The legal profession is a long way from IT distribution, and Adam Davenport has been involved in both, these days preferring to be at the ‘coal face’ of business as the managing director of ASXlisted national IT distributor Cellnet.
Davenport, the former country manager at Kanbay, was hired in June to take the reigns at the national distributor, already completing the first stage of a reorganisation of the business that melded together its IT Wholesale (ITW) and Cassa business as well as the audio-visual and telecommunications accessories divisions.
In an increasingly tough IT distribution market, Davenport is charged with restructuring Cellnet in order to reduce operating expenses and position it as a strong player in the market against the likes of distribution behemoth Ingram Micro.
Recently, Davenport was forced to retrench 40 staff at the distributor following a lower-than-expected profit result for the 2004-05 fi nancial year. Despite a 30 percent increase in year-on-year revenue, Davenport said he "had to address profit issues".
On 9 September, Cellnet Group reported an after-tax profit of $6.1 million on revenues of $586 million for the financial year ending 30 June.
The company had previously forecast net profit after tax of between $7.3 million and $7.5 million.
After completing a law degree at Sydney University in the mid 1980s, Davenport started his legal career as corporate counsel Asia-Pacific with USlisted advertising agency Leo Burnett Advertising before he started to dabble in the legalities of intellectual property (IP) and information technology at Baker & McKenzie. "I was originally a lawyer and graduated as a lawyer. I worked in Baker & McKenzie in Sydney in the area of IP and IT back in the late 1980s," he says.
Not surprisingly, Davenport felt that law was a difficult profession and as a result, he was keen to get into business and management.
As a lawyer, he says, "you’re one step away from people making the decisions".
One of his largest customers while working in IT law was now-defunct Wang Computer. With a passion for IT and management he decided to join the company in the role of director of corporate services around the time Wang was in Chapter 11.
"I learnt a lot about the IT industry and change [management]," he says. He then joined the Australian subsidiary of NASDAQ-listed US office products company Blue Star at a time when this industry was consolidating in a very similar fashion to the consolidation that is currently occurring in the IT distribution market and industry as a whole, he says. Small office products buying groups were getting together to get the economies of scale they needed, he says.
"We saw the small resellers still managing to do well and make their way based on long-standing customer relationships," he says.
With IT industry experience under his belt, Davenport moved to Europe to undertake the role of regional vicepresident at 3.5 billion euro IT systems and services giant Getronics. "I was based in London and Paris and responsible for the Europe region," he says.
Davenport gained a great deal of experience when Getronics acquired Olivetti’s services business in 1999. "A lot of work had to be done to develop a strategy and execute that strategy."
"Getronics asked me to go to Shanghai and I eventually came back to Australia and got the country manager role at Kanbay in 2003," he says.
He worked at Kanbay for about 18 months before being approached by Cellnet for managing director. "It’s [Cellnet] been very profitable for a number of years and has had strong revenue growth but has reached a crossroads in its strategy."
Davenport believes the IT market is at an interesting time in its history.
"The China influence is going to affect everything that we do, which will impose different pressures on manufacturers. Price pressures and the development of Chinese brands is going to make it more difficult for them," he says.
These days, Davenport believes that manufacturers want simplicity and scale from a distribution partner. "They don’t want large numbers of relationships. There’s extra costs in all those roles — they [manufacturers] don’t want to have too many relationships. We [Cellnet] have started reducing the number of vendors that we represent," he says, while declining to name them. There are four vendors the distributor is no longer working with and Cellnet is now focusing on vendors that it can build strong relationships with, he says.
"We’ve applied a filter to all of our vendors and identifi ed which ones are poised for good growth and which ones [are not]. Some of them haven’t passed through that filter."
We think that some companies have got good growth prospects — some are struggling a little bit and we want to work with companies that are going somewhere," he says.
Vendors too are deciding what their long-term strategies are, which has prompted most of them to look carefully at which distributors are representing their products, Davenport says.
Cellnet deals with many retailers across the country and Davenport admits that retail conditions at the moment are quite difficult. "I think that’s across the board. As far as retailers are concerned, there’s a lot of changes going on down there."
The SMB and retail markets are merging and the retailers and resellers that are nimble and can take advantage of market dynamics are going to survive, he says. New retail buying groups are also emerging that are resulting in these groups taking advantage the benefits of pricing and support usually enjoyed by larger retailers.
Growth areas
The distributor is branching out into other areas — one being its new ‘Mercury’ division, which is offering ring tones and music downloads that Davenport says it a huge growth area.
"We’ve got a number of different activities here that allow us to maintain our margins — this is a year of transition."
Making that transition to higher profits has included collapsing six or seven Cellnet divisions that were overlapping and strengthening the distributor’s management team.
Davenport recently appointed Geoff Sondergeld to the new role of general manager, supply chain at the distributor. Sondergeld has experience in supply chain management at companies such as James Hardie and at Post Logistics, a division of Australia Post.
His focus is on taking costs out of the supply chain and working with partners to take costs out of the business, Davenport says.
Family time
Since taking the job in June, Davenport — who has two children, one who is completing the Higher School Certificate in Sydney — is commuting quite frequently between Sydney and Melbourne.
He will move to Queensland — where Cellnet has its headquarters — in January when his daughter finishes studying. "We’ll all start supporting the Reds [Queensland state rugby] and being Queenslanders."
Davenport enjoys golf, although he admits he has not had time to hit the course lately, and has been known to ski at NSW’s Perisher Blue ski fields.
However, "the scale is much bigger and the snow is more consistent in Europe", he quips.
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