As the ink dries on the blockbuster acquisition of Innovix, Tech Data’s ambitions for future growth across Southeast Asia and the wider region are starting to take shape, underpinned by an enhanced technology portfolio.
Weeks after taking control of the previously Hong Kong-based distributor - which formed part of Fortune Global 500-listed Jardine Matheson Group - go-to-market strategies are now being created from a structural and integration perspective, with people and product line-ups taking centre stage.
According to Jaideep Malhotra - president of Asia Pacific at Tech Data - the acquisition will allow the distribution giant to become a “clear leader” in cloud and cyber security solutions across the region.
“Bringing Innovix together with Tech Data will expand our portfolio, our end-to-end solution capabilities and our footprint,” he outlined. “Everything gelled together. Innovix’s expertise is well-known in the endpoint solutions business which Tech Data did not have in this market. This expertise combined with our advanced solutions portfolio represents a very good fit for our strategy in the region.”
Such focus comes amid a “resilient year" for cloud services in Southeast Asia, providing “robust growth” opportunities for partners in the months ahead.
According to IDC, infrastructure-as-a-service (IaaS) investment is expected to increase by 26 per cent during the second half of 2020, triggered by increased demand for business continuity and collaboration technologies. During the same period in ASEAN, platform-as-a-service (PaaS) deployments are expected to increase by 38.5 per cent, alongside projected growth of 22.8 per cent within the software-as-a-service (SaaS) space.
Meanwhile, managed services is expected to account for the “largest and fastest growing” segment of the security market during the coming months, triggered by heightened customer demand for protection amid a sustained shift in remote working.
Billed as ‘single-tenant solutions operated by third-party providers and residing on customers' premises’, increased end-user appetite for managed security offerings delivered via the channel comes in response to the continuation of wide-scale lockdown measures which in turn have prompted a significant rise in cyber threats.
According to IDC, such demand is followed by integration services and consulting services, with the overall security services market accounting for approximately half of all security spending in the short-term.
“Innovix has a growth mindset but they are now joining a global company with $37 billion in revenue, which is totally focused on IT distribution and backed by Apollo Global Management,” added Malhotra, when speaking exclusively to Channel Asia.
Following the $5.4 billion acquisition of Tech Data by affiliates of the private equity firm in November 2019, the business has since unveiled plans to invest around $750 million in digital transformation initiatives during the next five years.
Specifically, the investment will underpin ambitions to accelerate innovation in a move designed to enhance experience and agility levels within the ecosystem. Such efforts are focused on delivering state-of-the-art automation, platforms and analytics, as revealed by Channel Asia earlier this year.
“We will complement this with the addition of Innovix to enable growth as we embark on this journey to create the distributor of the future,” Malhotra said.
Leveraging more than 60 years market experience, Innovix specialises in the delivery of cyber security, networking and digital infrastructure technologies, alongside hybrid IT, end-user computing and software solutions.
Key vendors across the region include Dell Technologies, Cisco, Hewlett Packard Enterprise (HPE), HP and Microsoft, as well as Lenovo, Sophos, Trend Micro, Veeam and Vertiv among others.
“Our vendor portfolio is more complementary and where we have overlap, we’re strengthening our partnerships and building scale,” Malhotra stated. “That doesn’t mean increasing the volume, rather that we’re in more markets.
“For example, we’re now back in Malaysia and Hong Kong with HPE. Dell EMC represents a similar story and we previously did not have HP at a regional level so clearly, there are multiple benefits here to not just expand into multiple geographies but take the Innovix portfolio to our channel partners.
“We’re not new to these relationships due to our global partnerships and in respect to our vendors, they are pleased with our strategic intent in Asia Pacific. More vendors want distributors capable of offering regional solutions.”
Specific to the ecosystem, Tech Data now also gains access to an Innovix supply chain housing more than 8000 channel partners.
“We have 12,000 resellers and Innovix has 8000 so combined, we’re serving 20,000 partners,” he explained. “The good news is that in Hong Kong and Malaysia especially, this all represents an addition to Tech Data. In Singapore, we are very focused on providing advanced solutions while Innovix is excellent in endpoint, cloud and security.”
Terms of the agreement will see more than 500 Innovix employees join Tech Data from offices in Singapore, Malaysia and Hong Kong, with structural and leadership plans set to take shape during the next 3-6 months.
“Innovix has great leadership and people so we want to ensure we take time to build out our integration plans and define our go-to-market strategy in a way that enhances our joint value proposition,” Malhotra explained. “We’re in the early stages and will start to lay out how we will bring together the best of the best to offer increased value to vendors and channel partners.”
When embarking on mergers and acquisition (M&A) activity, Malhotra said Tech Data is motivated by three core requirements; "culture fit, strategic fit and financial fit".
“Innovix ticked all three boxes,” he added. “Innovix’s core values are very similar to Tech Data, the differences come in the processes and the way you run the business, which is what integration is focused on.
“While we’ll have a structure in place within the next 3-6 months, integration actually represents a longer process. But there are immediate priorities which are more channel partner and vendor focused to ensure the process is as smooth and quick as possible. Other areas such as facilities and ERP systems for example, will take care of themselves.
“I feel very good about the culture mesh together. Under Jardine, Innovix was a very people focused business which is similar to Tech Data - people drive value and growth.”
The buyout comes more than nine months after India-based Inflow Technologies withdrew from closing its acquisition by Tech Data, breaking free from the agreement less than two months after striking a deal.
The acquisition - revealed by Channel Asia in December 2019 - was expected to close during the distributor’s first quarter of fiscal year 2021, subject to customary regulatory approvals. Following the withdrawal, Inflow paid a break fee to Tech Data, as outlined in the original acquisition agreement.
Going forward however, Malhotra remained open to further M&A within Asia Pacific, cited as a key strategic imperative for the distributor.
“Asia Pacific is a huge market and we’ll continue to invest,” he confirmed. “Innovix represents one of the first acquisitions under Apollo globally which is a great statement of intent and highlights the importance of Asia Pacific to Tech Data. Our growth ambitions span M&A, organic and investment strategies. We look at everything and consider all three possibilities.”
In referencing an “unprecedented year” due to Covid-19, Malhotra said that through M&A alone, the Tech Data business will grow 50 per cent next year in Asia Pacific, with organic growth strategies also on the agenda.
“We are looking to expand our business in Asia Pacific but more importantly, deliver high value as a distributor and continue to execute locally,” he added. “Our people define our local execution to ensure we’re absolutely in tune with the market needs in a particular country. Being global brings a lot of benefits but there’s a nice balance between what we provide without losing any focus on local execution.”