It’s a familiar story for anyone who follows mergers and acquisitions. One company has a big customer base but needs new, higher-growth products to sell. Another company has attractive products and services but wants to expand its reach. Plenty of M&A activity has followed this script.
In the IT channel, it’s been the raison d’etre for a spate of deals between printing manufacturers and solution providers. Ricoh, Lanier and Konica Minolta have all followed the narrative. They all have printing customers, from consumers and SMBs up to the largest corporates, in every corner of the nation, but they recognise that ink on paper is a declining sector.
Canon is no different. Of all deals between print vendors and IT providers, Canon’s buyout of a majority stake in leading east coast managed service provider Harbour IT got the most attention from CRN readers. A year on from the sale, we sat down with Harbour IT general manager Michael Giusti and Craig Manson, director of Canon Business Services, for an update.
It’s little wonder why there was so much interest. Founded in 2001, Harbour IT has built a strong reputation thanks to its mix of enterprise vendors (it’s a top-tier partner with NetApp, Symantec and Microsoft, among many others) and is particularly known for its data centre acumen. Guided by its four directors, brothers Sean and Craig Bishop, Charles Tym and Ken Pitt, along with general manager Michael Giusti, Harbour had grown to offices in Sydney and Melbourne and almost 200 staff. Last year, it grew 38 percent.
Canon is a different beast altogether. The Japanese-owned giant turned over ¥3.7 trillion (A$43.4 billion) in 2014. It employs around 200,000 people across the world and is a leader in photography, imaging and printing.
Cultural differences would be par for the course. Sadly, the history of IT acquisitions is littered with examples where a much larger business took over a promising company and crushed the very qualities that attracted the buyer in the first place.
Not so here. Canon is taking a light-touch approach. “We’ve been very conscious to not get involved, because we love what Harbour do, we really respect their business,” says Canon’s Manson. “We know we’re a vendor. We’re not a channel.
“We’re very conscious not to put our vendor view of the world onto Harbour. We can add value around a whole range of different things without doing that. The last thing we want to do is be value-destroying. We only want to be value-creating,” says Manson.
Giusti adds: “I think you need that autonomy to build a business within a business.”
“And that’s effectively what we’re doing,” says Manson.
There’s a major size disparity, sure, but there are parallels between the two. Harbour IT now sits under Canon Business Services (CBS), which already provides managed print services, and dabbles in reselling. “We’ve got some software that we resell that actually competes with the Canon-owned software,” says Manson.
A light-touch does not mean low expectations. Manson has major ambitions for Harbour IT, which is expected to help the CBS division achieve “aggressive growth targets”.
Bearing fruit
It has been a full 12 months since the deal closed on 1 October 2014. Giusti and Manson tell CRN that the combination is bearing fruit. The cross-selling has begun in earnest.
Canon is ‘eating its own cooking’ by using Harbour’s infrastructure for its own IT requirements. Much of the focus is on Canon’s managed document services, or MDS.
This is where physical print meets digital workflows. Canon’s offer combines technology from three acquisitions made over nearly 10 years: workflow management tool UniFlow, information management system Therefore, and document capture tool Iris.
Canon has already deployed the hosted version of its Therefore software in Harbour’s private cloud and is looking to do the same for Iris.
Manson says Therefore is popular for its easy links into Microsoft SharePoint. “Often our customers have SharePoint at the front and Therefore behind it. It’s just a stronger document management piece – SharePoint’s a collaborative tool. Therefore has a fantastic workflow engine. Through business rules, we can drive documents through an organisation through to a sign-off process.”
Use cases include accounts payable, tax and mortgages.
Document management is not particularly compute-intensive, says Giusti. “It’s more the data storage. It’s about having multiple tiers of storage in our platform, making sure we’re getting the best bang for our buck. It’s also the connectivity piece back to the customer; that’s where we are interfacing with the on-prem systems with the customers. It’s having that connectivity conversation with the customer, and getting a solution.”
Giusti and the team at Harbour IT reckon their private cloud is pretty special. Dubbed CloudMetro, it stands apart from other midmarket options by operating active-active, offering high-availability between environments at two co-location facilities, NextDC and Equinix, both in Sydney.
The cloud is built on NetApp’s MetroCluster architecture, allowing Harbour IT to replicate data and applications in real time across multiple data centres.
Canon’s Manson says: “It would have been very difficult for us to build, and hard for us to gain credibility in that. What we loved about Harbour, we loved their technology. I love CloudMetro. I just think it’s brilliant.”
The technology sharing cuts both ways, and Giusti says Harbour IT is also adding print to the mix – “having a whole business solution with managed print, and document management, plus also service desk, plus also hosting infrastructure. We’re having really rich conversations."
Big company thinking
It’s not only technology that is being swapped between the two. Harbour IT has been able to tap into the kind of management expertise that would not be available to a medium-sized, privately owned Australian reseller.
Two months ago, Harbour IT appointed former Canon exec Josh Watts as its new chief operating officer. It’s a win for Watts and for Harbour IT, says Manson. “He was general manager of sales and operations contracts [at Canon]. It’s a bigger title as COO, but he brings big company thinking to a small company.”
Being on the Harbour IT leadership team within Canon allows Giusti and his fellow directors “to sharpen our strategy – make sure that we know what we want to do, know what we want to sell, and know what we believe in. We get access to a new level of resources that we wouldn’t have access to,” says Giusti.
“I think Josh is a good example of that; where we’ve been able to really leverage a smart individual, who has enterprise-level of experience. He’s coming into our midmarket organisation and has worked for big enterprise companies before Canon, and then been in Canon for five or six years.”
Beyond Watts’ appointment, the companies are taking it slow. They’re operating as separate companies, under their own names, and only integrating softly-softly. “We’ve just got a new building in Brisbane, and Harbour IT has taken some space in there,” says Manson.
Bankrolling business
The benefits extend to access to capital and finance, says Manson. “We’ve got a finance company. We just started offering everything-as-a-service. We can move from a capex to an opex model. Harbour is doing that. We’ve got a couple of examples where we’ve already done that. Then there’s a really nice offer for customers.”
Canon already finances more than 80 percent of sales of its multifunction device sales, equipment investments that are not worlds away from the kind of data centre infrastructure that customers purchase from Harbour IT. “We actually understand IT-type equipment financing [better] than the banks,” says Manson.
So a year into the marriage, what’s next? One might expect an accomplished MSP like Harbour IT to be gunning for Canon’s managed services, though Manson explains
that work is currently under contract to another provider.
Both organisations have aggressive targets, and performance will be under close scrutiny from head office. The Harbour IT deal was one of the first of its kind anywhere in the world, so the experiment is being looked on with keen eyes.
“It has happened before globally, and it’s worked well,” says Manson. “This is a slightly different move. Yes, Canon Inc are looking very carefully at what we’re doing. So far, we are achieving the goals that we set down to achieve.”
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