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Synnex CEO Kevin Murai On Growth Markets, Windows 7 And Health Care

In a Q&A, Murai explains why managed services, retail and health care are strategic investments for the distributor.

Synnex's year-over-year losses in the third quarter

Synnex President and CEO Kevin Murai chalks those "wins" up to key strategic investments Synnex has made in the past year in areas such as managed services (its managed print services program, PrintSolv, has seen steady gains) and health care, where earlier this year it entered into a partnership with AllScripts.

The latter move is a significant step for Synnex VARs interested in health care. AllScripts, one of the country's foremost specialists in electronic medical records applications and services, also is a vendor trying to build out its own channel base thanks to the federal stimulus and the emergence of EMR opportunities everywhere from physician practices to large hospital enterprises.

It's those investments and a focus on streamlining operations that have allowed Synnex to emerge from the recession intact, Murai said, and move past both the economic downturn and other setbacks such as being deactivated by IBM. Assistant Managing Editor Chad Berndtson caught up with Murai at Synnex's 2009 National Conference in Greenville, S.C., late last week to discuss how strategic investments in health care and managed services -- plus the coming of Windows 7 and the changing role of distribution -- are helping Synnex continue to make gains.

Synnex gained market share following its third quarter results, and while I know you're hesitant to give specific examples of how you run your operations, it'd be helpful to know what's been keeping Synnex consistent in that regard while a number of others, especially your competitors, have seen substantial decline.

It's a combination of different things, starting with a great level of energy. Culture is probably the biggest thing we have, and there's a group of people here who are only used to winning -- it doesn't matter, we'll figure out a way to get to the finish line. We've also made a number of bets that paid off, such as in consumer electronics retail, from when we acquired New Age Electronics. There are interesting product lines in consumer-based notebook and printer categories, and we also picked up a great management team, so that's been one big bet.

From a managed services standpoint, PrintSolv is a growth category -- we have a lot of customers who are interested in it, and in managed services, partnering with a winner is one of the critical success factors to your own success. We've done a lot of work to see who's out there and partner with them.

Synnex's partnership with AllScripts is a significant move that says a lot about how Synnex views health care as a major opportunity for channel. Why AllScripts in particular?

We've been really focusing on health care for a long time, even prior to the $19 to $20 billion the government has been putting up for physicians on electronic health records. Our M.O. is to go narrow and deep. When we look at the health care industry, it's not just the hardware component -- that's not all that difficult -- but as we get more into specific solutions in verticals like health care, it's the software component that holds everything together. We looked around and AllScripts came out as a clear best-of-breed product, which is what led us there.

Another thing we've been hearing a lot about during the conference is, of course, the arrival of Windows 7 and how it will bolster PC sales. What's your take?

From our perspective, PC sales have been a stable part of our business. Go back a couple of quarters -- it's actually been one of the stronger categories we've had, with notebooks and netbooks. That being said, I do think many are going to take advantage of the refresh cycle. You have so many businesses still on XP that the refresh cycle on Windows 7 is going to be a little shorter.

Do you see netbooks continuing to gain traction through the channel at present pace?

Sales through the traditional channel are going to continue to be a strong wave, but we're already seeing other areas in which netbooks are being sold or given away as part of subscriptions to wireless networks as well. The channel does have a role there. I think from a technology standpoint, the lines will continue to blur between what a netbook is and what a notebook is. What we call a netbook today might not be the same in a year. They're ready to get full business adoption, and what we really need is to commit to make that step level change. I think that will happen in a short period.

We've seen plenty of change lately related to consolidation, with Dell's buying of Perot and Xerox's acquisition of ACS being the most notable recent examples. How do you see these moves reshaping the channel?

I think you can put our history into a similar category; we've made moves in areas like software that are important components to what we need. What you'll find with Xerox and HP and Dell and others is that those [the acquisitions] are a critical piece that they need to effectively service the market. We've done the same thing, and we now have a large services component that's not just in BPO services. I think that's going to continue.

How will Synnex need to change, if at all, in 2010 to best service your customers?

We've got to be proud of where we've come from, but we're also a culture that's never satisfied. We'll be continuing on the same path, and looking to get more share of wallet with our existing customers. We'd like to address more customers than we address today, and a lot of the growth initiatives are toward making multibillion-dollar businesses out of vertical markets and the solutions we're focused on. That's going to help us redefine who we are and be more important to strategic partners.

Is it fair to say, then, that you're looking more to expand your business with existing reseller partners than recruit new ones?

We're really doing both. Customer intimacy is one of our prime areas of focus, and we don't want to come to the point where we can't be equally focused on new customers.

How does the role of the distributor have to change going forward? We seem to be entering one of those periods again where changes in the IT channel -- services and cloud being so popular now, for example -- raise talk that the distribution model is on the way out.

The core value-add in what a distributor does well -- that is, highly efficient supply chain management -- that will never go away, and we'll never forget how to do that as best we can. But we will focus on strategic areas in which we make an investment, and be not just a point of supply, but a strategic go-to-market partner for our customers.

Do you have any lingering thoughts on the ending of Synnex's relationship with IBM [which deactivated Synnex for X series servers in January and said it would do the same in July for IBM software]?

With IBM, what they said was that they were looking for a partner that had a global reach. Look, it's not our priority to have a global footprint. As we focus on the markets we know geographically, we find growth in different ways. The priority for a global footprint has a lot of cost and complexity. And we've taken advantage of the opportunity to strengthen our relationship with others that compete against IBM. We've been doing quite well. Despite the loss of IBM, we've more than held our end.

We've talked a lot during the conference about particular technologies that are strong growth areas, and others that are in their infancy. Digital signage, for example, was just coming into its own a few years ago and now it's one of the hottest channel plays out there. What else do you put in that category, and what do you see emerging over the next few years?

Digital signage is at the tip of the iceberg. Take a look at some specific vertical applications for digital signage, in retail, for example, when you start introducing technologies like RFID. When you integrate that, you change the entire shopping experience.

I think there's a world of opportunity going forward using integrated technologies instead of technologies that are new. You've got significant broadband already, for example, and most people have a network already, but they haven't yet integrated fully in areas such as surveillance. The opportunities as we go forward will see a lot of products come out that aren't based on any big technological breakthrough but be a better integration of existing technologies.

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