GTDC Summit: New Technologies, New Models Change The Role Of Distribution

Distributors, who long ago said goodbye to the traditional product-focused, "pick, pack and ship" model of distribution, are still going through a significant amount of transformation to respond to new technologies and new customer requirements.

That's the word from Tim Curran, CEO of the Global Technology Distribution Council (GTDC), a St. Petersburg, Fla.-based nonprofit organization that brings distributors together to keep up to date on channel issues.

Curran, speaking during his keynote address during this week's annual GTDC Summit in San Francisco, told an audience of distributors and vendors that technology companies continuously change their models as a way to improve the lives of their customers.

[Related: GTDC CEO: Amazon Is Not A Threat As Distribution Is Actually 'Accelerating' In An Era Of Disruption]

"That's still the value proposition of the tech industry," he said.

Things are no different for the distributors who are facing a massive wave of changing technologies including mobility, cybersecurity, cloud, hyper-converged infrastructure, big data, machine learning, block chain, artificial intelligence, augmented reality and virtual reality, IoT, and everything-as-a-service, Curran said.

"Think about how everything changes," he said. "The span of products you sell. The range of opportunities. … Is this a threat or an opportunity? It's both."

The future of distribution lies not in more efficiently shipping products, but in developing a diverse ecosystem focused on multi-vendor solutions where the distributors play a key role in bringing such solutions to solution providers and their customers, Curran said.

"The world doesn't buy products," he said. "It buys solutions. And those solutions are put together by distributors."

Distributors are playing a big role in increasing the value of both the vendor side and the channel side of IT, especially in five key areas, Curran said.

In terms of vendor planning and marketing, distributors bring engineering and design, kitting, logistics, configuration and assembly, channel program, demand generation, and specialize communities capabilities to vendors, he said.

They also are key to solution offerings and education, including training, solution selling, services consulting, managed services, multi-vendor integration, and application engineering, he said.

Distribution also plays a key role in financing and channel management with such capabilities as account management, branding and marketing, credit and leasing, licensing, certifications, authorizations, and e-business integration, Curran said.

Distributors provide deployment and post-sales services, including network assessments, site preparation, asset tagging, custom packaging, field application engineering, device programming, installation and deployment, project management, and technical support, he said.

And finally, when things eventually have served their useful lives, distributors provide such lifecycle renewal and disposition activities as annuity management, lifecycle services, software and firmware updates, sustainability measures, and asset disposition, he said.

“You hear a lot about enabling the channel," he said. "This is how we do it."

Curran, citing a report by the NPD Group, a Port Washington, N.Y.-based market research firm, said that U.S.-based revenue for distribution in the first seven months of 2018 has reached about $35 billion, or about $2 billion higher than for the first seven months of 2017.

A key driver of that growth: the PC, server, and table sectors -- which saw revenue for the first seven months of the year soar more than 15 percent from the previous year to reach $15 billion. Lenovo, HP Inc., and Apple were the leading revenue generators for distribution during that time, followed by Hewlett Packard Enterprise, Dell, Cisco, Microsoft, Acer, and Panasonic.

Another driver was the commercial software and cloud business, where U.S. revenue in the first seven months reached $14 billion, up over 6 percent over the same time last year, Curran said. Sales in this category were lead by VMware, IBM, Microsoft, and Cisco, he said.

Distribution is becoming increasingly important to the vendor community, with over 400 new vendors being added to distribution in the last 24 months, Curran said.

"On-boarding new vendors is not easy. … It shows the vitality of your organizations to bring in new partnerships," he said.

Distribution is indeed changing to become a more important part of the channel's business, said Ben M. Johnson, CEO of Liberty Technology, a Griffin, Georgia-based solution provider and one of only four solution providers invited to the GTDC Summit.

Distributors have in the past suffered from a lack of continuity in their sales representatives, forcing solution providers to prove themselves to new sales reps every time a new one came just in order to make sure they get all the marketing funds, discounts, and other benefits to which they are entitled, Johnson told CRN.

"It's kind of an inverse relationship," he said. "We're the customer. Distributors need to sell themselves to the customers, and not force customers to sell to them. That revolving door, that lack of consistency, has really been one of the thorns in my side and the side of the channel."

A big example of that inconsistency is in how solution providers are forced to align to a primary distributor every year, Johnson said. And while distributors are asking channel partners to align with them in order to enjoy the full benefits, their product offerings and programs may not meet all partners needs, he said.

“Vendors are doing a pretty good job of bringing products to market super, super fast," he said. "But it seems that distribution has not been as fast in keeping in alignment with all the new stuff coming out. A lot of the things we're selling now are platforms. We're not selling boxes any more. We're not selling products. We're not selling as-a-service. We're really selling into an ecosystem or a platform."

Johnson cited Cisco WebEx as a prime example of where distribution can change to better serve solution provider requirements.

"WebEx offers remote meetings and call-ins, all with APIs, and all could be automated," he said. "But no distributor is helping to bring Webex and [Cisco] Meraki and Cisco cloud security products and Cisco Intersight together. That would be the four pillars of simple IT, bringing those things together and helping us to automate, provision, set up, and so-on. That's just one example. HPE and Lenovo have similar platforms."

Customers really want everything as-a-service, or as part of a platform, which Johnson said is his real focus. "I'm really looking for distributors to really help us with this," he said. "I believe that's the big underlying market evolution now."