What Can We Expect From CompuCom After Sale Of Software Business?

As the dust settles from the sale of CompuCom's software business to SoftwareONE, the question becomes: What will the solution provider look like going forward?

On Friday, SoftwareONE, a $3.3 billion solution provider in Milwaukee, announced to its employees that it had acquired CompuCom's software business for an undisclosed amount. The deal includes CompuCom's Microsoft licensing business, which is one of only around 15 Microsoft Licensing Solution Provider (LSP) programs for enterprise volume licensing agreements in the country.

A CompuCom spokesperson told CRN that the sale of its software business would allow the company to further focus on its "core offerings," which it defined as end-user services, services management and cloud technology services. Since selling its software management capabilities to SoftwareONE, CompuCom said its clients will get access to better capabilities in that area with optimized technical setup, sourcing, compliance, governance and more through the acquiring solution provider.

[Related: Sign Of The Times: SoftwareONE Acquires CompuCom's Software Licensing Business]

The trend fits in with a company shift that CompuCom has been navigating from a traditional reseller company that was "going down," to a solution provider focused more on services and recurring revenue, Jim Dixon, chairman and former CEO, said in a keynote presentation at the Best Of Breed Conference in Orlando, Fla., last fall. That shift, from around 30 percent of recurring revenue to a goal of 70 percent, took the company from $1.4 billion in revenue in 2004 to $2.3 billion in 2012, $1.1 billion of which was services, Dixon said.

In today's market, that move could make a lot of sense, said Allan Krans, cloud practice manager at Hampton, N.H.-based Technology Business Research. As the market shifts toward cloud computing, Krans said he sees many solution providers are finding it tough to make money and grow as a software reseller, especially as many of those relationships are starting to be handled directly with the vendor.

"It's not a market that's going away, but it is a market where it is more challenging to grow," Krans said. "What this acquisition speaks to is that it's a consolidation for two players in the market because the market itself is not growing at a rate to sustain growth for all the players that are in it."

In particular, TBR's Krans said the move for CompuCom to focus on cloud technology services is a "logical progression" for the company.

"I think that's the logical extension for these software management players to deliver value. They aren't going to be cloud providers themselves, but they can help aggregate that and manage that for customers," Krans said.

One executive from a research firm, who did not wish to be named, said the acquisition signals a shift form the company away from licensing, particularly its Microsoft licensing, toward services and solutions. "I would focus on services more than everything else. It's more of a focus on solutions," the executive said.

Vince DeLuca, CEO of Logicalis U.S., agreed, saying he expects CompuCom will develop its strong end-user services business, particularly in the area of mobility. "Perhaps they're looking at that as future investment and where they want to continue to infuse investment in the company," DeLuca said.

One thing everyone agreed on is that the CompuCom acquisition is just one of many to come around software licensing.

"Those businesses will continue to change shape dramatically, and software and services combined in a different light where most companies will want to consume technology that way," Krans said.

PUBLISHED MARCH 19, 2015