Tough PC market, but outlook optimistic at Dicker Data

CRN Australia recently spoke to Vladimir Mitnovetski, the chief operating officer of the country’s largest distributor.

The interview followed Dicker Data’s announcement in May that it had ended its first quarter of 2023 with revenue and profit increases compared to the same period of time in 2022, despite supply chain and interest rate headwinds.

We wanted to know what’s happening in the world of Dicker Data and what’s driving its growth.

Not only that, but as anyone can tell, the technology market that was staggeringly buoyant just a couple of years ago has taken a hit.

Higher interest rates have led to inventory costs going up for distributors, and inflation puts pressure on every part of the technology industry which has seen redundancies for the first time in many years.

So we also wanted to ask Vlad for his view of the IT market. We start below with his comments about growth drivers. The questions and answers have been edited for length.

CRN Australia: What’s doing well and where, Vlad?

Vlad Mitnovetski, Dicker Data: My cybersecurity business is double digit growing month-in month-out.

Anything as a service is doing really well. This is the future of how people consume technology. 

Everything software defined is doing really, really well. 

All my enterprise networking vendors are doing exceptionally well, because all these mid to large sized projects are coming back. 

All of them were on hold during COVID. So now we're all of a sudden so busy doing a lot of deployment, we're doing a lot of quoting and booking and big enterprise networking projects.

We’re looking at Dell’s APEX model, we're looking at HPE Greenlake, Lenovo TruScale. Those are big opportunities. These are triple digit growth opportunities.

Data centre infrastructure is doing really well. People are trying to find an optimised way to shift their workloads. 

On-prem becomes incredibly interesting. People are counting costs. Before COVID it was “let's just all go to the public cloud.” It's been a good move. It's been simple, easy.

But ultimately what customers want is not the public cloud. What they want is the cloud experience. 

You can achieve the cloud experience by actually navigating through multiple different clouds and optimising your workloads and finding the best cost benefit ways of operating. 

And so we're seeing a lot of that happening right now. 

We’re looking at Dell’s APEX model, we're looking at HPE Greenlake, Lenovo TruScale. Those are big opportunities. These are triple digit growth opportunities.

CRN Australia: You mentioned COVID. What does the hybrid work opportunity look like to you now?

Vlad Mitnovetski, Dicker Data: If I look at our smart rooms, smart offices category, it's grown 100 per cent year on year. Huge, absolutely huge. Anything to do with Teams room environments. 

Now everybody is changing their office spaces from cubicles…because you can do that at home. You don’t need to come to the office just to sit for nine hours in your cubicle and just keep typing emails. 

So people are actually not calling them offices anymore. They’re calling them collaboration spaces. 

They’re saying, “if you need to stay at home and do your work then do that, and come once or twice a week and all day you collaborate, create, innovate, come up with ideas, talk to different people, different sides of the organisation, meet with your management and so forth.” 

So all that is changing as well. And it's great because a hybrid worker, again, is a gift to the technical industry, because we need to connect him, we need to secure him everywhere he goes and works, so it becomes a lot more complex. 

... when the economy is a bit tough, people are happy to sweat their assets a little bit longer. They are not jumping into actually refreshing it so quickly. So that's the part that is in decline. That's the part that is very soft.

But luckily for Dicker Data it's only not even 30 per cent of our revenue. 

And while complexity is not a good thing overall, it's actually not a bad thing for a distributor like us. 

Because our job is to remove complexity, make it nice and simple, digestible, and really offer all our customers a straightforward, simple solution that will achieve their customers' outcome.

Every conversation is outcome based, it's no longer about the product itself, it's no longer about features or solutions. It's all about what they are trying to achieve. 

So all of a sudden the skill set of an engineer, technologist, solution architect, that skill set becomes invaluable. 

That's why it's so hard to find these people. I do believe we're incredibly fortunate, because we have a very, very good talent pool within the company.

CRN Australia: Services seem to be doing well, but not the hardware market. What’s your take on that?

Vlad Mitnovetski, Dicker Data: When you say hardware, personal computing has been in decline. And there is a good explanation for it. 

Of course, we've had two years of COVID, where a lot of organisations just really doubled and tripled up on it, because overnight, everybody had to go home and start working. 

So we need to double the amount of monitors and double the amount of computers, and we need to connect it all and secure it at all. And we need to get easy access no matter where you are. 

... if you are diversified enough and you establish multiple diversified practices under one roof, this always will be an opportunity.

So all that work has been done. So that's why we've seen a huge growth in this sector in the last couple of years. So now it's coming down a bit. 

But also, I think when the economy is a bit tough, people are happy to sweat their assets a little bit longer. They are not jumping into actually refreshing it so quickly. So that's the part that is in decline. That's the part that is very soft.

But luckily for Dicker Data it's only not even 30 per cent of our revenue. 

CRN Australia: Is the labour market tight for Dicker Data too?

Vlad Mitnovetski, Dicker Data: We've been living through a very, very, very difficult employment market in the last couple of years. It's still very difficult. 

Every time good talent becomes available, everybody just jumps on it.

The problem is that we're moving quite fast, the market changes quite fast. 

So we need more AI specialists, we need more complex cybersecurity specialists. 

There’s just not enough talent. That's why, if someone becomes available, everybody just jumps on them and are happy to pay a ridiculous amount of money, because it's not an option anymore. 

For example, at Dicker Data, I need to watch my cost carefully. But it's not an option, I need to have those skills, because I have thousands of partners who have no opportunity or no chance to have those skill sets within their organisation, they rely on us.

Their growth, their survival, relies on our expertise. So that's why it's not easy. Absolutely, it's tough.

CRN Australia: We have to talk AI; what will it bring for Dicker Data?

Vlad Mitnovetski, Dicker Data: On a very simplified level, we're already using AI. Some of my marketing guys, like Ben [Johnson, Dicker Data general manager of marketing and strategy], he's already utilising that. 

Some of my product managers are already using it. It's all about optimisation of your time. 

Microsoft obviously launched the Copilot AI based platform. So we’re learning a lot and we will be training and enabling all our partners on that as well. That's a really cool feature. 

Look, ultimately, you can like it or not – it's happening. 

Yes, you need to be very careful with AI. I do agree with that. 

And I think it will be regulated more and more, and yet it's going to become a part of our everyday life very, very soon.

It's very hard for me to answer the question in terms of how do I see it directly impacting us or our customers, but we cannot ignore it. There’s no question. So that's why we are learning, we are very interested. 

All our vendors, all our tier one, are heavily involved in it: NVIDIA, Microsoft with ChatGPT, Dell Tech and others. 

So everything is moving in that direction. So we are definitely skilling up and making sure that we will understand it better and take it to our customers.

CRN Australia: Can you give us an update on the warehouse expansion at Dicker Data’s Kurnell headquarters in Sydney?

Vlad Mitnovetski, Dicker Data: It's full steam ahead. I think we should be good by end of July. So, super excited. We actually have some containers sitting outside of the main warehouse.

CRN Australia: What about Dicker Data’s New Zealand business?

Vlad Mitnovetski, Dicker Data: Last year was very challenging. I think we’ve just sort of overloaded ourselves a little bit. 

But all the acquisitions we've done were very strategic and very important. 

Last year, we acquired Hills distribution here in Australia. We needed to turn it around, make it work, invest a lot in it, refurbish a lot of stores. 

At the same time, we acquired Exceed in New Zealand, which, again, a lot of work needed to be done to really integrate the company and we needed to find a new office, a new warehouse, bring the cultures together. 

At the same time we lived through 11 interest rate rises, inflation, something that we didn't budget and we didn't forecast. 

It was a very stressful and difficult year last year. But we've left everything in that year, we're coming into this year with a lot of optimism. 

So we thought, okay, it's going to be a tough year for us, we just need to put our head down and really deal with it. 

And I think we've done sensationally.

Now we're getting out of that year, DAS [Dicker Data Access and Surveillance] is going to have a fantastic quarter. 

New Zealand, Q1, if you look at the results that we've posted, had a record Q1 if we compare it to the Q1 previous year, we're turning that around as well.

...software, recurring revenue, subscription base, you know, as a service, all growing really, really well. 

I think that's why my optimism and my passion is coming through a lot. 

It was a very stressful and difficult year last year. But we've left everything in that year, we're coming into this year with a lot of optimism. 

The second half of last year, that's where we started to see a little bit of softness. I'm hoping that the second half of this year is going to be the reverse. I'm hoping that, again, I'm by nature an optimist, so I'm taking that optimistic point of view, but I do hope that in Australia and New Zealand at least, we'll have a little bit more stability in the market.

One thing definitely will happen is that budgets and targets are going to be more aligned with reality. 

At the moment, our vendors are normally a quarter behind. They don't accept the reality. And I'm predominantly talking about the PC vendors, of course. All the other segments of the market are actually doing alright. 

But the PCs are tough. It is declining, there's no question there. 

But it takes about a quarter for vendors to realise that and to readjust the targets and that essentially will help us as well, so we don't have to carry as much inventory. All about operational excellency, right? So, we are striving for that as well.

So I think the second half is going to be a really good half.

The key takeaway, in the most declining markets, in the most tough conditions, there's always an opportunity, always. 

And if you are very specialised around a particular tech, it's a little bit more difficult to find those opportunities. 

But if you are diversified enough and you establish multiple diversified practices under one roof, this always will be an opportunity.

And it’s the ability to understand them, identify them, quickly move and pivot investments and drive that growth, that's what probably differentiates us from some of the other competitors.