Westcon International divisional review

Purpose

Westcon International's purpose is to enable and transform the distribution channel. This is achieved through its people, relationships and innovation.

Corporate overview

Westcon International is a value-added speciality distributor of industry-leading cyber security, network infrastructure, unified collaboration products, data centre solutions and channel services with a global network of service providers, systems integrators and speciality resellers. It goes to market under the Westcon and Comstor brands.

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, Broadcom, Tenable and TrendMicro
• Networking infrastructure: APC, Ciena, Extreme Networks, Juniper, Nokia Nuage, Ruckus, Silver Peak, Solar Winds and VeloCloud
• Collaboration and mobility: Avaya, Jabra, Microsoft, Mitel, Poly, Zebra, Audiocodes
• Data centre: NetApp and VMware
• Business productivity: Amazon Web Services 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
• 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
• Global supply chain services: logistics, staging, strategic stocking, configuration, project co-ordination, VAT recoverability; global contracting and global credit management

How Westcon International creates value

Westcon International's people are dedicated to delivering outstanding performance and customer satisfaction. Westcon International has a wealth of industry insight, market-leading digital platforms, innovative marketing and business generation tools, technical expertise and decades of distribution experience.

Westcon International has long-established strategic vendor engagements. These relationships are leveraged to ensure its partners can access established and emerging technology solutions. With over 30 years' distribution success as a strategic partner to the world's leading IT brands, Westcon International combines global reach, digital capability and scale with a personalised, local footprint to provide capabilities and services that outshine the traditional distribution experience.

Westcon International selects specialised vendor solutions and enhances 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 offers employees rewarding and challenging work in an inspiring, fast-moving environment. It has established a culture where people are valued and respected and where everyone can contribute, collaborate and reach their potential.

Environmental impact through business activities

Westcon International provides Circular Technology Solutions such as Cisco Refresh which offers like-new Cisco equipment at significant savings. Cisco Refresh offers risk-free, environmentally responsible remanufacturing by the original equipment manufacturer, improving sustainability and reducing carbon emissions.

Westcon International's value creation business model

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

Strategic overview

Westcon International's strategy is to be the leading value-added distributor for networking and cyber security vendors across Europe, the Middle East, Africa and Asia-Pacific.

Westcon International has developed its strategy according to its core values, enabling its partners and improving their business potential and performance. Westcon International's strategic framework aims to create value for all stakeholders via seven strategic pillars that define its priorities, namely: business model evolution; partner alignment; solutions lifecycle; execution excellence; data-driven; digital first and people oriented.

Westcon International aims to bring to market industry-leading fixed or wireless-based networking solutions, including unified collaboration, security, virtualisation, remote access and cloud computing products.

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 remains focused on profitability by driving business improvement through revenue growth and margin expansion supported by cost controls. While several macroeconomic risks exist, the FY21 results highlight Westcon International's ability to respond effectively to challenging circumstances.

AchievedAchieved

STRATEGIC PRIORITY		2021 DELIVERY
Business restoration
Ensure that Westcon International successfully navigates the Covid-19 pandemic		Operations Key logistics centres in the UK, the Netherlands, the Middle East and Asia-Pacific remained open and operational supporting approved critical business needs Frequent and unplanned changes in border controls and transportation schedules and restrictions on the movement of people have resulted in a suspension of standard service levels by most global carriers with a consequent impact on shipping rates, estimated time of arrivals and delivery capabilities Weston International continues to work closely with vendor partners to ensure adequate supplies in the face of potential disruptions, as well as monitoring backlogs, shipments and delivery acknowledgement dates Collaborated closely with vendors and carriers to identify potential supply chain issues and how to reduce their impact. Westcon International encourages its customers to work closely with their local Westcon-Comstor sales representatives to share information and plans for product demand and any physical delivery constraints at customer sites People Implemented specific health precautions including workplace and travel restrictions and enabled employees to work from home Provided secure applications access and communications facilities for all teams, enabling employees to work flexibly, providing continuity of support for partners and customers Established management protocols and implemented formal training for remote working to mitigate possible feelings of isolation, support closer collaboration and maintain people's wellbeing and focus Westcon International continues to update its policies and communications in line with recommendations from the WHO and local government and health organisations
Focus on working capital and liquidity		During the Covid-19 pandemic the division added resources into the credit risk function to deal with the expected increase in volume of required credit risk assessments and add manpower that was expected to be needed to be in closer contact with all customers This contributed to strong cash collections performance in all regions and has resulted in improved working capital investments Despite the pandemic, Westcon International secured new financing facilities on more favourable terms in all key markets
Further central cost optimisation		Costs have been maintained at prior year levels These costs relate primarily to the IT support functions required to host and maintain the division's centralised IT platforms Reduced from US$63 million in FY17 to US$28 million in FY21
Grow revenue contribution from next-generation technology providers		59% revenue growth year-on-year on identified next-generation vendors This remains a key growth priority for the division
Customer engagement
Successful deployment of key performance indicator ("KPI") solution with additional four strategic global vendor partners		Vendor KPI dashboard reporting and tracking successfully rolled out for all strategic global vendors
Successful adoption of a sales commission system that enables the alignment of sales rewards and incentives directly with the achievement of specific vendor objectives		Sales commission system rolled out in EMEA Piloting in Asia-Pacific during H1 of FY22 for rollout in FY22
Continue to evolve value propositions, go-to-market models, capabilities and platforms to reflect the needs of these customer segments and drive improved growth, profitability and customer satisfaction		Established framework model for segmentation, delayed implementation as Westcon International dealt with successful navigation of Covid-19 pandemic Segmenting customers so that the appropriate propositions and go-to-market models can be deployed in an effective manner is a key priority for FY22
Solutions and services
Successful rebranding of global services under the ORBIT programme which integrates a number of value propositions and delivery models in a compelling and customer-centric solution set		Rebranding and go-to-market refresh successfully rolled out
Further integration and evolution of services capabilities to drive deeper customer relationships		Continue to adapt, refine and refresh services offering in line with changing demand and vendor portfolio
Rollout of intelligent demand programme in FY21 – increased use of big data and analytics to identify opportunities for integrated solutions in key technology, customer and industry segments		There were 346 intelligent demand engagements with over 50 vendor partners across all regions, predominantly with cyber security vendors, led by Palo Alto in EMEA and Cisco in Asia-Pacific Intelligent demand has also been instrumental in next-generation sequencing ("NGS") vendor recruitment by offering early insights into addressable market segment size and strong candidate resellers for onboarding
Winning team
Continue to nurture internal talent while developing a positive external employer brand through advocacy of performance and values		Brand positioning and employee advocacy via social media and digital marketing is a strategic priority and good progress has been made Close relationship with marketing to promote Westcon-Comstor at every opportunity Using tools to nurture internal talent is ongoing
Continue to develop people and their potential for successful careers through a combination of formal training and development and a collaborative cross-functional ethos based on our core values		Full training programme has been developed across Westcon International Training and development strategy has been created Career paths are being created across Westcon International
Ensure further delivery of the leadership training and development programme		Virtual training sessions are ongoing This programme particularly is enhanced by face-to-face training which Covid-19 has impacted; the full programme will be reinstated as soon as Westcon International is able to	One cohort completed and achieved Second cohort in progress
Execution excellence
Continued focus on process automation through the increasing capabilities of digital technologies productivity		Rolled out first phases of automation in European operations This rollout enabled the division to reduce ongoing costs by an annualised US$17 million	Phase 2 includes rollout to other regions
Digital enablement
Continue to innovate in digital distribution platforms to enhance customer experience and vendor ecosystem		All development objectives for FY21 designed and deployed Key focus on BlueSky functionality and SAP functionality Systems reconfigured to prepare for and adapt to Brexit environment. This area remains a priority for FY22 in a dynamic environment
Undertake further targeted sales and marketing activity with named global and enterprise customers to drive further integration and adoption of the application programming interface ("API") toolset		Four partners now fully integrated via the AIM API program (Orange, Verizon, HCL and MTN) transacting over 68 000 requests in FY21 Continuing targeted sales engagement with prospective adopters and there is a significant pipeline of these at various stages of discussion and evaluation
Integration of SalesView with the Pardot Marketing Automation platform to enable seamless lead management, allocation and tracking solution that is designed to improve opportunity identification and conversion for sales and marketing teams		Achieved this level of integration for SalesView and Pardot The decision in FY21 to adopt Marketo globally as Westcon International's marketing automation platform and parallel progress in data and analytics will enable an alternative business intelligence solution offering additional benefits in FY22

In executing its strategy, certain trade-offs are often required to be made, and decisions about trade-offs are made after careful consideration of the risks and rewards present in each case. During FY21 Westcon International experienced growth and expanded its market share organically. Gaining market share, territory expansion with existing vendors or bringing new vendors to existing markets requires investment and competitive pricing strategies which all come with a degree of risk.

Performance

Markets

Westcon International revenue increased by 4.6% to US$2.6 billion (FY20: US$2.5 billion^ restated revenue) on strong demand for networked cloud computing, remote access solutions for mobile working and virtual office environments, unified collaboration and enhanced network security. In constant currency*** terms, revenue improved by 3.5%.

Strong growth was experienced during FY21 in Europe, Middle East and Asia-Pacific, offset slightly with some contraction in Sub-Saharan Africa mainly due to market conditions. Westcon Europe performed strongly with 21% growth, from continued good growth in cyber security and networking technologies. The Comstor Europe division recorded strong market share gains across EMEA despite overall revenue declines of 7%. Asia-Pacific revenue increased 5% with strong growth in Asia (14% increase) offset by a 3% decrease in revenues in Australia and New Zealand.

Westcon International's gross margins increased to 11.3% (FY20: 11.1% restated^) with higher margins in Europe and MEA. Westcon International's gross profit increased by 5.6% to US$291.0 million (FY20: US$275.7 million) with higher results across all regions.

The improving financial performance, improvement in net working capital, market share gains across all major markets and vendor recognition all demonstrate that Westcon International continues to provide excellent customer experiences through the execution of its turnaround.

Outlook

Westcon International continues to monitor and respond to the Covid-19 pandemic with its priority on maintaining the health and wellbeing of its staff in compliance with relevant government directives, while limiting business impacts for channel and vendor partners.

Westcon International's key logistics centres in the UK, Netherlands, Middle East, South Africa, and Asia-Pacific remain open and are being managed under strict measures to ensure the wellbeing of logistics and warehousing teams while maintaining service levels. This has enabled the division to take an active role in servicing the needs of critical business sectors alongside partners during the pandemic.

The multi-year investments in Westcon International's advanced systems and business automation enabled business continuity plans to be deployed seamlessly with almost the entire workforce continuing to work remotely.

Westcon International aims to bring to market industry-leading fixed or wireless-based networking solutions. While the near term remains uncertain, current conditions are driving demand for technologies that Westcon International sells.

The global semiconductor shortage due to Covid-19-related constraints is impacting all technology participants across the entire value chain and Westcon International continues to monitor and mitigate the impact on availability and costs where possible.

Awards and recognition