across all markets that Westcon International operates in are evidence that regaining control of the customer experience and transaction execution has proved pivotal to the turnaround.

Partners: customer and vendor relationships

Westcon International's partners include technology vendors, customers such as value-added resellers, systems integrators and service providers offering technology solutions for small- and medium-sized businesses, enterprise organisations, governments and other vertical markets around the world. Solutions include the design, configuration and implementation of cyber and network security, network infrastructure, unified communications and collaboration, mobility and data centre networks, as well as network storage. Westcon International also provides a range of comprehensive services to complement these solutions, such as Westcon-Comstor EDGE, its unique partner enablement programme.

Partner engagement programmes and an ongoing focus on vendor relationships continue to create new market opportunities. Westcon International's relationships with its "global eight" vendors remain the fundamental platform for driving revenue growth, opportunity for services penetration and influence for software and cloud solutions. Examples include the launch of the "Comstor network initiative" following the successful Comstor security initiative executed in FY19; the investments in Mitel across all regions; and growth with Palo Alto Networks and global deployments with Symantec confirm Westcon International's position as a global leader in cyber security distribution. The expansion with Microsoft for its portfolio and advances of the accelerate programme to grow emerging technology vendors, underscores the deep-rooted focus on technology evolution combined with commercial opportunity.

Outlook

Building on the successful turnaround of FY19, Westcon International is expected to deliver a significant improvement in its operational performance and further central cost reductions.

Awards and recognition

Westcon International’s leadership, vision, programmes and performance continue to draw the attention of the technology market it serves. Westcon International’s relentless commitment to excellence transcends all facets of the organisation. Most recent accolades include:

International

Westcon International – Avaya – International Distributor of the Year 2018


United Kingdom

Comstor UK – Comms Dealer Sales and Marketing Awards – Distributor channel marketing campaign of the Year 2018

Comstor UK – Comms National Awards – IT Distributor of the Year 2018


UK&I

Westcon UK&I – Avaya – Enterprise Distributor of the Year 2018


Norway

Comstor Norway – Cisco – Distributor of the Year 2018


France

Comstor France – Cisco – Distributor of the Year 2018


BeLux

Comstor BeLux – Cisco – Distributor of the Year 2018


Germany

Comstor Germany – Cisco – Social Responsibility Partner of the Year 2018

Westcon-Comstor Germany – IT Business Magazine – UC and Telecommunication Gold 2018


Spain

Westcon Spain – Symantec – Best Distributor Spain 2018


EMEA

Westcon EMEA – Extreme Networks – Global Distributor of the Year 2018

Westcon EMEA – Palo Alto Networks – Rockstar award for outstanding contribution 2019

Westcon EMEA – Ribbon – Support Partner of the Year EMEA 2018


Middle East

Westcon-Comstor Middle East – Aon Hewitt Best Employers – Engaging Leadership 2018

Westcon-Comstor Middle East – Channel ME – Value Added Distributor of the Year 2019

Westcon Middle East – Palo Alto Networks – International Top Distributor – Better Together Campaign 2018

Westcon Middle East – Pelco – Best Distributor 2018

Westcon Middle East – Reseller Hot 50 – Best Channel Training Initiatives 2018

Westcon Middle East – Ruckus – Distributor of the Year 2018

Westcon Middle East – Symantec – Fastest Growing Distributor EMEA 2018

Westcon Middle East – Zebra – Distributor of the Year 2018

Westcon Middle East – Zebra – Best Distribution Sales Person of the Year 2018


Sub-Saharan Africa

Westcon sub-Saharan Africa – Ruckus – Distributor of the Year 2018


New Zealand

Westcon-Comstor New Zealand – Women in ICT – Technical Award 2018

Westcon New Zealand – APC – Distributor of the Year for New Zealand 2019

Westcon-Comstor New Zealand – IDG Reseller News – Cloud Distributor Value Award 2019

Westcon-Comstor New Zealand – News – 30 Under 30 Tech Award 2019


Australia

Comstor Australia – Cisco – Best Adoption of the Cisco Start Portfolio 2019

Westcon Australia – Pulse Secure – Distributor of the Year 2019

Westcon Australia – Networks – Distributor of the Year 2019


Asia

Westcon Asia – ForeScout – Best Distributor 2019


Taiwan

Westcon Taiwan – Palo Alto Networks – Field Service Distributor of the Year 2019


Thailand

Westcon Thailand – Avaya – Best Distributor 2019

Westcon Thailand – Solarwinds – Outstanding Sales Growth Distributor 2019


Singapore

Comstor Singapore – Cisco – Top Overall Distributor 2019


Philippines

Comstor Philippines – Cisco – Top Distributor Services Partner 2019


Westcon International’s executives are active members of the Global Technology Distribution Council (“GTDC”), a consortium of the world’s leading technology distributors.