COVID-19 SPECIAL, Mike Norris, CEO. ComputaCenter

Well, it was my idea, not the accountant. I'm the salesman. As we went into this, as it started to materialize, you don't know, and you certainly didn't know how severe it was going to be. It's probably been less severe than we thought, and the furloughing schemes have been more generous across Europe than we thought. But the logic, my logic, was simple: we're going to ask some employees to take some pain. I think they're taking less pain than I thought they were going to, but you know, we can afford it. We should set an example. Said it to Tony, Tony agreed, and it was, you know, it didn't take very long, took about two minutes to decide. I look at the professional footballers and wonder, yeah, just do it, right? So it's not hard. No, it's unprecedented, it's hard as well. I even like the football, as you're thinking, well, why don't they make this decision? You know, when they do the Battle of Hotspur? That haughty other thing, I was pretty shot without really, but I think they've obviously turned it around now. But you know, obviously a gracious thing to do, but is there it is in many staff that you've actually sort of furlough or help? How's that work? And how do you sort of how many people to furlough, etc.

Well, we've got 15,000 staff, so we've got a lot of people. And we have 1,500 in either furlough or partial furlough, so about 10%, just under 10%. And that turns into a full-time equivalent of just over a thousand people, because in Germany and France you can be on partial furlough. In the UK that's not allowed, you're either on it or you're off. In Germany and France you have people furloughed part-time, so it's about 1,500 people effectively, but full-time effective it's just over 1,000. There's about 600 in the UK. And that furlough stuff really predominantly is one thing, not exclusively. I'll talk about the second bunch in a second. It's access to staff by on-site engineers. So for example, a large German motor manufacturer, I have 260 staff on site, and that site is shut completely. They cannot get on site, they have nothing to do. Right, they are clear classic, you put people on furlough. That's no different to a restaurant or you know, it's sharp end. And the vast majority of that 15,000 people are engineers. There are a few people in the UK and elsewhere, you know, I've got three people that book travel exclusively, well, you know, there's no travel. I've got a couple of people that do events, so there are a few around the business, but predominantly it's on-site engineering that cannot have access to site. There's nobody in the sales force, there's nobody on the sales admin functions. It's not the normal staff that you and I would know, it's just the on-site engineers really of any consequence, okay.

The response, the network. So the VPN, typically we have about 2,000 people a day pre-crisis. We've peaked at 10,600 people on the VPN. That's the biggest number that we've had, but most days we'll have 9,000 people logging on externally, up from 2,000. So that's a big increase. So we called that early, we increased capacity. We doubled the capacity of that network both in the UK and Germany, and also we can use both networks. So if we lose the UK, everybody can flip through to the German one or vice versa. So we've got some resilience in the network. And you know, we had one dodgy day, yeah, we had one day where it fell over a few times, but in general it's been fantastic. So the resilience of networks is important for everybody's peace of mind, well-being. You know, being able to log onto calls, you know what it's like when you can't log on, that's pretty well. We're big Teams users inside the business, and managers have been doing a lot of work, doing Friday evenings, you know, have a drink on a Friday evening, five o'clock kind of calls to make people positive about their environment. Yeah, life's not easy. You know, we all don't want to live like this. Yeah, it's been challenging.

Yes, obviously there's been a huge spike in demand for home working equipment, laptops, lots of networking gear, particularly Wi-Fi stuff for homes and stuff like that. One of the interesting things has been delivering to people's homes. And yeah, you know, where the whole GDPR, you know, please deliver this to 1,500 addresses. You go, hang on a sec, should we have that data? If you're giving us that data, we make the assumption you're allowing us to have that data. And how long should we keep that data for? You know, we delete it in three months, are you happy with that? So it's been... and actually some of the legal issues normally would have been very heavy and you'd be taking weeks to negotiate, but they went straight through. So really amazing how fast people can move when needs must. Yeah, because you have challenges around installations and producing kit and getting it out and couriers out into the market. Because like I said, 1,500 laptops to 1,500 addresses, it must be exactly right there. Yeah, just actually trying to automate downloading the addresses onto the system that was a big challenge. We saw a doubling of support calls in the first two weeks. So downing... I mean, we've got 3,000 people sitting on... I'm just at the 2,800 service desks throughout the globe and they doubled in size. I remember we were trying to move them home. And it's easy for the sales force or some of the admin function, you know, it's a laptop, stick in your bag, go home, plug into the network. You know, if you look at the CSS guys, the services agents, typically two screens, sometimes three screens, and that's just all there. Lots of them have to pile their kit into the back of the car, send them home.

Send them home, bit more challenging to some locations. You know, we've got a lot of staffing in Cape Town, 840 staff in Cape Town. Some of the cities and towns where they live, the infrastructure is not as good as other locations, but it's still pretty good. Infrastructure in Cape Town has been fantastic since the World Cup in 2010, hugely the network's been very robust since then. Prior to that, rubbish. We've actually seen a lot of customer issues with India. We don't have a big Indian presence, we have some, but getting Indian workers working from home proved to be very challenging because they don't have the infrastructure in the cities. So we've seen we picked up business from people with Indian call centers who can't work.

We buy some through distribution, certain vendors we buy to distribution, certain vendors we buy direct. And that's more to do with the vendor strategy than it is our strategy. HP are typically somebody who likes selling through wholesalers, Novo, Dell typically people are like selling direct, Cisco direct to us, took to us. I mean, not directly. I would say yes, we have supply problems, but I promise you nowhere near as much as I expected. I mean I really thought we were going to be desperate for supply, and in general that's not been the case. Has it been perfect? No, given the spike in demand, you know, given what happened in China and the slowdown, the lockdowns we've had. I've found suppliers to be incredibly good. And you know, as far as I'm concerned, I expected it to be worse.

Oh yeah, definitely. Because at the moment, customers go to who they know. And you're not bidding for new customers, you're not bidding for new business. And the threat of losing a customer at this moment in time is probably less acute. People are going to their regular suppliers at the moment, they're not moving around. They're going to people that they rely on and they trust. So my sales force at the moment are fighting admin systems, fighting legal systems, getting availability. Are they selling? Well, I suppose that's a form of selling, but they're not pitching for business. They are operating. And how you respond in these kind of crises buys you a lot of goodwill and favors.

It's been quite interesting looking at some of the social media posts that we've put out about how our department is responding. Yeah, you see an awful lot of my sales teams go, 'Yeah, great, great job guys, well done.' So that's... but you know what you should see, customers commenting on our social posts and thanking us. Yeah, that's rare. And I think society is a little bit more grateful at the moment for everything. You know, you walk on the street, I mean, you've done, I'm sure you know, in January a little more friendly. They are friendly, they're kind of the nicest I've ever dealt with in a nicer place. I was saying to the channel in general, though, you know the channel, listen, I think it's been a tremendous effort from the channel in general. I think there are a lot of unsung heroes in the tech community. They've kept the business world going, which is brilliant. But in general, decision makers seem to be much more careful about... which I think is a great thing if that can happen post-COVID. Fantastic. Whether it will or not, who knows.

Well, I think some of the data has been interesting to see what's happened to volumes across Europe. I mean, you have seen the UK, you know, volumes have shot through the roof if you look at the latest channel data. Whereas you see Germany, pretty good, strong, Denmark strong, but other places, I mean the French market is falling off a cliff, Spain, Italy struggling. So there is certainly a reflection of the countries that are suffering most from this crisis, and the pattern is going down. And I think vendors are seeing that across the board.

I think most vendors that we've experienced have been very quick to respond. They're working very closely with us. And you know, they have a challenge in their business. I mean a lot of the funding that they're putting out, trying to... you know you've seen Cisco extend their credit terms to 90 days, which is what they did during the financial crisis of 2008. Yeah, very interestingly, they sat and they extended them for the financial crisis and it stayed for seven years. Seven years, right. Which was quite... in fact, just when we got used to it, they took it away. You know, I think it's a good thing to do, but let's not do the same thing again. You know, we're lucky enough not to need it. We're financially well off. And I think managing your cash is an important competitive advantage. Under normal times, I get a bit upset when they just use flash credit around and support people that shouldn't be supported. In these times, I appreciate it, I think it's the right thing to do.

Profiteering, I think it's an important point to make. So we have government framework contracts, or agreed contracts with certain customers at certain margins. And given times of shortage, you could hang out and say, 'Well, you know, I'll sell you that, but the margin's got to be better.' I mean, that would be short-term bloody suicide. And if you're going to do that, then you probably want to sell your business in the short term and take as much cash as you can. So you've got to stick with your margins. Yeah, out of that, equally the opportunities: if you're just scaling up the business, if people are buying ten times as much, that's not profiteering, that's just sensible business, isn't it?

And people are out there buying more kit. And because it goes back to... got my talk very interesting. They say, you know, people want to spend more money taking their business forward and less money keeping the lights on. And well, you would be if I said to you, 'What would you like to do, pay your electricity bill or build an extension on your house?' No, I'd rather build the extension, please. That sounds more progressive. However, if I come along and say, 'By the way, someone's going to cut the electricity off,' all of a sudden, forget the extension, worried about keeping the lights on. Now this is a keep-the-lights-on time, and we are an infrastructure player, and our job is to keep the lights on. And right now, our customers within the companies that we sell to, the operations parts of IT, they, you know, they've taken their underpants off and put them on outside their trousers, and they are flying. And they need the support of their suppliers. And that's what the opportunity is.

Well, no, I'm showing my bias here. I'm probably going to get myself into trouble. Yeah, I really hope we don't have so many events. And we just event... Christ, right. I mean, I do get you know we have some vendor conference and then I look across my group, which I sold to, of our thousand people, and you find people have got 70 people going to that conference from different parts of the business.

So I actually think, you know, for so many reasons, maybe we can cut down on a bit of travel, right? I guess environmentally good. I'm not the biggest environmentalist in the world, but I certainly have a level of consciousness around it. And you know, I think the collaboration tools have been able to... travel a little less, maybe we should get used to that, right? Yeah, you still need face to face, right? Yeah, but if you could chop 20% travel, what a difference, right? Yeah, your travel and expenses bill must be on the floor now. You don't have people driving or going on train fares, hotels. It must be... it must be for a year. Our travel bill is about 6 million. Wow. And I guess it won't be very much taller at the moment. Yeah, absolutely.

When we are super busy. April, May, there's no doubt that we're less busy in France, but we're busy in Germany and busy in the UK. France coming out of lockdown probably a little earlier, so maybe that will pick up. But we are busy. We think Q2 will be robust. Q3... as we come out of this lockdown, the short-term spike in demand will reduce, and there's going to be a hiatus in the second half of the year. Because we've been focused on the here and now, you know, the ERP projects, the CRM projects, the e-commerce projects, the take-the-business-forward projects are not being done. You know, we're not building those extensions to the business. And there's going to be a quiet period to come in the second half of the year. I don't think we're going to come out of this like a cork coming out of the bottle. I think people are wrong in that. So in many respects, we're going to struggle more in Q3. I think there's a stop the gap in Q4. My prediction is through Q3, obviously it's going to be very...

Interesting to see how many people you can get back to work. I can't believe the government furloughing schemes in the UK will continue into Q3. Now interestingly, France and Germany already agreed 12 months. They really? Wow, already agreed. They've already agreed 12 months, and so is Italy. So some spikes are in Italy, though in Spain too. And I would be very surprised if we did the same in the UK. So but remember, these furlough schemes are not there to prop up company's profitability, they're there to avoid redundancy, keep jobs, retain jobs. Yeah, retain jobs, right. So you know, we would be a profitable business this year. There's an argument: should you take government money if you're a profitable business? To be honest, if it's about retaining staff and not making people redundant, and taking government money, I think you have to.

Depends on function. You can't have engineers furloughed and then be hiring engineers. You know, that's just ridiculous. That's crass at best. I think you know, the talent in the marketplace will become available through this. Yes, organizations will treat their staff unfairly. Some employees will feel they've been unfairly treated, maybe they have, maybe they haven't. But certain employees will exploit the situation, they'll go over the top, maybe because they need to. You know, this is a chance to differentiate. If you are a good employer, you do differentiate. There is still a war for talent in the marketplace.

Yeah, let me be clear. That war for talent is overdone. Because people think it's the entire market, but that's a wolf attack, which is not true. There are significant pockets of the marketplace where there's a war for talent, but other skills are readily available. So you have to make sure you're very discerning with your HR policies in terms of: these are war-for-talent people, these are readily available people. If you treat everybody like a war-for-talent person, you'll end up... if you treat everybody as highly available, you never hire people. So you've got to be discerning. Yeah, in terms of if you do hire people, you've got to adapt your inductions and your onboarding processes, obviously, because you can't get mobility at the moment. Yeah.

Things that we've done: some of our graduate trainees, we felt it, just because we can't spend time educating them. A lot of them have gone away and done self-help, and we remember we are not just using government cash, we are topping up as well. So yeah, roughly these are people getting 90% of that pay, sitting at home, doing nothing, not having the cost of commuting to work. So they're financially in there. Yeah, so yeah. But equally, they're bored, right. And one of the issues with furlough is not just about money, it's about worth. Everybody wants to feel valued to their business, everybody wants to think they come in and add value. And all of a sudden they said, 'Actually, we don't need you anymore, go sit at home, come back in a couple of months.' Yeah, I mean, it pricks someone's pride, you know, they feel less valued. Oh, I get that. And nobody wants to devalue their staff. It just makes sense, right? Yeah, so we've seen a lot of the graduate scheme guys go, 'Right, okay, I'm going to self-help, I'll learn stuff about this business that I can do quietly in my own time.' And that works very well because we want them back. Yeah, they wouldn't have hired them three months ago. You are talking about people that started in the middle of January, right? Yeah, graduate trainees, no experience, started in the middle of January. Then middle of March, they've been with me two months, what use are they to me? Yeah, so so but furloughed, go away for a couple of months, come back, hit the ground running.

Because your leadership team had to adapt their management style in terms of actually keeping in touch with people, because they can't do one-on-ones face to face anymore. Yes, we've got Teams and we've got video conferencing, etc. But around, well, almost what you said that the board of at home around well-being, there's obviously a lot of anxiety out there. And we're going to get the job back, I'm not going to give back into Computacenter and get a job back? You know, is that you adapt their leadership style, their management staff? There, I think obviously given we are very international business, you know, we have people in Kuala Lumpur, Cape Town, Mexico City, as well as throughout Germany and the UK. We used to conference calls, we used to remote working, so we're probably better off than if you're a substantial business all in one or two locations. Yeah, we kind of get that and the management used to that. I mean, I am in all of the team, you know, the whole people response to it has been brilliant. You know, the collaboration, much the team... you can't ask your people to collaborate if the senior team don't collaborate. That's a must. I think the way in which the team relied upon each other, they've trusted each other, they've got things done. No, I couldn't be more proud. And proud of this man, I have... you know, overused phrase, but I've been doing this job for a very long time. Yeah, I think I probably have the strongest management team. And you know, I thought that a year ago, but I definitely think that now. I mean, I think they've done, and you know, to a certain extent, they make my life really fantastic.

Oh gosh, yeah. Just your view on it. But this... there's a great sketch where John Watson was commentating for the BBC and Sir Alf Ramsey, the old England football manager, who was his co-commentator. It was at the bowling ground, up to Bob, and he turned around to him and said, 'So, sort of filling in, so, Alf, how long do you think the lights are going to be up?' So Alf Ramsey turned around, looked at him, and said, 'I am NOT an electrician.'

I think it's going to be tough, right. I think part of... I mean, let's be clear, let's be clear and callous. Obviously, you know, people are losing their lives. And sadly, we've lost three employees so far through this terrible thing. One in the UK and two in Germany. That's really... and in France. And so you guys, you have to... everybody, particularly the closer they are to you, the more... yeah. But I do think we will increase capacity in the corner, as the NHS in the UK, how the capacity is built up, the physical capacity and the people capacity. We can afford to unravel this lockdown because we can cope with more people.

Yeah, which is the same case. But it's the fact we can cope with more people getting ill because we've got more capacity to cut. We have to unravel this. I mean, the damage we're doing to the economies is enormous. And look, let's remember, you know, obviously you'd rather save lives, but from an economic point of view, the economic downturn is going to hurt people's lives, right? The suicide rates will come back to pressure, you know, we know that the lives lost through the financial crisis of 2008 probably greater than what we're losing at the moment through COVID-19. So getting the economy back is not just an altruistic money-driven thing, it's for society. Yeah. So I think we've got to unravel this lockdown. I think the UK will come a bit later. I would imagine primary schools will go back after the May half term. I don't think secondary schools will go back until September. That makes a problem with care for kids through the summer, etc. etc. So I don't think... I think Q2 will be good, should be good for the channel. You should be doing well out of it. Also you've got some troubled clients, right? I mean, retailers, you've got gambling, you've got, you know, if you're a sports betting company, there's no sports. But I think as you unravel through this, Q3 will be tough. So Q2 should be fine, Q3 will be tough, and then I think we'll start to ease out of the market. And I think into a... perhaps time will be clearer, but it will take a bit, probably take until the second quarter of next year to be clear of this issue.