It’s a common talking point in the channel: the push away from hardware and towards services. It is backed up by the data in this year’s Fast50. In 2013 – and for the first time since the Fast50 began – services provided the majority of revenues to the Fast50. Between 2009 and 2011, the dial barely moved on services growth and the relativities between hardware, software and services remained largely static. But the emergence of cloud computing in recent years has broken the nexus. Services clearly dominate.
Another reason for the smaller overall revenue of this year’s Fast50 compared with previous years is the increased importance of cloud services. Without the necessary capex of equipment sales, the size of a company’s revenue is no longer the primary indicator of its stature. Take 24th-placed Rock IT, recently chosen as an exclusive OneCloud partner by the world’s biggest integrator, Dimension Data.
DiData told CRN that size didn’t matter as much as Rock IT’s expertise with cloud and its profile within its verticals. This year’s eighth-placer, Paradyne, is another example. It was one of only two companies in the top 10 to generate less than $1 million of revenue, but the company was also Microsoft’s 2013 Public Cloud Partner of the Year (SMB). The Office 365 expert has more than 250,000 cloud user migrations under its belt.
Cloud computing has grown from two percent to nine percent to 12 percent of Fast50 revenues since 2011, fuelling the percentage of the services take from 41.2 to 56.5 percent over that period.
Hardware’s contribution to the Fast50 revenue mix, meanwhile, has dropped from 40 percent in 2009 to just 29.7 percent this year. Furthermore, the past 12 months has seen the biggest single decline for hardware, with revenue dropping from 36.3 percent in 2012 to 29.7 percent in 2013.
Software licence revenues are also in decline with the emergence of as-a-service models, however, that decline is less pronounced. Software dropped from 18.8 percent of revenue in the 2009 Fast50 to 13.7 percent this year.
Amalgamated cloud revenues exceeded the standalone hardware category revenues by more than $1 million. Sales of private, public and hybrid cloud together amounted to $30.9 million; hardware was worth $29.7 million.
Treated separately, hardware remains king even if it wears the crown with less confidence than ever before. That’s also reflected in the fact that hardware remains the most popular category among the Fast50 with 28 companies declaring standalone hardware revenues. That compares to 27 companies that declare standalone managed services revenues, for instance.
Some 21 of the Fast50 are currently active in the cloud.
Within cloud (click here for more information), private cloud was the largest sub category at $14.9 million and was also the most contestable. Some 13 companies were active here, with no single provider taking more than 30 percent of the total share across the Fast50. PCS Australia (14th) was the clear leader, with close to $4 million in private cloud revenues.
Fast50 companies in public cloud generated $12 million from the category, but the lion’s share went to one company, Bulletproof Networks (16th), which took more than 70 percent of the Fast50 takings.
By comparison, hybrid cloud on $3.8 million seems perfectly parsimonious, although it provides rich pickings for Advent One (44th), which took home almost 60 percent of those revenues.
Next: Spread of technology
Diversity
CRN tracks 21 revenue categories in the Fast50 (see main table, page 36) from the smallest – data centres – the largest – hardware. Typically, Fast50 companies were active across four to seven product categories, which was similar to last year’s result. The most diversified was Advent One, which operated across 10 different technology categories, making it the only company to hit double digits. Last year, four companies matched its diversity.
Advent One’s approach was reflected in its project scorecard. In 2012-13, projects for existing clients included storage and services for Monash University, software for CSL, IBM Pure Systems and services for Healthscope, software for Muirs, storage and services for Reece and power for Westfield. On the new business front, projects include power and services for Office Works, IBM Pure Systems and services for Clarendon and storage and services for Metcash.
In contrast, the most concentrated company in terms of revenue source was third-placed Outware Mobile, which makes all of its money from software development.
Number one on the list, NGage, identified eight separate technology categories where it is active. That’s a lot of balls to keep in the air at one time and its achievement is even more remarkable when you consider that the company only has four staff. However, as director Jarrod Bloomfield told CRN, it was a firm focus on hardware that helped the company grow so quickly.
Vendors and distributors
Respondents were asked to score vendors and disties on a five-point scale from ‘Most Important’ to fifth most important. By adding up these votes, giving five points for Most Important down to one point for the lowest category, it gives an interesting insight into the interplay between the major suppliers. (Click here for the full list).
Microsoft is now more important than ever to the Australian channel, at least as far as the Fast50 is concerned. In fact, the measure υ of its importance has increased in the last 12 months (see Top vendors, below).
HP remains the channel’s second most important vendor but the big surprise this year was Dell. The famously direct business has clearly become highly channel focused, and this year overtaken a clutch of companies to move into third in terms of importance to the Fast50. IBM and VMware, meanwhile, slipped, while Telstra dropped out of the top 10 all together.
Ingram Micro was clearly the most important distributor to the Fast50. Second place went to Express Data, while Dicker Data, Synnex and Avnet filled out the top five. Ingram received both the highest raw score plus the highest weighted score.
Activity breakdown
As this is the fifth year of the Fast50, it was instructive to look back to see how the technology preferences in the channel have changed.
The biggest contributors to revenue for the Fast50 of 2009 were end-to-end solutions, which typically provided resellers with 40 percent of their revenues, followed by consulting, networks, managed services and security.
Contrast that with the class of 2013. There is a big change due to methodology – which now recognises a standalone hardware category. And of course cloud has emerged as a major moneymaker. But some things haven’t changed in all that time. General business consulting, end-to-end IT solutions and managed services still rank among the top five activities for Fast50 companies.
And a final exclamation point. When we look at the 10 youngest companies in the 2013 Fast50, the majority are involved in either some form of cloud computing or infrastructure (servers and storage) provision. But none of the Fast50 companies founded since 2009 are involved in managed services.
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