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Dave Stevinson, the Group CEO of specialist distribution firm QBS Technology Group, discusses the company’s passion for software and what he thinks the future of distribution will look like.
QBS started in May 2017, you now have revenues approaching £100m. Tell us about that journey.
QBS was conceived to scale quickly with seven acquisitions on top of a very fast organic growth cadence defined by a rigorous focus on delivering value for multiple application software publishers. We now offer a full service to our publishers having established entities in four discreet market sectors: Consumer Software, MSP/CSP, Value Add Distribution and Software Delivery. Today we have seven offices across Europe with four in the UK and employ almost 110 staff.
How did you expand internationally?
It takes time to do international well, one must understand the culture, logistics, business models and market nuances. We started by acquiring Siener Informatique in France to extend our platform into an adjacent geography. Many of our key partners, (solution partners, resellers, MSPs and RSIs) have pan European footprints – so by being closer to them, speaking their language and collaborating was a model that worked. So we decided to extend this into Russia through the acquisition of UAB Laknova. We believe by 2023 our export business will exceed our domestic business in value.
Why are you so focussed on software?
I truly believe in specialising and doing one product area very well. In the knowledge economy enterprise software offers a market of significant size and I believe we operate in a defined niche in that market and that provides QBS with the opportunity to obtain a relevant position alongside the broadliners of Tech Data, Ingram, Westcoast and Exertis in the UK. Naturally we have walked away from a decent, growing and profitable hardware business but our vision is clear and we see ourselves as a pure software company, thus we made a conscious decision to exit. This was necessary so we could put our capital to use in order to have a full service and complete coverage for several key software publishers.
Your model differs from traditional distribution – what is a software delivery platform?
We deliver our entire product range electronically and in many cases with STP (Straight Through Processing). We have almost 10,000 ‘publishers on platform’ and transact with just over 4100 partners. We offer a renewals management service, software asset management, dynamic quotations, billing, provisioning, SaaS and perpetual licensing through a single pane of glass.
Coupled with experts in telemarketing, pre-sales, post sales and positioning on hand for when partners need a hand with a relevant opportunity. Essentially we are very different from traditional distribution and for some clients that works particularly well and we tend to grow our mutual business together very quickly.
What is the obsession with MRR and ARR?
The beauty is that our solution partners enjoy consistent and predictable revenues and margins. Our platform can manage the entire process for the reseller including quotation, billing and provisioning allowing them free to wrap professional services around creating a solution for their client all through our platform. Our focus is then helping foster adoption and expansion of the technology by the user through personalised marketing, success sharing, pre-sales and post technical support.
You recently acquired a £10 million VAD. Can you explain the rationale for this?
Many of our System Integrators and Solution Partners have the capability to deliver professional services (consultancy, solution development, training, sizing and chargeable support) themselves, others need to lean on us to do the heavy lifting here on their paper. We are hyper careful not to cannibalise our true VARs by replicating or replacing their capabilities and simply moving the profit layer away – so the acquisition of the VAD was to provide an extra 30 technical staff with capabilities to deliver projects for our RSIs around specific publishers.
What’s next for QBS?
We will continue developing our platform and commit a significant proportion of our profits to extend and augment the features and services. This is designed to increase efficiencies through process automation for both our publishers and clients. We will extend our business model into further geographies primarily through acquisition. We expect to see treble digit growth in our security, automation, DevOps and data analytics SBUs. We are primarily driven by listening intently to our customers and publishers in order to make it easier to buy and sell more software.
What is your view on the future of distribution?
I still see distribution consolidating further with the big getting bigger and the small either specialising or getting squeezed out completely. The appetite for acquisitions will show no sign of abating but these will be predominantly there to fill gaps in the offering or as P/E arbitrage transactions or both. There will be steady disintermediation which will grow faster than the growth of the market, yet the market served by distribution will still show modest growth in the next five years and internationalisation will still be important post Brexit and COVID-19.
Why should readers of PCR do business with QBS?
We believe we operate in an attractive market with high barriers to entry and sustainable recurring revenues for resellers who can maintain a strong customer relationship. The market we operate in is incredibly fast growing and although many of our publishers are not household names, we have witnessed their growth over the last few years driven by customer demand. For those customers who want to fully access the platform there is a small piece of work round data integration required.
Are there any more acquisitions planned?
The short answer is “Yes”. We have put a lot of effort into building and maintaining a watchlist of targets. We are carefully targeting acquisitions which deliver to us more than just profits. We have a clear strategy of where we intend to operate and how we intend to succeed. We know exactly what we are missing and will build up those competences by organic growth or through selective acquisitions. Saying that, we are not afraid to walk away from the transaction at any stage if the deal is not right for both parties.
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