Despite the negative expectations of some industry skeptics, a number of IT distribution companies continue to strengthen their channel value propositions and their business models. And, if the M&A activities of the last two months are any indication of what’s ahead, buckle your seat belts. In early August, ScanSource caught the attention of many channel professionals with its acquisition of Intelisys, a telecom and cloud services master agent company. That $83.6 million transaction is being touted as a real deal changer in the channel.
The acquisition gives ScanSource a larger footprint in the services space, allowing them to help partners create a host of the latest, most in demand solutions. More cloud and connectivity options for the distributor’s MSP and VAR community, and easier access for Intelisys’ telecom agents. Leverage is what’s it all about. A greater collection of offerings and support services with what will eventually become a more efficient delivery model. Sounds like a win for all partners and agents involved.
Similar synergies may have led to this month’s major distribution M&A deal. On September 19th, Avnet Inc. sold its Technology Solutions (ATS) business to Tech Data Corp. for $2.6 billion. The acquisition seems very straightforward, giving Tech Data access to a number of new markets and strengthening their position with enterprise channel portfolio.
These transactions are also indicative of the major transformation taking place in IT distribution. Despite continual pressure from online hardware and cloud services sales, the indirect market has continued to thrive. What many fail to realize is that the big distributors have been paying close attention to the threats and opportunities ahead. They are responding with new support and solution offerings, and developing platforms that allow channel partners to build and manage unique cloud portfolios for their own clients. In effect, the distributors are countering the industry fears and potentially negative trends quite well.
Tim Curran, CEO of the Global Technology Distribution Council (GTDC) is quick to remind the naysayers of all the positives. “Over the past 20 years, the distributors have met every major challenge they’ve faced. When the internet came to be, many said the distributors would all go out of business. Now many of the big internet resellers (such as Insight, CDW and PC Connection) depend on distribution to deliver their product. When the market went to direct selling, the industry responded. For example, Dell is now one of the fastest growing vendors in distribution, because we demonstrated the efficiency and reach the model has for any IT vendor. The same thing is occurring with the cloud. The distributors built effective platforms and are effectively growing their cloud businesses.”
The recent M&A news is another step in that transformation process. Distributors are buttressing their strengths and filling in the gaps, focusing closer on the specific needs of their partners and looking for complementary opportunities. The ScanSource and Tech Data acquisitions fit that mold.
“Distributors are utilizing mergers and acquisitions to grow their business, both from a technological and geographic point of view,” adds Curran. “This is a big deal, but it’s part of an ongoing evolution. Distributors continue to provide unmatched logistics, marketing, enablement and financing to the channel, and remain the leading route to market for many vendors.”
The key to any deal or change in the evolving distribution ecosystem? Continuity. Distributors have to seamlessly transform their business without disrupting or causing pain to their partners. Whether they’re completing an M&A deal or upgrading their partner portals, VARs and MSPs want the distribution processes and programs they enjoy to remain constant (if not improved). Transition and project teams have to elicit feedback constantly during any transition, and test meticulously to ensure everything works well. Failure is not an option for channel partners. They simply have too many other options today.
The good news is distribution understands. Overall, they continue to grow and expand their offerings to meet the constantly changing needs of their partners. There will always be skeptics, especially in the highly competitive IT channel. But distribution is alive and well, and improving each and every day.
Brian Sherman is Chief Content Officer at GetChanneled, a channel business development and marketing firm. He served previously as chief editor at Business Solutions magazine and senior director of industry alliances with Autotask. Contact Brian at [email protected]
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