Networks Unlimited turns 25 years old this November – and the value-added distributor seems to be improving with age.
Not only has it grown over the last quarter-of-a-century, but it has pulled off the feat of thriving under pressure. Even as the IT industry as a whole is battling the effects of recession, digital disruption and ongoing trade wars, NU is posting record performances .
Anton Jacobsz, CEO of Networks Unlimited, points out that the company turned in its best annual results for the 2018 financial year, and looks set to be doing the same this year.
“So far, we are more than 20% up year-on-year in the first half of 2019, with the second half looking positive as well,” he says. “Surprisingly, a large portion of this growth has come from South Africa.
“We were expecting big growth – in the region of 100% – from Africa, but the home market has come through so much stronger than we anticipated. Having said that, African markets have turned in solid growth at around 50% and still account for about 44% of our total revenue.”
What’s the secret of NU’s success, and how is it managing to not only survive, but thrive in a depressed market?
“I think the key thing is that we invested in new products and headcount two-and-a-half years ago,” says Jacobsz. “This is starting to show results now: as the numbers are starting to come through from the new products, and we haven’t had to adjust the headcount.”
NU also focuses on new and innovative technologies, often being the trailblazer in introducing them to the market. Because it’s a visionary about what solutions will be needed down the line, and is willing to take a risk in working with technology that’s not well-known in the local market, it reaps the rewards when it becomes mainstream in Africa.
Jacobsz points to innovations like SD -WAN technologies , where NU was ahead of other players in bringing in the technology and investing almost three years ago.
Others include enterprise systems management; Web application firewalls (WAF) and security space allocation in the cloud; as well as security fabric technologies.
In fact, the company started out with what was then bleeding edge technology. Back in 1994, NU – which was founded by Wayne Bird and Craig Copeland – sold DOS network sniffers and offered network services to its customers.
The company really started small – in one of the founders’ spare bedroom – offering consultancy coupled with the products or solutions required to help solve customers’ problems.
“At that stage, we were more of a systems integrator than a distributor, and operated only in Cape Town,” says Jacobsz. “But management slowly realised that, in order to gain momentum and cover a wider market, they had to change the model.”
The company was appointed to distribute a number of what were then specialist products like SurfControl, MineSweeper, IronPort and PGP.
“NU had the South African rights to the products, and realised that a great way to scale was to get the backing of other systems integrators – if it became a distributor it could achieve the scale that was needed,” Jacobsz says.
Once it had made the change, and shifted its business model to value-added distribution, NU could grow rapidly and start serving the broader market outside of Cape Town.
Being first to market with new technologies has also helped the company to remain agile.
“New technology is what we’ve built our reputation on,” says Jacobsz. “We will typically find a vendor that is willing to try out the South African market and will work with us.
“We help develop the market from a customer and channel point of view: we create the demand, build a channel and, typically, close the first deal.
“Once that’s done we can start shifting the product into run-rate business.”
Because it works with bleeding edge technology innovators, the vendors are typically smaller – either start-ups or pre-IPO (initial public offering) organisations, Jacobsz explains.
“Two things can happen with these companies: they could list themselves and the product becomes a great asset for us; or they could get bought out by a bigger player and the product is ripped out of our arsenal.”
Some examples of the latter include IronPort, which NU brought into the South African market and developed into a mainstream offering. When Cisco bought IronPort, the product was placed with the mainstream Cisco distributors and NU lost a big chunk of its business. “Two years ago, we lost R160-million of revenue through HPE’s acquisitions of Aruba and Simplivity,” Jacobsz adds.
But this risk goes with the company’s business model, he says. “We are not a commodity distributor and we position ourselves very differently to the other big distributors.
“We like to work on the leading edge – almost the bleeding edge, but also to keep going with those products once they have matured.
“For example, Fortinet and F5 are hugely successful technologies that we have helped to develop, evolve and create the market for.
“As they move on to the next generation of new technology, we are there to make the journey with them.”
Its reputation for building specialised markets means that vendors often approach NU to help them develop a market for new products. “If it’s not in competition to our existing stable, we will certainly look at it.” Jacobsz says.
“Our primary go-to-market strategy is to take on products that won’t compete head on with other suppliers and we always aim to build a very solid professional team behind each product we take on.
“Because of this, we can also be used to do the deployment – in fact, this happens often – because we have the skills due to our early investment and vendor requirements to build the market. We don’t compete with our channel partners but work with them to fill in skills gaps.”
Bringing in new technologies isn’t a hit-and-miss operation: Jacobsz points out that the majority of NU’s products are in the Gartner Magic Quadrant. “This is important and means our people and partners can trust what they are selling – and customers know the product will have the required abilities.”
Once they sign up a product, NU promotes it in the South African and African markets, trains its own staff and partners, creates market pull, and ensures ongoing delivery and support.
Maintaining a high level of skills is arguably one of the biggest challenges that a value-added distributor faces, Jacobsz adds. “It really is a massive challenge keeping skills up to date. As soon as they are trained up, people become very attractive to other companies – or else very expensive to retain.”
Jacobsz joined NU six years ago, charged with growing the company and making it a truly regional player.
Turnover this year is set to hit R700-million, up from R117-million six years ago, so he’s well on the way to achieving that goal.
The first move in driving massive change was to move the business operations out of Cape Town and into Gauteng. “Having a committed management team in Johannesburg made a major difference,” says Jacobsz. “Over the last six years, we have moved most of the management and operations to Johannesburg to be closer to where the business is.”
With more of the day-to-day control of NU passing to Jacobsz, he has been able to leverage his extensive industry experience.
Having worked as the CIO for an end user, with a major software vendor, and in the channel environment, he is well placed to understand the challenges of each industry stakeholder.
“The experience across the industry helps in my decision-making process,” Jacobs says. “And working for Microsoft was a real benefit in learning how to build structures.”
NU had a staff count of 35 people six years ago. Now, it stands at 97.
“But it’s the bottom line that is important,” Jacobsz points out. “And that is looking healthy.”
Two-and-a-half years ago, the decision was made to diversify the business into the African market. “Before that, 8% of our revenue was from Africa. Today we have offices in East Africa, West Africa and Indian Ocean Islands – and 44% of our revenue is from Africa.”
Another thing that had to change was management style. “As soon as we went over 50 people, the business dynamic changed,” Jacobsz points out.
“All of our back-end processes such as recruitment, training, reviews and performance management had to move from a personal, front-end function to an operational function.
“I’ve also had to spend a lot more time working with teams internally to better develop the customer space.
“More and more, we are developing the next level of management team with other managers taking a bigger chunk of accountability and responsibility.”
NU has also focused into three distinct divisions: cyber security; networking and storage; and enterprise system management and cloud.
Each division is responsible for five or six products.
These products are by no means cast in stone, and those that don’t fit the company’s strategy will be let go while new and innovative market entrants will be added.
For instance, Jacobsz explains that three new products have recently been added to the NU stable: operational technology (OT) security product Indigy; entry-level data management and disaster recover solution Altaro; and the full product set from Hitachi Vantara.
Operationally, the Johannesburg team acts as the channel and product team for the whole group, although there are systems engineers in the regions too.
“A lot of our people are multi-skilled with certification in both their primary product and a secondary technology,” Jacobsz points out. “Our people all have skills in the ecosystem of the environment – they understand the environment and its challenges – and we bring the product certification in underneath that.
“This makes us a little bit different from many other players.”
Jacobsz explains that NU differs from traditional distributors for a number of reasons:
- It has a strong product focus on selected products in its suite, which have very little overlap.
- The distributor offers a strong product team focus behind each product set available.
- Certified engineers provide assistance with professional services.
- The company provides certified training and boot camps (technical and sales readiness) on each of its products.
- It has a strong reputation for delivering new and cutting-edge solutions to the marketplace, creating new business opportunities.
- It shows marketing alignment between the vendor, Networks Unlimited Africa and its partners.
- The internal sales team helps to drive new opportunities and build pipeline.
- NU has logistics abilities across Africa.
One thing is constant in the modern business landscape and that is change. Jacobsz recognises that, for all that it is growing and profitable, NU has to keep ahead of the curve.
“The business landscape is getting very interesting,” says Jacobsz. “Our medium-term mission is to be the number one value-added distributor in Africa.
“But at the same time, I realise that our model may have to change at some point – maybe not as much as our competitors’ because we are at less risk, but we have to be aware of market forces.”
He believes the hyperscale cloud providers and major e-commerce platforms will start to erode market share from traditional distribution.
“A lot of the products in the online channels compete with what the traditional distributors offer. Our products are a lot more specialised than some, but soon the hyperscale cloud providers will be able to provision more products than before.
“I don’t think the value we offer will go away, but we have to think carefully about how, as a distributor, we go to market.
“We don’t know what all the answers are, but we know the market is going to change and we have to constantly think about it, and come up with some workable strategies.
“At a high level this strategy must be to make it easier for customers to acquire and use our products. We need to work out how to do it, to facilitate the change and generate new revenues.
“There is no doubt that annuity-based consumption models are where the market is going.”
In the future, collaboration is going to play more of a role than ever before, Jacobsz believes.
“Over the years, there are many changes that we’ve seen. I used to work at Microsoft and we were directly competing with open source. Today, through the foresight if its CEO, Microsoft is embracing open source and working with organisations to fundamentally change its earning potential.
“Your enemy then is your friend now. The whole collaborative world that the customer wants to see is being driven by market forces.”
More specific planning at NU revolves around skilling up the channel.
“We are creating an alignment with some of the universities,” Jacobsz explains. “We are establishing a training academy and incorporating a lot of our certified training into third-year ICT studies. We can then help to place these students for practical training. We are so specialised that currently most interns who come to us as IT graduates are of no use to us at all. We still require them to complete another two or three years of training before we can use them in our product and channel.
“By doing the certification and practicals, they are much more employable when they complete their degrees and have a better idea of the ecosystem that they will be working in.”
NU is an authorised training centre for many of the products it distributes and is now working on registering as a training provider and getting its certification approved by the South African Qualifications Authority (SAQA).
The first university that it is partnering with is the Tshwane University of Technology, and it will expand from there.
“If youngsters can come out of university as more valuable candidates we can start making a real difference in the industry and to the unemployment statistics,” Jacobsz says.