PINNACLE: New Growth Sectors Take Pinnacle to New Heights

As a leading distributor of technology, hardware and software in southern Africa, Pinnacle is key in Africa’s digitisation and the movement around the fourth industrial revolution. It has also been pivotal in the movement to remote working and the switch back to the office, and everything between including cloud, security, digital communication and more.

A champion of brands including Dell, Lenovo, ASUS, HP, Huawei, LG, Microsoft, and many more, Pinnacle is home to technology giants that are breaking the boundaries of possibility.

Working across multiple channels, partnering with numerous resellers, and driving product into a thriving commercial market, Pinnacle has positioned itself strongly, becoming a technology partner of choice when reliability has been vital for consumers.

With a quarter century history and the backing of JSE-listed Alviva Holdings, Pinnacle is diversifying to meet demands of the market. Thankfully, forward thinking and a nimble approach to the market have driven the company to its strongest year – quite a coup for a business during the challenging economic conditions prevalent through 2020 and 2021.

“We had a record year last year,” says CEO Tim Humphreys-Davies. “Our fiscal year runs July to June and from July 2020 to June 2021, we grew revenue at 17% and profitability by 248%. There were some large enterprise deals, but we definitely saw the work from home scenario crystalise into a 30% growth in revenue in the client space – Dell, HP, Lenovo and ASUS. We’ve started to see an increase in enterprise spend which is encouraging. Noticeably, all the peripherals such as webcams saw great growth but we are starting to see that decline and focus switch to storage while people operate in the cloud. We are also starting to see some nice large enterprise, datacentre-type deals materialise and that is the backlog of Covid.”

Alviva financials for the period ending 31 June 2021 were impressive considering the circumstances, and Pinnacle was highlighted as a standout performer in the group. “Their performance has been the stand-out feature of the ICT Distribution segment. In addition, Pinnacle has successfully implemented a new ERP system, allowing it to take advantage of enhanced digital efficiencies and reporting,” said Chairperson Ashley Tugendhaft and CEO Pierre Spies in results commentary.

Humphreys-Davies was delighted with performance and expects ongoing success because of the shifting marketplace and constantly accelerating need for digitisation.

“We have been fortunate,” he says. “There have been no retrenchments in the group and none within Pinnacle. Right now, we have a demand problem more than anything else. We have adapted by embarking on digital transformation, which was difficult with everyone working from home, and we migrated to a new ERP Sage X3 which has enabled us to build a Magento platform because we felt that was very important. We have created and end-to-end eCommerce solution for our resellers to give them flexibility and trading hours beyond 08:00 – 17:00. We have invested in the company but demand continues to exceed supply.”

Currently, the concern across the ICT manufacturing and distribution industry is the infamous problem of availability of semiconductors, vital for effective operation of so many technology products. US chip makers are laden with demand and the few other manufacturers around the world are facing a backlog thanks to US refusal to make chips for Huawei. This, combined with major new demand for 5G products and remote working solutions as a result of Covid, and you have a perfect storm.

“That problem started two years ago,” says Humphreys-Davies. “The fabrication issues have been a major constraint. We were lucky enough in the fact that we took risks and because we have an office in Taiwan, we were able to anticipate this shortage. We took inventory positions and capitalised on that in revenue. It is a very difficult environment – you get an order for 1000 Dell Notebooks but you never know when it will arrive. The customer gets frustrated.”

Other macro factors did contribute to challenges for Pinnacle, but the size and reputation of the business allowed it to come through where others struggled.

“Operationally, we were affected massively with the supply constraints. Supply chain issues continue to be problematic in South Africa with a lack of containers, port issues, congestion and general availability. Lead times are just crazy – six to nine months sometimes,” says Humphreys-Davies.

PERFECTING PARTNERSHIPS

As technology advances and demands change, especially around a hybrid working model, Pinnacle has moved to reaffirm its dominance, building partnerships with exciting brands to the delight of its resellers.

“We have taken on WD and SanDisk recently,” says Humphreys-Davies. “We have started a new cyber security division with Guardicore and a number of others in that space as there is big spend in that area.”

The WD partnership was welcomed on both sides with Ghassan Azzi, Africa Sales Director at Western Digital commenting: “As South Africa’s leading ICT distributor, Pinnacle proves to be a very strategic ally for us. Not only do they boast a strong footprint and presence across Southern Africa, but the company’s core focus on delivering exceptional products strongly aligns with our purpose of providing consumers and corporations within South Africa with all the storage solutions they need to thrive in the age of data.”

Digital distribution is a newer development for the business and ties into the new ERP system and Pinnacle’s eCommerce drive.

“We have built an Electronic Software Distribution (ESD) model on the back of our eCommerce portal as we are starting to see migration towards ESD which is nice for us in the Microsoft space. We’ve seen a bit of a migration towards computer on the cloud with Edge and others but not massively. People are still nervous about moving their workload to the cloud but we have seen some hybrid transitions, particularly around back up,” details Humphreys-Davies.

A particularly strong area of growth has been in what Pinnacle labels life security. This exciting and innovative sector is booming alongside IoT, and as being fuelled by Covid. Connectivity improvements are also helping this sector thrive.

“We’ve seen a big demand in life safety spend with cameras because of the security situation in South Africa,” admits Humphreys-Davies. “People are very aware of security, and that life safety space includes facial recognition, x-ray scanning, temperature checking etc. We are seeing a slow and gradual return to office working in South Africa with some of the government businesses still working from home, but we do expect to see a longer-term switch back to majority office hours.”

Datanet, Pinnacle’s infrastructure division, is currently seeing a return of business following a slowdown. As an essential component of IT build, and one which drives revenue in other parts of the company, this expert provider is hoping to ride the wave of positivity around South Africa’s fibre rollout.

“We are seeing the big data centres like Teraco do well – they are building lots of infrastructure,” says Humphreys-Davies. “Interestingly, we have seen a return, post Covid, to the big FNOs and metro fibre link guys investing money. There is a lot of money in South Africa floating around acquisitions of FNOs. Fibre to the home and fibre connectivity took a bit of a hiatus during Covid, but we are excited to see Datanet getting back on track. Historically, that was always a strong part of our business, selling copper enclosures, but it went completely dead during Covid. It’s only a small part of our business, between 7-10%, so it is frustrating, but we have seen a return.”  

In April 2021, Datanet announced a partnership with CommScope resulting in Datanet distributing RUKUS networking products. CommScope’s RUCKUS Wi-Fi can improve the way services are offered by delivering faster and clearer communications between departments and people located in different physical spaces – especially in healthcare, higher education, and hospitality.

HISTORIC POWERHOUSE

Through its life, Pinnacle has become, in some cases, an extension of its customer’s businesses, operating so closely alongside in an inexorable partnership. This hand-in-hand approach has seen the business grow at a sustained rate, achieving a healthy position in the market that will not be risked.

“We have 600 staff and operate across all of southern Africa,” highlights Humphreys-Davies. “We have a cross border go to market operation where we sell into Botswana, Zambia, Mozambique, Lesotho, Swaziland and Malawi. We dispatch into those countries and then use on-premise service providers. We also have a physical branch in Windhoek.”

Pressed on plans to capture further market share across Africa, Humphreys-Davies is clear that southern and South Africa remain the priority, with the rest of the continent well-covered by the Alviva Group.

“Our sister-competitor Axiz has a much stronger presence in Africa through their acquisition of Tricon International. Pinnacle doesn’t have plans to expand further into Africa at this stage as we are balancing the risk profile as a group.”

Currently, Pinnacle works alongside some of the largest resellers in South Africa including Datacentrix, DG Stores, Intdev and Centravoice. Pinnacle established their in-house brand Proline in 1994 which currently includes a full range of tablets, notebooks, mini PC’s, towers and UPS’s. The Proline range is designed for the harsh temperatures and dusty conditions of Africa, and the products are assembled locally. Pinnacle is also a AWSP for Lenovo, ASUS and Hikvision, and boasts HP, Dell, Lenovo, and ASUS as anchor brands. Distribution remains 40% of the Pinnacle business.

“On the enterprise side, through Pinnacle Enterprise Solutions (Pinnes), we are a distributor for Nutanix, Supermicro, Huawei, Commvault, and we have a specialised sales and pre-sales team focusing on this division specifically,” says Humphreys-Davies, adding that this important division now contributes around 30% of Pinnacle’s turnover.

“We provide a lot of pre- and post-sales support,” he continues. “We supply the complete package to resellers and equip 6500 resellers on an annual basis,” and we have 15 silos going to market. We are strong in traditional brick and mortar retail as well as the online space with companies like Takealot, and we have a large commercial offering too.”

In October 2019, President Ramaphosa stated that South Africa would become an economy that uses technological innovation to revolutionise manufacturing and industrial processes, and energy provision and distribution. While perhaps this dream is still some way off at macro level, there is no questions that digitisation forced by the pandemic has been massively aided by a buoyant ICT industry, and players like Pinnacle.

With technological advancement happening fast, the private sector has a major role to play in Africa’s unique digitisation. Thankfully, Pinnacle is at the forefront and has managed to continue delivering success without major interruption. “We have stuck to all the Covid protocols and we now have around 75-80% of our staff back at the office as we are in a very dynamic environment which is reliant on collaboration and that is simply more difficult when working from home,” says Humphreys-Davies.

“A lot of companies are going to run a hybrid model which is good for IT because it translates into spend at home and into the office.”

In the future, it is clear that an expansive footprint and a tested methos to market will be essential for individual, business and economic advancement. This is where Pinnacle will continue to serve.

“We are the authorised and exclusive distributor for many leading vendors, allowing us to be the first to market the latest technology and ideas available. We are built on the foundation of entrepreneurial spirit ‘Delivering the exceptional’ spans across everything we do. We believe that it is our technical expertise, drive and determination that sets us apart and ensures that every delivery takes place exceptionally making Pinnacle southern Africa’s ICT distributor of choice,” concludes Humphreys-Davies.