Early last year, Gerry Tucker met Sepp Stepanian. Tucker had spent 20 years running operations for vendors such as BroadVision, Rockwell Automation and Proofpoint in APAC and Europe. Stepanian had 25 years' experience owning and running managed services and integration businesses.
The two were introduced by a mutual acquaintance. Both were interested in starting a distribution business, and thus VADIS Systems was born.
Launched in November 2009, VADIS Systems is a Sydney-based distributor that prides itself on adding value to all members of the channel cycle, including vendors, resellers and end-users.
VADIS is primarily focused on three sectors: cloud services and virtualisation; networking; and security. While the company is far from the first or only networking and security distributor in Australia, VADIS expects to carve out a new niche in the market by combining the technologies with cloud computing.
"We perceived a gap in the marketplace and reached the conclusion that the combination
of our backgrounds would help us fill that gap," says Tucker, who is the company's sales and marketing director.
"Our timing seemed to work very well," he tells CRN. "Q2 to Q3 2009 was when there was growing confidence in the Australian market. Most people are reasonably confident that 2010 will be positive as well, and a lot of organisations are reassessing how they do business."
VADIS targets small to medium businesses (SMBs), which by definition comprise less than 1000 employees. SMBs represent more than 80 percent of businesses in Australia and nearly half the country's economic output, according to the Australian Bureau of Statistics.
According to Tucker, cloud services particularly appeal to SMBs as they allow businesses to keep up with the technology demands of their customers and larger counterparts without the large acquisition and maintenance costs of running their own systems.
"There is a growing awareness among SMBs that they need the same type of capabilities as enterprises, but at a different price point," Tucker says. "SMBs are looking at the cloud as a technology that could help them fill that gap."
VADIS currently works with nine vendors from around the world, for whom it sees "significant growth potential" in the Australian market. Among its security-focused vendor partners are Singaporean email authentication solutions provider BoxSentry; US-based antivirus software provider eScan; and Russian network security vendor Kaspersky Lab.
It is also partnered with Astaro and PineApp, which both specialise in appliances that secure network and email systems. Tucker cites Astaro's cornerstone product, the Astaro Security Gateway, as one of VADIS's more popular offerings.
For its networking offerings, VADIS works with hardware vendor Allied Telesis. It is also partnered with agile network solutions provider Quipa and remote access solutions provider SlickAccess.
UK-based ThinkGrid comprises a bulk of VADIS's cloud business. ThinkGrid is a channel-only vendor that offers a range of white-labelled services including virtual desktop, VoIP, storage and hosted services via six data centres in Britain, US and Australia.
The cloud gathers
Since Amazon popularised utility computing by launching its Simple Storage Service and Elastic Compute Cloud in 2006, the industry has been rife with new and more varied cloud computing offerings.
The technology has gained traction especially during the past couple of years, as service providers built trust and end-users were made aware of the scalability, flexibility and relatively low costs associated with computing in the cloud.
At the Gartner Symposium/ITxpo in October 2009, cloud computing was identified as one of the top ten technologies and trends that will be strategic for organisations in 2010.
The buzz around cloud computing has sparked competition among vendors and service providers.
But Tucker notes not all cloud vendors are suited to a distribution model, and not all service providers have "true" cloud offerings.
"We are seeing a number of organisations who were previously in the MSP [Managed Service Provider] space essentially repackage their MSP offerings," he says, "but they will not be able to provide the same services at the price point of true cloud offerings."
MSPs provide outsourced services such as networking, antivirus and email security, and software as a service. As with cloud service providers, MSPs typically assume all responsibility for purchasing and maintaining relevant software and hardware. End-users are billed on a per-use or subscription basis.
What differentiates managed services from cloud services is the underlying infrastructure that defines cloud computing. Whereas managed services may be hosted locally or accessed via a closed network, cloud services typically are delivered over the internet and tend to adhere to open standards.
Meanwhile, in comparison to other major cloud services providers such as Citrix and Amazon, Tucker says, "ThinkGrid is a much more complete offering. ThinkGrid works on a business level, rather than a SOHO [small office/home office] level, and its backend processes are very strong, developed, and mature."
It's not just end users who are adapting to the cloud. For distributors, the shift away from physical products to more complex network services may be challenging.
"Cloud [services are] really taking off and that changes how distribution takes place," says Tucker, noting that traditional inventory requirements are fast becoming a thing of the past.
Vendors, Tucker says, are looking for partners who are able to add value through business acumen and additional services like credit capabilities, rather than simply providing the means by which to distribute a product.
VADIS calls itself a "full-service" distributor, referring to its commitment to add value to all aspects of the pre- and post- sales cycle.
The name VADIS is an abbreviation of the term "value-added distributor".
"We see the life cycle of vendor, distributor, reseller and end-user not as hierarchical but as a matrix," Tucker tells CRN.
Credit where it's due
Describing VADIS as an extension of the vendor's sales force, Tucker says the distributor works on
end-user lead generation to proactively grow business opportunities for resellers.
It also offers flexible financing terms that could assist end-users in coping with the "changing economic dynamics of the marketplace", Tucker says. He expects the terms to appeal particularly to SMBs that favour a service-centric, OpEx (Operating Expenditure) model of ICT purchasing.
Credit may be an issue for SMBs, especially in the wake of the global financial crisis. Many vendors and resellers are unable or unwilling to take on the additional risk of providing credit facilities to end-users.
"Some resellers have the ability to do that [provide credit facilities] themselves, but a vast majority of them don't," Tucker says.
"Our flexible financing terms help bridge that gap."
VADIS offers "multiple forms of credit" to end-users, with more options available to those who purchase larger technology bundles.
The distributor itself is part of a group of companies being financed by an anonymous, privately owned organisation. Tucker tells CRN the owner, whom he refused to name, has investments across a range of industries and saw an opportunity in distribution.
VADIS currently employs six staff members in its Chatswood, Sydney office. Tucker says the company will be making changes to its staff soon but declines to disclose specifics.
While VADIS does provide service to end-users when required, all sales go through the company's reseller partners. "We are a pure distribution business; we do not have a reseller arm," Tucker says.
The growth plan
Resellers are expected to select from three levels within the VADIS service model. "Fully certified" partners provide the top level of service; "white-label service" partners provide a basic level of service, while VADIS is wholly responsible for providing service for products sold by "on-sell service" partners.
A reseller's service partner level determines margin of revenue earned on services provided on VADIS's offerings. By choosing their own service level, resellers are able to flexibly balance their investment in service infrastructure and headcount with the aim of lifting service revenue.
Tucker was unable to disclose details of VADIS's reseller base but says the number of reseller partners had grown by several hundred percent from launch to January 2010.
Resellers tend to fit into VADIS's three key technology sectors, with most spanning two areas and focused on selling to SMBs in Queensland, NSW, Victoria and the ACT.
"We're on a very aggressive expansion path," Tucker says, adding that the company is planning to expand to South Australia soon.
Networking is key to growing VADIS's reseller base, along with building trust and relationships in the channel. "In the Australian market, the channel is a lot more demanding of both the vendor and distributor, compared to other parts of APAC," Tucker observes.
Meanwhile, VADIS grows its vendor portfolio through extensive legwork. It expects to take on two to three more vendors within the next nine months and aims to limit its portfolio to 12 vendors in total, in the short term.
"It's hard work," Tucker tells CRN. "Initially, for our first vendors, we went hunting for those. But now we're finding vendors are coming to us and we're being very selective about taking them on."
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