SYNNEX CEO Talks Opportunity in Services, Cloud

**Editor’s Note: Click here for Channel Partners’ complete coverage of the April 2014 SYNNEX Varnex event in Orlando.**

ORLANDO — Distributor SYNNEX – which has taken to calling itself “a technology solutions provider,” but more on that later – this week is holding its Varnex conference, its exclusive event for solutions providers, vendors and key internal executives.

Channel Partners spent some time with CEO Kevin Murai to get his thoughts on issues ranging from how SYNNEX stands out from its peers to the cloud and the company’s growth. Check out the takeaways:

First, SYNNEX distinguishes itself from other broadline distributors by investing in services, said Murai.

“So when we look at our role, we don’t stick to a legacy distribution model – in fact, we view ourselves as a technology solutions provider,” he said. (Indeed, SYNNEX’s attempt to shift away from the term “distributor” mirrors similar efforts in the telecom industry. For example, several master agents are terming themselves “technology distributors” or “brokers,” rather than “agents.” The change comes as traditional and next-generation technologies converge and create new opportunities – and that convergence seems to be challenging IT and telecom suppliers and partners alike to think about how they define themselves.)

That services focus means VARs, MSPs and other solutions providers can look to SYNNEX to help them in areas where they are limited, Murai said. The partners who focus on SMBs, while “very good at what they do,” also struggle with limited capabilities and geographies, he pointed out. But since SYNNEX provides capabilities such as data-center assessments, professional services, a network operations center, training and more, partners can lean on the distributor to help them in those areas.

Next, SYNNEX views the cloud as an opportunity, rather than a detractor of on-premises sales. That’s because Murai refuses to see it as anything but an opportunity. The SYNNEX head has worked in IT and distribution for almost 30 years “and this is probably the third time that there’s been talk around the disintermediation or the risk to the channel and to distribution,” he said. “Obviously [cloud] is a change in how people are consuming IT but, if anything, I think the level of integration and the opportunity for services actually increases when things move up to the cloud.”

As one way of turning cloud into opportunity, SYNNEX offers the CloudSolv platform, which allows solutions providers to provision services for SMBs.

“The obvious threat is that the end customer can go to Microsoft or Symantec and sign up for their own services,” said Murai. “But when you’re talking about a small or midsize business and dozens, or even hundreds, of end users, you have to provision every single time. And then you think about, nothing’s static – people leave and you hire new people and you’ve got to continually maintain that. So that’s where our [channel partners] really step in.”

What’s interesting is that cloud-services uptake among SMBs remains somewhat sluggish and as a result, so does many resellers’ transition to recurring revenue opportunities.

“There’s no question that the revolution is coming and I think the change will be quick when it starts to happen, but it has been relatively slow, for a couple of reasons. No. 1, the end-user market still doesn’t have a real good grasp on what that new world of cloud looks like and what the benefits are for them,” Murai explained. “And, frankly, many of our resellers are still catching up as well, trying to understand not only how do they sell it but also to transition their business over to that new model. The world of an annuity business with a much richer mix of services, all would agree is a much better business model than what legacy hardware selling has been, but making that transition to get there does present its challenges. And one of the fundamental challenges is it is a big short-term change in their cash-flow situation and shifting over to that. I think the good news is that because the transition is slow, they all have a bit of time to start participating in some of the annuity business as the up-front growth profit model starts to shift over that way. I think that transition will be successful for most.”

The question is, how much time is left for that transition? Cloud and other recurring revenue services are taking over the technology sector. As multiple analysts have warned, partners either need to get on board, hire salespeople with the right skills for the new buying conversations, or risk obsolescence. For Murai, the situation does not appear that dire.

“I think there’s still a lot of time,” he said. “The big complexity in the cloud is really doing a lot of that integration because it’s not just consuming spot-type applications. That’s really what it looks like today but it’s not just about an Office 365 or the hosted desktop, it’s really about the fully integrated solution in a hosted way and that does have to be integrated, so I think there’s still time. And frankly, when you look at the vertical-specific applications that really drive the overall solution anyway, a lot of those software vendors are still moving their platforms to the cloud and more of an as-a-service type offering.”

Finally, to that point, SYNNEX is emphasizing the money to be made in services surrounding high-profile, fast-growing technologies such as mobility, cloud and security. But it’s also not letting go of profit from older, slower-growing areas such as print. VARs can charge a per-impression fee for ensuring print capacity and upgrading to green technologies, for example, while continuing to benefit from the hardware refresh cycle, which pays via the legacy up-front compensation model.

“The parts of the business that are more commoditized, such as print, are undergoing some innovation, too,” said Murai. “And they’re part of the total sale.”