What's Driving Avnet's Acquisition Strategy?

Is the line between enterprise distributors and their solution provider customers blurring?

Avnet Monday agreed to acquire Ascendant Technology, its second purchase of a VAR this year.

Arrow Electronics, meanwhile, launched the Arrow S3 networking unit after buying Shared Technologies in August 2010 and Cross Telecom in May 2011, both of which were top 10 U.S. Avaya partners.

In both cases, the distributors said the VARs' offerings would be integrated into their portfolios and made available for other VARs to offer to their end-user customers. Executives at both distributors said at the time of the acquisitions that they were looking to expand specific services offerings to VARs and that buying companies with existing capabilities would accelerate that strategy.

Arrow executives could not be reached for comment, but Jeff Bawol, president of Avnet Technology Solutions, Americas, said his company doesn't specifically look to buy solution providers but looks to purchase any company that can bring a service to other VARs.

"Ascendant in our mind is similar to Canvas [Systems, an asset disposal specialist acquired by Avnet last January]," Bawol said. "We did not view Ascendant as a VAR. The reselling of software that they do is in a very low single-digit percentage. We did not buy them for any part of their [IBM] Software business. We bought them for services."

Specifically, Ascendant's services revolve around its proprietary Insight Driven Engineering Approach (IDEA) Solutions Framework. It provides software engineering around relational consulting and training, automation, transformation and testing, and business process management and enterprise content management services, according to the company's Web site. In addition, Ascendant has expertise in several vertical markets including finance, health care and retail, Bawol said.

Ascendant has 500 employees and 300 are dedicated to services delivery and application design, Bawol said. Avnet is hoping to leverage the company's capabilities across its base of IBM VARs currently only selling hardware or software, he said.

"We now have a vertical focus for these services. We think we can accelerate the growth that partners have around these vertical practices. They can use Ascendant's services to help them get there," Bawol said.

The acquisition also complements IBM's "Blue on Blue" program of having VARs deliver more IBM products and services across the board, Bawol said. Now, solution providers can package Ascendant's IBM-related services in with their hardware and software sales, he said.

"It encourages the partners to sell more of the total IBM solution. It backs into what Ascendant has if they don't have the skills to deliver from a services perspective. They can take advantage of Blue on Blue," Bawol said.

More than a dozen IBM VARs already have informal partnerships with Ascendant. Avnet plans to formalize a program and bring the services to more customers more quickly, Bawol said. IBM has asked Avnet to play matchmaker between different types of partners and the Ascendant acquisition fits squarely into the distributor's plans to accommodate the vendor, Bawol said.

NEXT: Avnet Talked 'Conceptually' To IBM First

"We didn't do this in vacuum. We talked to IBM conceptually about this. We couldn't name Ascendant at the time, but they were very positive [about a services acquisition]," Bawol said. "The arrangement we have in combining legacy IBM people with a good service provider, it was a natural step for that to happen."

Chad LeMaire, owner of CMA Technology Solutions in Baton Rouge, La., is a longtime Avnet customer and has partnered with Ascendant for the past five years or so, leveraging Ascendant for Websphere development and some services around IBM Rational software and IBM Network File System, he said.

"We look at Ascendant like we look at Avnet: They provide us something we can provide to our customers," LeMaire said. "We have no fear of any competition. We've had a great relationship with Ascendant and I don't see any change there."

CMA has partnered with several other solution providers in the past, LeMaire said. "We position ourselves as a consultant to customers. By being a consultant, we think we need to have a broader set of offerings than just the 60 people we have on staff can bring," he said.

Avnet is looking to further expand its services portfolio through other acquisitions, Bawol said. "We're not looking to buy more VARs but we are looking at other opportunities," he said.