Services Now The Main Focus For Avnet TS Growth

Global IT solutions distributor Avnet Technology Solutions is shifting its focus from hardware to services and solutions, and it is ramping up to take advantage of a couple of recent acquisitions to bulk up the fastest-growing parts of its business.

Phil Gallagher, president of Avnet Technology Solutions Global, said his company's services business is growing despite relative silence from the company in terms of marketing that business.

"We have a business we don't really market to the community, and that is services," Gallagher told CRN after the company on Thursday reported its third fiscal quarter financials. "We have a $1.5 billion business."

[Related: Avnet Launches Program To Augment Partners' Services Capabilities ]

Avnet Technology Solutions on Thursday reported third fiscal quarter 2012 revenue of $2.5 billion, down 8 percent compared to third quarter 2012 revenue of $2.7 billion. However, earnings for the quarter rose over 18 percent compared to last year to reach $67.9 million.

On the product side, Avnet Technology Solutions said its industry-standard servers and professional services saw double-digit year-over-year revenue growth which was partially offset by a decline in microprocessors and other computing components.

The services business is still a relatively small part of Avnet TS's overall business. The $1.5 billion Gallagher mentioned was the total services revenue for fiscal year 2011 out of the company's total revenue of $11.5 billion. However, Avnet said, the third quarter 2012 services revenue grew 17 percent compared to its third quarter 2011 services revenue.

The bulk of Avnet TS's services business stems from reselling services stock-keeping units (SKUs) from its supplier partners, Gallagher said. "It's a great business," he said. "But we also have managed services, and the cloud."

Avnet TS in February introduced a new program under which it seeks to augment the services capabilities of its solution provider partners as a way to help them move into the professional services business without large, upfront capital investments.

The company in March also acquired Ascendant Technology, a fast-growing IBM solution provider with a large financial, healthcare, and retail vertical market services business.

Since the acquisition, Avnet TS has started offering services including a healthcare provider portal, middleware infrastructure automation, and social business in the cloud primarily targeting IBM solution providers.

"We want to enable Ascendant to scale and let its services go to our VAR community," Gallagher said. "We've already had many VARs call us looking to leverage our Ascendant services."

Next: Asset Disposal Services, Or "Tomb To Womb"

Avnet TS in January also acquired Canvas Systems, an IT hardware and services distributor specializing in the environmentally-friendly and compliant remarketing, refurbishing, and disposal of IT hardware.

Canvas, with its asset disposal and reclamation service, gives Avnet the ability to work with solution providers across the entire IT lifecycle, Gallagher said.

"Today we provide 'womb to tomb' services, from pre-sales to sales to integration to data center services," he said. "The big question is what to do with the old stuff. Canvas resold used data center equipment."

Avnet TS is in the process of integrating its Canvas acquisition, but is already taking its services to its solution providers, Gallagher said. "Is it fully integrated into Avnet? Not yet," he said. "Are we selling the services? Yes."