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Posted Date: 12/10/2013

VAR Spotlight: Denali Advanced Integration

By Lisa Terry
Climbing mountains means taking risks: choosing the right route, selecting a qualified team and equipment and getting the timing right. Yet when you overcome setbacks, make it to the next base camp and finally reach the summit, you’re treated to a rarified experience that very few have attained.

It’s a lot like growing a wildly successful IT solution provider business.

Which is why it’s so appropriate that Majdi “Mike” Daher and his brothers Mohamad (Alex) and Mitchell Daher named their company Denali Advanced Integration. Denali is the 20,000 plus-foot Alaskan mountain better known as Mount McKinley. (Which would officially be called by its original name if not for some stubborn members of the Ohio congressional delegation. But that’s another story.)
The series of privately held companies that the three brothers formed under the umbrella of 3MD since immigrating to the U.S. from Lebanon in the ‘80s reads like a history of IT: First came a white box builder and components distribution business in 1992. Then as the Internet began impacting margins in the mid-‘90s, they began a buying spree, snatching up 17 companies focused on professional services based on desktop deployments by 2003. Next came the startup of a data center business in 2004. And then, in 2007, the company took on mobility.

Denali Advanced Integration is one of several companies owned by the three brothers, who grew up poor, came to the U.S. and created an empire.
But the difference between Denali, based in Redmond, WA, and a lot of other systems integrators that endured similar swings in the market, is that it’s still in all those businesses while continuing to jump on emerging opportunities. Like climbers scaling one of the world’s highest peaks, they’ve managed to build on those early successes and create a $180 million (2012), multifaceted systems integration company that’s growing at an impressive 30 percent a year. Its ability to produce has earned Denali exclusive, insider status with many key vendor partners and high-and-rising rankings on many top VAR lists.

Ten Tips for Scaling Peaks—and Markets
Denali is successfully attaining world-class summits—the concept behind its tagline, “Above the Rest”—but it didn’t get there without taking risks and learning some lessons. These include:

1. Develop a well-tuned market sensor. Majdi Daher, who serves as CEO and is a 3MD board member with his brothers, has a keen eye for emerging market opportunities. Perhaps too keen: He recognized the need to shift from product- to services-based revenue back in the early 2000s, tried to build a service desk in 2003, and a cloud offering in 2006 and saw mobility as a budding mainstream IT opportunity six years ago. “That’s my curse. I’m always early,” he jokes. “But in all seriousness, we see it and we play toward it. Every time there is a disruption, we try to monetize on that, because in chaos there lies opportunity.”

“Denali, more than any other company I’m engaged with, looks around the corner to see where the market is moving, areas that represent tremendous customer need and opportunity to drive growth and profits,” says John Convery, former executive vice president of vendor relationships for Denali, and now president and CEO of John Convery Consulting.

But Denali is careful not to disrupt what’s making the company money based on a hunch. They treat each new business venture as an internal start-up, keeping them separate to protect the core—a more costly, but less risky, strategy that’s meant the initiatives that didn’t work out didn’t hurt them. Today that means resisting the hype around hot tech trends, such as cloud and managed services by not moving in too fast.

2. Build on your success. Many VARs shift their business models when revenue and opportunity slows, with some investing heavily to get to the next iteration. Not Denali. Even though they’re often early into emerging opportunities, they also stick with those they created, which often keep plugging along. While not every venture goes the distance, the company’s white box business still generates $30 million a year, for example, and Denali’s desktop unit is enjoying a growth rate well above 20 percent.

They also take lessons from one business to inform the others. For example, “Manufacturing teaches you very high discipline and how to manage a business through P&L and efficiency,” says Daher. “Our DNA is all about high efficiency. Do it because it gives you returns, don’t do it because it’s a hobby.” The company’s approach is dubbed SET, for survive, evolve and transform.
In 2006, Daher recruited Chris Gerhardt as president of Denali, to transform the company from a classic VAR into a full-services IT firm. Over the next six years, Gerhardt led the expansion to enable Denali to cover nearly any device in technology from engineering through support. By the time that was all on solid ground, of course, the industry was changing again.

“The entire industry is being transformed by technology as a service and consumptive economic models, where customers are increasingly demanding integrated technology as a service,” such as cloud or mobility services, says Gerhardt. So, he is now overseeing business development as CTO, taking up the crystal ball role as the company transforms again from systems integrator to services integrator. “We need to figure out how we’re going to play in that space… We’re moving further up the stack toward the application arena,” leading business transformation efforts.

As Denali has grown, its sweet spot has grown as well. The company serves mainly mid-size and some enterprise customers, including many in retail and healthcare. In mobility, that means crafting strategies to help retailers leverage mobility in conjunction with services, such as mobile device management, location-based services and data analytics, and even data center services such as a private cloud to host mobile apps. “People come to us because of the completeness of our offering,” says Gerhardt.

3. Make a firm, clear commitment to a market. Denali has steadily built itself into a market leader in packaging complete mobility lifecycle services, becoming the go-to partner for many vendors to help customers manage their mobility solutions.

“AirWatch is pretty selective about who we partner with,” says Kevin Keith, director of business development for AirWatch. “Part of what makes Denali a great partner is their commitment to providing a very positive AirWatch delivery experience,” which takes deep knowledge of both rugged and consumer products and their place in the enterprise market.

The most visible sign of that commitment was the October 2013 opening of a state-of-the-art warehouse and configuration center in Plano, Texas, a facility similar to the one at Denali’s Washington state facility, but devoted exclusively to mobile integration. The facility enables Denali to deliver planning through ongoing management with operations including warehousing, integration, a call center and a service desk, so Denali can deliver the full array of services without subcontracting, even working with the carrier. Companies “need a valued intermediary to pull it all together,” says Mike Anderson, vice president of client mobile solutions at Denali. It can be difficult, for example, for an enterprise to set up mobile support or to separate application from carrier issues, he says.

That’s critical as mobility grows more complex, AirWatch’s Keith agrees. The addition of the similar-but-different cohort of consumer-grade devices to the family of rugged mobile computers already in place adds to the challenge, making Denali’s ability to help with mobile strategy, proof-of-concept, implementation and management/support all the more essential. “It’s one of those spaces that’s more difficult to do than to talk about it.”

“Their investment in the integration center speaks volumes,” says Richard Hutton, director of channel marketing for Samsung, a close vendor partner of Denali’s. “This is a notch above the normal investment that top partners bring to the table. They bring to market something we are not able to do, integrating software, installation, designing solutions.”

4. Model Resiliency. The Daher brothers heralded the combining of several of their companies under the new Denali Advanced Integration name on an auspicious date: September 10, 2001. So the next day hit like one of the earthquakes that formed Denali’s namesake mountain. Leadership was critical. “We had to tell 300 people to stay the course, that our job was to go to work,” Daher says.

Such resiliency also helps Denali weather its mistakes, such as a mis-timing on the launch of managed services.

5. Make sure services drive product sales, not vice versa. Services are survival for IT channel players, but many still wrap services around products. Instead, Denali has adopted a model seen in big consulting firms, leading with services—or selling only services. “We create demand for our products and services by offering solutions on the front,” a reverse of three to four years ago. Daher says. For example, a professional services staff highly skilled in configuring Windows 7 drives hardware sales.

6. Recognize that your IP is people. “For most system integrators, unless they’re developing products, their IP is their people,” says Daher. So Denali exclusively hires the best talent they can find to work on their most difficult ideas, taking the long view that if they build a strong name, those candidates will see the company as a destination. That’s not a widely used strategy.
“Solution providers come with a myriad of different business models and are started by very entrepreneurial people with varied backgrounds,” says Samsung’s Hutton. “His approach is to run an efficient business and hire the right talent on the staff. I wish there were a thousand more like him.”

7. Invest in people’s strengths. There’s an argument to be made that companies should invest to improve on their employees’ weaknesses. But Daher isn’t buying it. “It takes too long,” says Daher. “Investing in their strengths instead of their weaknesses is how people grow.” The strategy has helped keep attrition very low.

8. Be the face of your business. Being perceived as an innovative thought leader requires getting out there to share your thoughts. That was a job Daher had been leaving to others as the company grew. “From 2003 to 2005 I never left this office,” he says. But after receiving some advice, he changed course and now takes a frontline role along with stepped-up marketing, which helps to attract not only customers, but talented employees and vendor partners as well.

That campaign has been led by one of those hires, Convery, who as former executive responsible for vendor relationships has helped establish or strengthen the company’s ties with vendors including Cisco, HP, EMC, Microsoft, Dell, Motorola, Zebra, Intermec, Samsung and, unusually, Apple. “Apple picked about 10 partners in the country, and Denali was the first one they picked” for their robust mobile capabilities, he says.

Denali tends to align with those who reward partners that exceed goals with opportunities for backend profitability, and continues to be singled out for recognition by those vendors. “They solicit us for our opinions because they have confidence in us, because we have a good scorecard in driving growth and understanding where the market is going,” Convery says.

9. Focus on innovating. Back in the late 2000s, Daher was speaking with a member of the data capture community and recognized that all that data had to go somewhere—namely a data center, such as the ones Denali was investing in. So they developed a rugged mobility practice as an entry point to attract data center customers, quickly building up a reputation as innovators and rule-breakers because they were talking about network, storage and data, not just devices.

Today’s mobility market, with dizzying options in device ruggedness, operating systems, networks, and so on, represents just the sort of chaos that Denali sees as opportunity. But with his customary vision, Daher doesn’t see Denali’s mobility practice as helping enterprises manage mobile device deployments: He’s thinking Internet of Things. So the pillars of the mobile practice are: mobile, secure, connect and providing organizations with the scale and the speed to support the coming explosion of connected devices. The current mobility practice gets just 15 percent of its revenue from product, 15 percent from services (projects) and the rest from SLA-type
managed services.

The real value, says Daher, is the ability to connect full-on mobility services back to Denali’s infrastructure offerings and professional services, such as setting IT strategy is an important differentiator.

10. Give back. “We’re immigrants. We earned the right to be Americans, and many people helped us along the way,” says Daher. So the three brothers make a concerted effort to partner with local organizations associated with each of their passions—technology, healthcare and education—donating $3 million over the past 10 years.

Not everyone is cut out to scale the world’s highest peaks, or even cares to. But the difference between those who intend to do so and those who succeed comes down to good instincts, careful planning and impeccable execution—elements that its partners say are very much in place at Denali Advanced Integration.

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