'We've ridden the wave' - Logicalis UK boss on plan to turn the business around

Alex Louth says Logicalis now has a firm vision in place having rushed previous attempts to reinvent itself

Logicalis is well positioned for recovery after restructuring the business and turning its attention away from reselling, managing director Alex Louth has told CRN.

Louth (pictured) joined Logicalis in June, having previously been the boss at Oracle partner Red Stack Tech, which was acquired in 2016.

The MD said he has spent his first six months in charge reorganising the business behind the scenes, reducing the number of core vendors it works with from around 14, and building practices around core vendors including Cisco and IBM.

Logicalis' UK business has struggled over recent years, seeing its revenue tumble from over £200m in 2014 to under £100m in its last full financial year.

The loss of a huge public sector contract contributed to the decline, but Louth said that the global Cisco partner has suffered as a result of multiple changes in direction.

"Logicalis has pivoted more times than you can pivot," he said. "You have to have a strong vision, not just a strong go-to-market, and you have to actually drive that change. It was something that we didn't do.

"I'm not saying that my predecessors didn't do what they were supposed to do, but it was very ‘we want to go in this direction and we have to do it as quickly as humanly possible'.

"Sometimes you hit a wall quite quickly. We went down a managed service line incredibly aggressively, not realising that our competition from different places in the world can offer, not as good a service, but most definitely cheaper. We enjoyed some very fruitful years of being in that marketplace, but then that market moved and we didn't.

"We lost revenue because the competition has changed and that isn't our world. The easy decision would be to buy a place in India, cut our margins and cut our service levels, but I'm really glad we didn't do that."

Logicalis announced a restructuring at the start of this year, revealing that UK jobs could be lost. Louth said that headcount currently stands at around 200.

The firm's last two UK accounts show staff numbers at an average of 387 for the year ending February 2018, and 307 for the year ending February 2019.

Louth said that the business is however in recruitment mode, as it looks to move its focus away from reselling and towards managed services.

He explained that the commission structure in the business will be turned upside down from the start of the next financial year to better reward salespeople adopting the new approach.

"We had a deal come through and the salesperson was doing a little dance, and I was thinking ‘you don't deserve to do that'," he said.

"It's a cracking bit of margin-rich procurement, don't get me wrong. it's great for today and tomorrow, but how is that going to help us in six months' time?

"Equally, we won another bit of business that was a tiny bit of managed services - it was about £300,000 over a three-year deal, and the guy wasn't dancing. I told him he should be. Our competitors didn't win it, didn't position it, didn't have the nine-month sales cycle… that is the difference.

"I cannot wait for 1 March. In our commission world, [the first] person isn't going to be dancing because it isn't going to make them a lot of money. I'm going to completely skew it, because that type of business is old world."

The managing director said he sees larger channel businesses occupying a void that has been created in the market between global systems integrators and smaller, niche boutique players.

He explained the move is partly being driven by demand from customers, who want to work with a partner long term, but added that Logicalis will not be abandoning its reseller roots.

"I don't want business like that," he said.

"Don't get me wrong, I'm not going to cut it off because I'm not certifiably crazy, but are we going out in the market and saying that we'll do cost-plus-one business for you? No way. In the past that was all the game.

"It's not a reset because Logicalis is a great brand, it's just a transformation of what customers want. We want to get into customers earlier, and get deeper into them.

"I asked some customers what they're looking for from us, and they said we need to stop selling stuff and going away.

"In my previous world, I probably wouldn't have chosen Logicalis as my supplier, because to be a partner you are not only answering today's question. Consumers have to have the confidence that [suppliers] can answer tomorrow's question."

When asked how he'll be measuring Logicalis' success over his tenure, Louth said that gross margin is a more important metric than revenue.

Gross profit was £16.9m in the most recently reported year, on revenue of £92.2m.

"We had to [change] because our numbers are awful, but that's a brilliant way of knowing that you need to change," he said.

"We've got to grow it, but what we don't want to do is chase it.

"The last thing in the world for Logicalis to do right now is chase gross margin, because we have pivoted.

"We have a plan, but no good plan in this industry is 12 months long. We need to continue our hard work to be a better company and if we just chase the dream of more revenue, we'll be doing everything that has been done in the past and we'll probably end up in the same situation that we're in now.

"We have a fantastic gross margin base - in this year we're already seeing change. Will I get excited if we hit £100m again? Not really. Will I get excited if we double gross margin? Yes."