In episode 11 of The Download, Ronnie Altit, Insentra’s CEO is joined by Scott Frew; entrepreneur, fantastic individual, a mentor and longtime business partner with Nick Verykios, who you could hear at episode 4. Ronnie and Scott will be covering all sorts of very interesting topics around some of Scott’s history and what’s made him successful, what it takes to build and sell multiple distributors, what’s the channel look like n the future. There’s an enormous amount of value to be heard from this podcast. Enjoy the listen.
TIMELINE / KEY POINTS:
0.49 – Listen to Scott Frew share a bit about his background and how he got into the industry.
6.04 – Make yourself redundant not because we’re going to make you redundant, but because it allows you to think, “I want to do something else.
6.11 – The reason I’ve been successful is I employ people that are smarter than me.
18.51 – Find out what Scott does with his success and how he enjoys the spoils of his success.
24.48 – Scott Frew recommends a book for someone looking to be an entrepreneur
READ THE TRANSCRIPT
Ronnie Altit: Welcome to this week’s ‘On the Couch’. Today, I’ve got Scott Frew, a long-term friend of mine, a mentor of mine. In industry, they call us veterans when we get to this age. An industry veteran, an ARN hall of famer, an enormously uber successful entrepreneur who’s built and sold multiple businesses, been doing it since the age of twenty something, if I remembered correctly. Scott, mate, thank you very much for joining us today.Scott Frew: No problems, Ronnie.
Ronnie: Fresh in from Spain.
Scott: Yes. [laughs]
Ronnie: Excellent. Scott, mate, tell us a little bit– There’s a bunch of people who’ll be watching this that don’t know much about Scott Frew, even though you are the international man of mystery. Tell us a little bit about you.
Scott: [laughs] That was my first LinkedIn profile. Born in the country just outside of Dubbo, moved to the city when I was about six. Parents eventually start an ad agency. They climbed up the ladder, sold his own business. Sorry, I didn’t tell you, he closed it down because he was the main copywriter for the business, which is why I always build my businesses not to rely on me being in it. Went to public school in Tamara, nothing exciting.
Realized very quickly, just like I did at school, that I had a problem with authority. I couldn’t work with anyone or for anyone else. I started programming at a young age, probably, fifteen-ish, and then went up, became a Cobol programmer for a couple of years. Cobol’s a really old language. And then decided that there was no one that really knew anything about how to run networks. Networks in those days were TV coax, cable go in between, or XTs, or even early than that.
I joined with two other guys that have come over from New Zealand to start a competitor in the distribution space against the Novel distributor. It was a very simple business plan. The current distributor then would sell direct as well as to resellers. I went, “What if we don’t sell direct?” Of course, the business fluttered over to us. We’re only twenty one and twenty two of age. Sold that ultimately to NetComm, the modem manufacturer, because they wanted to get in on it.
Realized I couldn’t work for anyone else, went outside at LAN Systems. I took LAN from zero to just over 200 million, mostly with Cisco and SMC. Sold that to Westcon, so some energy have got the Westcon building there. That’s the old company. Retired for a few years, sat on some boards, and then I came back and started distribution central which was everything but Cisco distributor. That’s right next door to Westcon. That entire front complex is my old companies.
Now, I ‘d joined again. Nick came in late in LAN Systems, but I joined back with Nick as we are yin and yang. Took the business from nothing to just over half a billion dollars when we sold it. I think Nick’s taken it up to another 700 plus. I try to build fast growing businesses that change– and I hate to use the word disrupt because everyone uses disrupt. I walk into a business that has existing multibillion dollar global players and grew very, very quickly.
The reason is because nothing had changed. I was away for five years, I came back and, literally, the same stuff was going on. If you look at the large scale distributors, it’s all about price. There’s no value to it. If you want support, you’ve got to ring the manufacturer, if you’re lucky. What I did, actually, when I started, I bought a little company called Firewall Systems. It was a security-focused distributor, we watched guard and a couple of other rats and mice.
What I realized immediately, after me getting on the phone because I’m doing the sales to start with, that 60% of the firewalls were being bought without maintenance. This is really where the story starts to get interesting. I teamed up with another buddy of mine that I’ve been with since we were five. He’s an awesome programmer, whereas I was okay. I said, “I want you to build me a configurator-like Apple or Dell, whatever, when you configure a PC up. I want you to build a configurator that forces maintenance.”
If you buy firewall without maintenance or any security product without maintenance, it’s not a security product because you’re not getting the updates. We did that, and I caused all sorts of grief. I had resellers ringing, yelling, and I said, “Here’s the name of my competitors if you want to buy firewalls without maintenance,” because it’s irresponsible. There you go. There’s their phone number, here’s the contact, off you go.
Of course, eventually, they fell over because I had the engineers to support them whereas the other guys don’t. Now, I have a business that’s transacting 100% of the products with maintenance. That’s at least a third jump in revenue. Of course, two months in the track, who’s chasing their renewals? That’s where the counter business came. It was building an engine to put our arms around the entire product life cycle. That’s what really took DC through.
The last year before we sold out, we walked into the year 43%-ish of our revenue, already booked for renewals, so I need to chase half the business. That’s made a big difference to our manufacturers and the resellers that we were transacting with. And then I spun the software up seven years, eight years ago. Now, we’re running the largest global organizations in distribution. In VendorLine we’ve just signed three large global resellers.
Scott: That’s the short version.
Ronnie: It took you all of about forty seconds before you gave the first critical piece of valuable information to the people who are watching this, which is, “I build businesses where I’m not the guy who’s core to the business.” That was one of the first things that you said as you started talking. That’s why I love having you as one of my mentors because it’s just those little pieces of information that you let go, that if you pick them up, you can do a lot with.
That’s something that I say in our business a lot, “Make yourself redundant to everybody who comes into the business.” Make yourself redundant not because we’re going to make you redundant, but because it allows you to think, “I want to do something else.”
Scott: That actually scares people.
Ronnie: It does.
Scott: The reason I’ve been successful is I employ people that are smarter than me but I take the risk, because they’re not prepared to take the risk. There’s this massive pull of really awesome, intelligent people that could blow me away, but they won’t take risk. When you say, “Make yourself redundant,” which I’ve used that pitch before, they’re like, “That’s a bit scary, I want to be valuable.” No, you want to move upstream.
Ronnie: For some people, they don’t have to move upstream. If they want to stay there and they want to do what they’re doing, that’s great. Just let us know, and make sure that works for you.
Scott: That’s an interesting point. We were in Great Places to Work as well for five or six years, my best was fourteen, so well done on that one. Large organization, I went and spent a good part of a year just focused on reading books about motivation and what drives people, and all that sort of stuff. What I was actually chasing was operations and accounts people because I can drive marketeers, I can drive sales people, anyone that’s in that space, but these guys come in every day and process the same order over and over, and over again.
Ronnie: They have different personality, right?
Scott: They are completely different. I was trying to work out a way to lift them outside of just doing this carrot and sticks stuff. I read Daniel Pink’s Drive book, very interesting book about motivation and pay, and all sorts of stuff. Then in the end it says, “But if it’s operations, it’s carrot and stick,” that’s it.
Ronnie: That’s the really interesting thing there. When you look at what you’ve done building businesses, you’ve spent a lot of time thinking about the front end and what goes on in that. But part of what’s making you successful as well is you’re not just concerned about the front end, you’re not just concerned about the problem that you’re solving for the market but you’re also concerned about each and every individual back in your organization.
Scott: Well, there’s two points to that. It is absolutely– a distribution is about staff. The people at work for me are the differentiator between me and anyone else because we don’t own anything. I figured in the IP that we built, that we’ve pushed out into iasset. We don’t own anything so we’ve got to be more professional, smarter, faster, better. By the way, we’re not going to sell on price, we’re going to be more expensive. If they don’t see the value, we’re not having the right conversation with them.
Scott: I do focus heavily on the backend because distribution, you can’t drive prices up out of the market because you are not the vendor, you do not control that. But you can increase productivity or save money for all the people that are underneath you to servicing. Operations and accounts are critical people because you don’t want them spending a minute clicking a mouse button if you can get a robot or whatever to do it. They’re just doing the more creative stuff within their realm.
Ronnie: Not the accountants, we don’t want them being creative.
Scott: No, not in that way. I do spend an awful lot of money with orders to make sure they’re not.
Ronnie: Absolutely. You’ve changed now, you’re out of distribution for maybe the next five years. If you’re not going to go back to distribution, and you look at what’s happening now in the future state of the market, and there’s been a lot of discussion around what does a distributor in the future look like. With the Cloud, for example, and the total different way people are buying and consuming, et cetera. What do you think the distributor of the future’s going to look like?
Scott: This is old argument that distribution’s dead about every ten years or so. There’s no point having distributor, a vendor can go direct. There is still leveraging and relationships that exist inside that channel, so forgetting the product delivery what it is. A distribution central and the other distributors around the world have a relationship with a set of resellers. You are trying to take cost out of their business and service them so that they can then engage with their customers better.
That never goes away. It doesn’t matter whether it’s a coffee cup, or a TV, or a router, it doesn’t matter. You still, as a reseller, you can’t deploy as many resources as you’d like to deploy to service a customer’s business. You need to rely on supply chain if it’s physical, or at least help in the backend for harboring Cloud configuration. Let me give you the right example. There is a reseller that we just signed on now. We haven’t released it yet, it’s a Cloud module.
They’d ingest a price list from one of the vendors, I’m trying not to mention names. Ingest a price list which is released every month. The price change every month on the Cloud thing, and then they ingest the file that use all of the consumption that has been done for everyone of their customers. They currently have six people managing this process. To me, that’s just like I can do that in seconds.
If I was a distribution central now, and I was still building the software inside DC, that’s what I’d be doing. I’d be going to the resource and saying, “Here’s some software that will process this so you can move that six people into forward sales or engineering work, or whatever.” There’s still that symbiotic– you talk about partnerships. When the channel comes together properly, it seams.
My job today out of distribution is to make sure all of the partners are seeing and make sure all the data is flying up and downhill without anyone touching it, because then I can deploy people into more interesting, exciting growth opportunities.
Ronnie: A lot about efficiency then?
Ronnie: Realistically, it’s all about–
Scott: Especially Cloud, right? If you’re selling a twenty dollar– I’ve used the process for fifteen seconds, how do you get an accountant to type an invoice for that?
Ronnie: Absolutely. It’s got to be automated and see how I’ll do. In terms of that, that’s the future of the distributor. A lot of things now as well about the future of the channel and how the channels work. There’s a lot of partner to partner going on, which is a conversation that, obviously, at Insentra, we love the conversation partner to partner being partner obsessed. [00:11:47] What’s your view on the future of the channel and that whole reseller network, and what that’s going to look like now?
Scott: My view is, I’ve watched partner to partner for thirty years. Mania has been generating a lot of those partner to partner main user program that DC/Aaron and I run to take the heads of the top resellers away and isolate them. Basically, we have the time. We drink plenty of beer and fall over, and lots of stuffed box in the business context that has built relationships from guys that are strong in storage, to guys that are strong in networking, to guys that are strong in security. That has been going on.
It’s accelerating, I think, at a rage because, again, if the distributors aren’t providing their security service, then the partner has to go out somewhere else because they’re not security guys, they’re storage guys, or they’re migration, or Outlook guys, whatever it is. I don’t think that’s ever changed. I think one of the points before I came here was what prevents that happening.
In Australia, I think, what prevents it happening is trust. Provided you can maintain your circle of trust, then that’s something we have spent– I, personally, have spent a lot of time on it, Nick’s the same, which is we never go over reseller. This is rules based which we never do. If you do that, in thirty years, people will trust you. But when you get new guys, especially when the IT market started, it was cowboy city. There’s still a few in there with cowboy city. No one trusted anyone.
Provided you can build that trusted ecosystem around you and other partners, then you’re fine. As soon as someone breaks the trust cycle, it all falls apart.
Ronnie: Absolutely. This is a thing that I’ve had for seven years now that we’ve been running with Insentra. I didn’t have that foresight seven years ago, I just assume people would trust me. You’re right, they didn’t. It took a long time to build that trust. It takes just one tiny thing that would kill that trust. Even to this day, I look back and go, “I probably should have called ourselves a distributor of services,” because I think people have the mindset that you’re a distributor, you don’t go direct. More often that not, right?
Ronnie: Whereas with our business because we didn’t call ourselves a distributor, it’s like, “When are you going to start going direct, Ronnie?” Because so many businesses have also done that. They’ve started as purely channel, and they get a taste for going direct. [crosstalk] In a way they go, “Just let that one start up.” That whole partner to partner and trust, and I think trust is a big problem in our industry.
Ronnie: I don’t know if you heard me say recently that I will write a book one day. I probably need to be out of the industry before I write it, and it’s going to be called ‘Taking the IT out of Bullshit’. There’s enough in here that’s bullshit.
Scott: Well, I think I’ve got the same problems. When I walked out of distribution, I had smashed the distributor market, built the sixth largest distributor in the region, and then I walked out and said, “Right, I’m a distributor. I want you to use my software.” They’re like, “Hang on.”
Ronnie: That’s right, how do we get the fox in the hen house, right?
Scott: That’s right.
Ronnie: iAsset, iAsset’s really going well for you. It’s another fantastic Scott vision. iAsset is a platform that you’ve built that allows people to do what?
Scott: The objective of iAsset is to run channels and product life cycles. It’s very simple. Anyone can run it, vendor, distributor or reseller, and control their own base of product. There’s three types of product. There’s Cloud, so consumption contract’s coming out. There’s hardware and maintenance, and then there’s large scale software contracts like Microsoft and lots of stuff.
The engine puts its arms around all the data flowing for all of those three types of products. If you’re a vendor, like we have VMWare and all those other guys, it manages the global channel for them so they know which aggregate or distributor sold the product, which reseller or service providers put into the customer. And then make sure that all the billing’s working through all of those flows.
Now, the secret behind the source is not actually, “That’s a great thing.” If you look at one of our customers, ninety-five minutes was their ROI because they’re losing two million a month just on Cloud contracts. Every other one of our customers,at reseller all the way up, is within six months, usually three, but some are a bit slower to move. The ROIs incredible because they’ve never tried to put their arms around life cycle.
The sales guy, the VP of sales whoever it is, is always focused on net new because that’s what they get judged on. Actually, do you know twenty-two times the initial sale is usually what you can drag behind in renewals, and upgrades, and all the rest of it. When people move and get the mindshift– and it’s getting easy because Cloud is exactly that, but just put over the other products’ hits, it starts to change. It changes dramatically.
If you get a vendor, and a distributor, and a reseller that are all running the instance, they will start talking together, and you remove the loads of people out of that, up to twenty-two phone calls or renewal. If you’re doing a Sophos or a WatchGuard, one of the small file renewals, and it’s 200 bucks. As soon as anyone touches that, fine. At any of the levels, you’ve lost money. And they’re calling each other same, is that right, et cetera.
The engine is a platform that eliminates all of that manual process for the large scale number of transactions that are going on in that channel. Give you some examples of where ecosystems exist, and this is an ecosystem product not just an app. When I’m in DC, if they touch anything under, say $5000, I was absolutely losing money because if you’re a six-point margin for distributor. I just built a team in Manila that sat on top of the DC engine, and they just e-mail chaste. Obviously, it’s an arbitrarous thing.
That’s now gone up to ten. Some of the guys in the US went out talking a hundred. It’s all shifting but they’ve got their own data, and they’ve never ever had this data before. I think the biggest problem in the channel is people are using systems that aren’t designed to do what they should be doing. My biggest competitor at iAsset.com is Excel. There are still some very large organizations trying around an install-based on Excel.
Another organization, I’m not mentioning names, deploy their large scale ERP systems, just recently, globally. I mean, we were in for the life cycle thing. CIA says, “No, we’ll build that in our ERP system.” Of course, they’ve been bought because it all fell apart. There’s lots going on with iAsset ecosystem point of view. It does make all of those partners more efficient, and it does it very, very quickly.
Ronnie: That’s where your passion sits at the moment, but again, you’re doing it in a way where you’re not the linchpin in the business, where it’s not entirely dependent on you.
Scott: I’m not a developer. I’m a relationship guy, I’m the funder. [laughs]
Ronnie: You’ve been very successful, there is no doubt. There’s no point hiding that in any way, shape or form. [00:18:51] What do you do with your success? How do you actually enjoy the spoils of your success?
Scott: That’s a good question. Now the boys are at the end of their schooling, I’ve got twenty-one and one just going through HSC at the moment. A lot of the focus is on them as they’re growing up. I’ll give you a story to put it in context. I tell a lot of guys that I mentor, or when I’ve done speeches for some of the magazines, everyone forgets the end game. What actually happens is, I grew up in a small town, built my life through it.
When I sold my first business for big bucks, I spent a year wandering around going, “What do I do now?” Because if your fundamental drive is to be independent, and you get, it’s like the donkey getting the carrot. Donkey eats the carrot and goes, “What’s next?” You go through this whole psycological shift, I guess. When I came back and started DC, it was more about I could see opportunity that was just begging to be solved.
I see it every day from coffee shops to restaurants, or whatever. You walk in there, and I just see the opportunities. That’s what drives me. I think I can change something for the betterment of the people that are involved in that process. That’s what drives me. How do I enjoy success? Well, I’m a boating guy, which everyone knows. When BIW asked me one year, they said, “Why are you doing it again?” I said, “It’s all about the next boat.”
Ronnie: A bigger boat.
Scott: Actually, I went downsize this time.
Ronnie: You got smaller, didn’t you?
Scott: Yes, absolutely.
Ronnie: I always say you just need a mate who’s got a boat, so I’m really glad to be mates with you. You keep that boat off the coast of Europe, right?
Ronnie: It’s been two months since–
Scott: Majorca, yes.
Ronnie: Two months off the coast, working off your boat. I think that’s everybody’s ideal dream. I think there’s a lot of people who would love to be doing that.
Scott: Well, I grew up with the dream that everyone was sitting on the beach on their laptops. For me, it’s on a boat.
Ronnie: Which is wonderful. When you’re doing that and you’re sitting on the boat, and you’re thinking about what’s next, you’ve got other interests as well. You’ve different boards, you invested in little organizations, et cetera. [00:20:52] What do you look for in an organization that would make you go, “You know what, that’s something that I want to put some time, effort and money behind.”
Scott: I’m looking for those disruptors. If it’s the same old thing just in different color, that doesn’t excite me. I’m looking for people who are actually changing things. I’m going to invest in a company in the UK that stabilizes viruses, so it stabilizes vaccines. If you want to meet these products around Africa, you can’t refrigerate them. They’ve stabilized a ball of vaccines and all these sort of stuff so that they can get to it. That interests me because it actually has a benefit to a greater part of the population, but it’s technology still.
It’s still a disruption piece. I mean, a Vietnamese in our collection been selling enough. Again, that’s about conserving all of these art that’s coming out of Vietnam, and almost protecting it from all of the art bills and all of the rest of it because built as a collection rather than selling artwork to our things. They do conservation in England, all that sort of stuff. I’m looking for something that’s a little different, something that I had added value to with my history and background.
Ronnie: Which is wonderful. We were having a chat a little while ago. I was talking about my trip and how I had some time to go through Monaco. You told me something interesting about the prince of Monaco. Share that with our audience.
Scott: [laughs] It was just introduce someone to his wife but it wasn’t the prince.
Ronnie: It wasn’t the prince?
Scott: No, it was his nephew.
Ronnie: Okay, and that started that whole process?
Ronnie: You had an influence there.
Scott: I just happened to be on the boat one day.
Ronnie: As you do in Monaco, so have a breather. You mentioned that it’s been a year reading all sorts of books of motivation, et
cetera. What are you reading now?
Scott: Right now I’m reading a book called Homo Deus, which is man god in Latin. Which is a futuristic book about where we’re headed and what’s going to happen to mankind. Interesting things like a B-C now kills more people than war, famine, disease, everything, just that one piece. Everyone’s chasing nirvana, which is living forever, and what impact does that have. Is living forever you’ve downloaded your brain to a computer or you’re augmented in some ways.
I’m always trying to look forward to the next ten years, or whatever. If you take from the Japanese, they think two hundred years ahead. If you do that, then you can work your way back. A lot of the challenges I have with American corporations is they only look the next quarter. You cannot build strategic businesses if it’s just every quarter rather than where are we actually going.
Ronnie: There’s another little tidbit there for people who are entrepreneurs. Think about what you’re doing strategically, don’t think just about the next–
Scott: The easiest way to explain it is, I spend all of my time outside the business. If you’re outside the business looking in, the business, for me, is the product. It doesn’t matter what the business is actually doing underneath. Here’s the product, what does that look like when you hand it off to someone else?
I might actually float iAsset because it’s an IP company rather than a sales organization. If you go to Arrow, I would hope, and Westcon, if you went to them and say, “How’s your experience,” of the product they bought. I would hope because they both grew significantly, that they’d be happy with everything that they were sold. That’s what I’m doing. I’m building the product. The people inside are actually doing whatever it needs to be done inside the product.
If you’re an entrepreneur, what does it look like at the point you step out? It doesn’t mean you have to sell it, but you might step away and let someone else run it, or whatever the case may be.
Ronnie: Okay, so that’s what you’re reading now. [00:24:38] What’s a book you’d recommend to people to read?
Scott: The number one book I recommend anyone that’s looking to become an entrepreneur or start their own business is The E-Myth.
Ronnie: The E-Myth. The E-Myth we visited it is now, isn’t it?
Scott: Absolutely. It’s a little bit American and a bit fluffy, but the core parts of it are things like not doing it but getting outside and looking at it. When you’re starting out, obviously, you don’t have time. You need to be doing things, you can do it for half an hour a day, and then next year it might be an hour a day. Eventually, when it’s big enough, you’re always out. Consistency, you’ve customer service. If I gave you a computer that ran like a dog, and then the next day ran really fast, then ran like a dog, you’d pull your hair out. This is terrible.
If I get a computer that is running slow all the time, literally all the time, you’d be fine
Ronnie: Expectations are managed.
Scott: I think my favorite one is service recovery. Every business I’ve had, and this will always happen in perpetuity, something will go wrong. Someone will screw up in the organization, someone you’re relying on, files, whatever it is, customers don’t remember the failure, they remember what you did to fix it.
Scott: Over time, if you go five years down the track, you won’t remember that I fixed it, which will have a positive imprint in your brain. You’re not sure why because you have forgotten the detail of the box blew up, that will stay with you forever. Service recovery’s always been a huge thing for me. I’ve always let myself be accessed by every customer I’ve ever dealt with. E-mail, websites, whatever, it’ll come to me because I want to know.
I want to go and find out why we’re failing in a particular way and fix it. Not only for them, but fix it so it doesn’t happen again.
Ronnie: Right, so was that a book called Service Recovery?
Scott: No, that was in E-Myth.
Ronnie: That was one of the first books I read. I must say one of the most prolific impacts was definitely from that book. It’s a great recommendation. If you’re a young person now, you’ve just come into this industry or you’ve been in this industry for four or five years. You spend time, you look at people like yourself who’ve been successful, who was prolific in the market, et cetera, and you’re thinking about, “Where am I going to take my career, what am I going to do?” What are some of the tips you’d give in our industry as it exists today about what they should be considering and thinking of?
Scott: Very simple. If they’re not doing AI or robotics in some form, doesn’t have to be physical robotics but in that market, they’re going to very, very quickly be driven out. I’m a little bit with Elon Musk in the singularity concern, which is if AI accelerates, because governments never move faster than IT. I would be in the AI space or data analytics trying to provide– and this is what we’ve been doing, we’ve been accumulating masses of data.
We’ve now got a new guy onboard who’s there to interpret the information, and then build the intelligence back to the customer base across the channel. I’ve been in AI, robotics. I’d absolutely been in security. I mean, security’s never going to go away. They’re the three key areas of the top of my head.
Ronnie: AI, robotics, security?
Ronnie: Excellent. In your time, you’ve been exposed to a whole stack of different people. Tell me about an amazing dinner that you’ve had with an amazing person.
Scott: Probably, it wasn’t dinner, but immediately jumps to mind is Dan Warmenhoven, he was the CEO of NetApp. You think of the scale of his organization, which is billions of dollars. I was just curious to hear because I’ve only ran hundreds of millions of dollars of business. Up until, let’s say, half a billion now, I’m good, I’m comfortable. Then when I go over that, I’m now in my comfort zone, but he’s running multibillion dollar businesses with so many people. It’s like, “How do you deal with that?”
I know the management structures and all that sort of stuff, but conceptually, you can’t touch every customer, you don’t know every employee in the organization, you’re across the globe. It’s a different dynamic.
Ronnie: That’s the question that I’ve actually asked. What are the top three things that you’ve picked up out of that?
Scott: Never building business that’s that big.
Ronnie: That’s that big.
Scott: I joke about that, but I actually like talking to customers. I get frustrated if I get completely removed. Obviously, at DC, I couldn’t talk to every reseller. There are individuals that I’ve dealt with in my companies that I’ve never met before, but I still like to talk to people. The mania driver was the whole– I spent a week just listening to customers. This is a critical thing because a lot of people forget about that. They build things that they think the customer wants. Not everyone is Steve Jobs. You need to go and engage that into customer, and find out what they actually want with you delivering the right service and those sort of things. I never work at that scale.
An iAsset point of view, when I did learn out of those large scale organizations is that their ability to innovate– Let me come back a step. If you’re NetApp, you build this awesome box. The job is to go and sell the box. The entire organization’s energy is at selling the box. I’ll throw in Oracle or SAP, or whatever, in the back. I’ll put some bean cans and some operations delivery guys in warehouse, and the rest of it. But we’re just going to sell the box and we’re going to tell the market how many we sold each quarter.
The problem is they’re never actually think internally about efficiency of delivery to the market. It’s frustrating because when I go in there and say– not necessarily with NetApp. I go in there and say, let’s say your renewal rights. Usually, the hardware renewal rights are about 50-60%. What if we drove that to 90? That’s what we were running at DC. That’s an enormous amount of free money. What I call free money sitting on a table. It’s just the customer hasn’t been told about the reseller because the distributor doesn’t know that NetApp doesn’t know the chain.
My frustration comes, particularly in the US, is their employment is different to us, in that they are at-will employees. You see the movies where they get fired and they pack the box, and out they go. We can’t do that here or in Europe. You have to go through a process. I think there’s a general risk averse attitude in the employees because if they do take the risk and it falls over, they’re at the door.
Of course, our IT industry’s getting older. I was having some fun with Andrew Thomas the other day. As they get older, risk adversity increases because they’re getting towards the end of their employment.
Scott: Yes, employability, so they are even more scared to make decisions as the gray hair increases. This is the big challenge for us, is to try and get these lives go to organizations to actually innovate internally, even though they might be fantastic innovators in the market that they’re servicing.
Ronnie: Which is really interesting as well, and you talk about this. You look at what separates a lot of people from others, and it is that ability to take risk, it’s ability to back yourself, and to actually just go out there and throw caution into the wind. But when you’ve got all these extraneous factors around you, there’s so many people I talked to going, “Oh my god, I’d love to set up my own business, but I’ve got to pay for the school bills, and I’ve got to do this, and I’ve got to do that.” It’s like, “Well, where’s your risk?”
Scott: Trust me, even my hairdresser in UK, when I sit down, because she knows I’m going to refer it. I really like to scale my business. I said, “Well, professional service as a business is a challenge. You need to lead trailing revenue so that you make money while you’re sleeping.” “Okay.” “What are you going to do about it?” “I’ll think about– I’d really love to.”
Ronnie: That’s right.
Scott: There’s goners and doers, right? Now, the thing about risk is you have to put everything on the line, everything. You have to be comfortable doing that. Sometimes it’s scary. All of my companies have faced periods of adversity without fail. Just make major companies that happen every year. The first year of DC, at that stage, never built a company that I’d lost money in any year. DC was like just, just– We climbed though at the end but I’m pulling my hair out because I never wanted to go backwards in an organization. You see this everywhere.
The thing about risk and then adversity is you got to have persistence. This is what a lot of guys that want to go at and do their own thing don’t have persistence.
Scott: Tenacity, there’s the brick wall. You got to keep hammering the brick wall until you go through. To give you a great example, iAsset’s been eight years now. Arguably, the first four or five was a science experiment was running DC, but now I’m fully doing it. I’ve been hitting this wall. It’s only now that chips are starting to form off the side. These large scale integrators, for instance, we’d never sign the large scale integrator. We’d done lots of small guys that are running it, but we’d never got one.
If we get this one– well, actually, I’m going to get three. They all deal with one particular vendor and one distributor, and the engine start talking together. I can prove the point that network effect works in a channel context with this data, but that’s taken eight years.
Ronnie: That’s about normal though, isn’t it? For a lot of businesses, there’s multiple break points or model points. I prefer that you get past year one, get past year three, get past year five. I’d typically say after your seven, once you’re into years eight, nine and ten, if your business is there and it’s been sustainable till then, and can still be sustainable, so long as you’re not just resting on your laurels, that’s when things usually start to explode and the business goes to the next level. Is that what your experience is showing too?
Scott: Basically, but just like I tell everyone, you got to keep learning. I am learning to build a software business. I’ve never built a software business. I know business, but in distribution- I know once, I get a lot of these- you buy something, you sell something, you take the margin, you reinvest, and you buy another one or two. You keep going from there, it’s instant fix. For someone who’s, I reckon, I’ve got a bit of ADHD in me, that’s great because I’m fast moving. Let’s go.
Software is let’s pour a bucket of money into this thing and hope at some point it comes out the other side. Of course, you see American companies. A lot of them don’t come out the other side in R&D, or they fall over. We have spent all of those years with me throwing money in, praying to the Gods. We came out into profit two years ago and went profit like, “No, we got to go faster,” so I’m pouring more money in.
Ronnie: You pour it back in. I think there’s another big message. You show me little messages that you’re sending that are so powerful for our audience, have tenacity, keep going, don’t stop, put your balls on the line. Get right out there, don’t expect that you’re going to be successful. Just because you’re successful, don’t rape your business.
Ronnie: Stick it back in and row the business.
Scott: You know me, Nick and I never rape the business. We put ourselves a reasonable at-market salary, and everything else was reinvested.
Ronnie: That’s why you’ve grown and been successful-
Scott: Yes, that’s right.
Ronnie: -multiple times.
Scott: The key tip for anyone who’s starting as an entrepreneur and they’re facing the adversity thing, Winston Churchill, my favorite quote, “When you’re going through hell, keep going.” You can’t just stop in the middle of it.
Ronnie: Fantastic. One last question for you. We spoke about who you may have had a conversation with, et cetera, but dead or alive, who would you want to have–
Scott: It’d absolutely be Winston Churchill. If you ever read his biography which is a massive mountain of book, thank God for Kindle. He has touched so many parts of history from the war when he got captured to Shackleton’s ill-fated Antarctica trip, obviously, World War II is the obvious one, to inventing tanks. He was the driver behind all of these bits.
There’s not anywhere in history you got Winston hasn’t gone to touch. He did this whilst being an artist and doing all these other things that were completely unrelated. The man was a machine if you read through all these and the impact he’s had. That would be my first prize. My second prize would be Nick. When Nick and I sit down, we always have an argument, we come out better.
Ronnie: That’s fantastic. For those of you who wonder who Nick is, Nick Verykios, Scott’s long-term friend and business partner. There is a podcast and a video interview with Nick, have a watch of that. Scott mentioned the yin and the yang. You’ll see the two guys on the couch. Watch that one after this one, you’ll see the yin and the yang. Scottie, mate, thank you so much for taking the time out. You are in Oz for just a couple of weeks. Loved having on the couch, having a chat.
Everybody who’s watching this would also be getting enormous value. Have a look at those little tidbits, listen to those subtleties with Scott because it’s those subtleties that will have the biggest impact on what you do as you move forward in your careers. Scottie, mate, great to have you here.
Scott: Thanks, Ronnie. Cheers.
ABOUT SCOTT FREW
Scott has over 30 years in the IT industry, and is a pioneer in IT channels. He was a co-founder of Micro Networks Australia Pty Ltd which was successfully sold to NetComm Australia in 1990.
He then founded LAN Systems Pty Ltd which rapidly grew to become the largest network distributor in the region. It was recognised as one of the top 10 fastest growing companies in Australia over 5 consecutive years, culminating as the second fastest in 2000. LAN Systems Pty Ltd was acquired at its peak of 72 staff and $200M in revenues to Datatec Ltd.
Scott then moved to Europe, establishing MarketEntry, a business consulting company that helped small technology companies reach and manage their growth potential, one of which was sold in a successful MBO. He then sold MarketEntry SPRL in Belgium to return to Australia.
On his return in 2004, he acquired a small distributor rebranded it to Distribution Central Pty Limited and grew it from 5 staff with $1.7M turnover to the 6th largest distributor by revenue in the region with over 160 staff and revenues exceeding $400M. Distribution Central Pty Ltd was acquired in March 2016 by Arrow ECS, a division of Arrow Electronics.
In 2008 he incorporated iasset.com, now recognised as the world leader in Installed Base Lifecycle Management for IT vendors, distributors and resellers. iasset.com is a global organisation and now drives the revenues of the most successful IT companies.
Specialties: Services based distribution and channel management, channels creation and enablement, installed base management, cloud consumption billing especially through channels, tracking certifications of channel resources and channel compliance management.