Entering an enterprise recalibrated by convergence

Today, the market is messy – a spaghetti junction of technologies and strategies intertwined in a state of disorganised chaos.

Thousands of products raining down on thousands of businesses, seldom in sync and rarely right fit. No budget to blow the cobwebs away and no blank canvas upon which to create a harmonised vision.

That’s the corporate crossroads upon which many organisations are currently stationed at in Australia, whether buyers or sellers of IT.

“Just think of the convergence taking place in our industry across the entire ecosystem, whether that be corporate convergence or technology convergence,” observed John Milionis, Director of Channel and Distribution across Australia at Fortinet.

“This is a complex ecosystem and everyone has the same mandate – to grow their business. Whether that’s a partner business, our obligations to shareholders as a vendor or end customers in the private sector – the goal is to increase revenue and profits.”

Cutting through corporate convergence

In the corporate space, mergers and acquisition (M&A) activity is returning to “rampant” levels with local dealmakers armed with greater certainty and confidence to transact.

According to PwC, one-third of companies are planning to make three or more acquisitions during the next three years, with early signs of an upswing in deal activity already underway in Australia.

This has been propelled by further capital recycling, public-to-private deals and foreign investment, as well as an increased volume of private capital investment given the “staggering levels” of dry powder available.

The Australian M&A Outlook 2024 reported that deal activity slowed in 2023 but was sustained by all the usual suspects listed above. Overall, 1,565 deals were announced locally in 2023 – down from 1,773 in 2022 – while publicly disclosed deal values reached $70 billion in USD, up from $65 billion in 2022.

During the past year, significant deal activity occured across several sectors in Australia, notably in consumer through SILK Laser and Wesfarmers, plus Kirin and Blackmores.

This is in addition to BHP and Whitehaven in mining, Honan Insurance Group and Marsh in financial services, as well as APA and Alinta Energy’s Western Australian business in energy.

“As one organisation acquires another, that means the acquisition of separate technology stacks,” said Milionis, speaking on the sidelines of Fast & Secure 2024 in Sydney. “The impact of this is that IT is now inheriting so many different environments with so many different vendors and the relationships that come with that.”

Complex IT environments are not exclusive to end-user organisations however, with the ecosystem also in the midst of extreme convergence from an M&A standpoint.

According to Moxie Research, 73% of Australian partners are currently engaged in M&A activity in one way or another.

Most are actively looking to acquire (37%) which is reflective of an urgent need to build technical expertise in cyber security, data and cloud solutions.

Only a small section of the channel is actively looking to sell (9%) while the rest remain open to conversations to either sell or acquire (27%) – this group will be persuaded by the quality of the offer on the table.

Based on Moxie Research – published via Business Insights: Australia 2023 / 2024 – a total of 87 partner M&A deals were completed during a 15-month period in the local market, from 1 August 2022 to 31 October 2023.

That equates to one partner M&A deal approximately every five days or 126 hours in Australia.

Cyber security was the primary technology expertise acquired in 19 of those deals (22%) with the bulk of activity driven by large-scale consultancy firms and global system integrators (GSIs).

“So many roll-ups are taking place,” Milionis added. “CyberCX is rolling up companies, Orro Group is rolling up companies, Brennan IT is rolling up companies, Tecala Group is rolling up companies, Telstra Purple is rolling up companies. And so on and so forth.”

Ending by completing one hand of finger-counting, Milionis’ point was resounding – “there’s just a multitude of corporate roll-ups in Australia”.

“Partners are rationalising and it’s not only vendor selection, it’s as simple as cleaning up shop to create synergies between the acquisitions made,” he noted.

For many, that includes the preferred process for streamlining product portfolios and how best to combine multiple customer relationship management (CRM) systems. This is more than simply a spring clean, rather a full-scale house in order project.

“We’ve acquired a cloud practice or a SASE [secure access service edge] practice but how do we combine that with our current business?” Milionis continued. “How do we align those offerings and which vendors will come on that journey with us?

“That’s the first element of conversion and we’re in that phase now. Then it comes back to return on investment and cost of ownership for partners because it’s very difficult to win a deal out there today.”

In the context of the ecosystem, Milionis highlighted that an active corporate market is creating two choices for partners specific to vendor selection – point or platform.

“Partners can continue to work with point vendors that are best-of-breed in a particular subset,” Milionis explained. “They can benefit if they back a particular vendor and grow very quickly – they might be one of five or six partners working with that vendor who has skin in the game.

“But as soon as that gets proven out, all of a sudden the competition intensifies and that’s when they can shift to more established vendors with a platform.”

Problem is, every vendor is now penning a platform story, “converging east and west” in the pursuit of growth. From the data centre, through the network, out to the edge and into the cloud – end-to-end capabilities is now captivating the ecosystem.

“Absolutely, every vendor is saying this,” Milionis acknowledged. “The challenge for partners is selecting vendors carefully which is why we invite and welcome critical assessment of our platform.

“We stand behind it but yes, interrogate it, play with it, try to break it and tear it apart. Satisfy yourself that it’s a genuine platform so that your technical organisation has the belief and confidence to go-to-market with this, which in turn will pass onto your sales organisation.”

Transforming through technology convergence

To understand the impact of technology convergence in Australia, Milionis recommended first starting at the end customer to assess evolving enterprise requirements.

“Every customer wants two things,” he stated.

“Firstly, to reduce risk. And their risks are many because it’s not only cyber risk that is of concern – technology risk, IT risk, competitive risk, employee risk, innovation risk etc. There’s not one CEO or CIO that doesn’t wake up every day and ask, where are all the risks in the business?”

Secondly, organisations are motivated to reduce costs.

“Think about the public sector, lots of budgets are under pressure,” Milionis shared. “We’re seeing that play out across the country at federal and state levels.

“Same in the private sector, we’re in a low GDP [gross domestic product] environment and many sectors are going through tough periods, just look at retail, wholesale, construction and manufacturing as examples.”

According to Moxie Research, 50% of organisations cite cost control and expense management as a top strategic priority during the next 6-12 months in Australia.

Achieving that goal will be dependent on a company’s ability to modernise legacy technology stacks and reduce technical debt, an activity which is dominating 38% of CIO agenda items nationwide.

Continuing down this path, 38% of organisations are committed to redesigning business processes, with more than a quarter (26%) already underway implementing new systems and architectures.

“They’ve got complex IT stacks and a complete mismatch of maturity profiles. Different vendors carrying a significant amount of risk because technology A comes out in December 2024, technology B comes out in September 2025 and technology C in February 2026 – it doesn’t give them a chance.

“So, how can they reduce risk and reduce costs? They can achieve that through convergence.”

In other words, a strong desire to do more with less.

Through a platform approach, Milionis said Fortinet is showing up in market to have that conversation with organisations aligned to a three to five-year strategic plan.

“An enterprise business might have multiple partners in the chain providing lots of different technologies,” Milionis explained. “Our recommendation would be to consolidate that around a particular partner that can go on the journey with you.”

Based on Moxie Research – which surveyed 251 IT decision-makers in Australia during February 2024 – 39% of organisations will consolidate the number of outsourcing partners in projects during the next 6-12 months.

This comes as 50% of businesses question pricing models from the channel and tighten spend in the face of economic headwinds – 45% of which are now also demanding increased levels of ROI on strategic initiatives.

The downstream value of consolidation for the ecosystem is through increased revenue and services opportunities for partners capable of tackling such maturity mismatches.

“Start by helping customers knock down different IT siloes and de-risk their environments,” Milionis advised. “Having different parts of the estate managed by different partners creates challenges and obvious finger pointing – that’s real.”

Instead, the more services a customer can procure directly from one platform vendor, the more improved the commercial outcome can be in return. This can then be directed back up the supply chain to partner and vendor.

The message to partners is one of consolidation. Milionis said Fortinet has “strong incumbency” in the firewall industry with almost 40% market share globally, generating “huge amounts” of telemetry and data in the process.

“Many partners built their business on firewalls and have been very successful,” he added.

Following that, the second wave of SD-WAN also yielded benefits for early adopters in the ecosystem which has since morphed into SD-Branch as a third wave of industry innovation. Now SASE is the play as the fourth wave.

“We’re a challenger in SASE,” Milionis accepted. “We have good incumbency in some areas and good adjacencies in others.

“Partners can join our journey at different parts because it’s not all-in or binary. If a partner has never done firewall, that doesn’t mean they can’t pivot into SASE.”

With many partner businesses built on point solutions, Milionis advocated the benefits of expanding beyond core offerings to accelerate market growth.

“I would urge partners to make that assessment because it can be a big differentiator,” he recommended. “An endpoint specialist that is just an endpoint specialist will reach decelerated growth and intensified competition. When that happens, what’s next?”

Entering enterprise territory, powered by partners

A market undergoing extreme convergence at corporate and technology levels represents fertile ground for Fortinet expansion into the enterprise segment. In a sense, this is untapped territory for the vendor.

“We have a very strong share in the corporate mid-market and there’s still huge amounts of growth to grab in that space,” Milionis qualified.

“But based on the key themes emerging, customers want to do more with less in the large enterprise market. Those funding envelopes are getting smaller which is why technology stacks are being converged.”

While definitions vary on the exact make-up of the enterprise market in Australia, Fortinet follows a simple method based on seat size. Organisations housing up to 10,000 employees fall into the enterprise category while anything above is considered very large enterprise (VLE).

“Both represent natural sweet spots in terms of our platform given the amount of complexity at the top end of town,” Milionis added.

Success in the enterprise will hinge on an engaged and influential base of strategic partners. That can be either established players in this segment or challenger brands seeking to disrupt the status quo.

“We won a VLE opportunity recently in which an existing partner was in that account but didn’t think of us as being a suitable option for this particular requirement,” Milionis said.

“The customer went through the process and it was evident that Fortinet was absolutely deserving of a seat at the table. That’s when the partner perception changed of us in the enterprise.”

In addition to changing the hearts and minds of partners through education, Milionis is also tasked with bringing the ecosystem along for the ride.

“We’ve got great references in this segment of the market at a global level involving some very iconic brands,” he highlighted. “It’s on us to give partners the confidence that we also deserve a seat at the enterprise table domestically in Australia.”

Global customer references span Toyota, Radisson Hotel Group and Siemens among others. Local use cases include James Cook University, Bakers Delight and Pacific National.

From being challenged as a mid-market incumbent to being a challenger in the enterprise, a mindset shift is required at all stages of the supply chain.

“Our job is to be clear and transparent with our partners and work in lockstep,” Milionis said. “That means no two-legged meetings – it has to be four-legged meetings with Fortinet and the partner on every occasion because strategy is critical in those large enterprise accounts.”

In establishing a unified front and removing any gaps at the customer level, Milionis is spurred on by the achievement of one overriding goal in 2025 and beyond.

“To be the most reputable channel business within the secure networking space in Australia,” he confirmed.