The introduction of new technologies and capabilities is combining to change the dynamics of distribution, as traditional models become redefined.
“Offerings are being made available both physically as well as virtually, as we enter a new world where traditional modes of distribution are being rewritten,” said Rich Hume, CEO, Tech Data.
“In this new era, it is now possible to buy infrastructure such as a server, storage and all that capability in both physical form as well as virtually through the cloud.”
Tech Data has for the past eight years developed its own cloud marketplace, called StreamOne, to benefit partners during this transition, offering virtually through the cloud what was once the domain of physical goods.
“Clients can either buy IT physically or they can buy it virtually through the marketplace,” said Hume, when speaking exclusively to Channel Asia in Singapore.
“The one thing that has not changed much is that our vendors still rely upon the totality of the channel ecosystem to serve the customer that their coverage models do not need,” added Hume. “That remains pretty constant even with the change in content through technology.
“I think that what distributors do currently and the type of offerings that they bring to market have evolved quite a bit relative to the traditional paradigm.”
To leverage this new era of advanced technology and changing distribution models, Tech Data has reorganised into specialised business units (SBUs), with each SBU focusing on a new technology with high growth - such as cloud, analytics, artificial intelligence, security and the Internet of Things.
“We set up these SBUs two years ago to focus on this next generation of technology,” explained William Chu, president of Asia Pacific at Tech Data. “We are seeing an increasing number of existing partners and a bigger proportion of new partners emerging from these new technology areas.”
While the vendor has the responsibility to launch such technologies into new markets, distributors such as Tech Data, in many cases jointly invest in rolling out new capabilities.
“A distributor’s primary role is to not only be an advocate but also an advisor to our customers on where they should consider pursuing new technologies,” said Hume. “There are no two that are built the same so it turns out to be a custom recommendation to each of the solution providers based on their strengths.”
However, as the channel ecosystem undergoes its own transformation with traditional lines blurring between a distributor, vendor and reseller - does Tech Data still consider itself a distributor in the traditional sense?
Or perhaps, is the tech giant now aligned to the more general term of solutions aggregator?
“We have always heard of terms such as volume distribution and value distribution within the market,” said Hume. “Years ago value distribution made the move to solutions aggregator.
“We have been focused on making sure that we help our customers deliver solutions to their end-users. We are a solutions aggregator in both the physical as well as the virtual world.”
However, as Hume rightly pointed out, to enter into today’s solution business, a more intensive set of technical capabilities is required - which is “one of the primary thrusts as to why we acquired Avnet Technology Solutions (Avnet TS)”.
“We knew that as we moved forward we needed to have more technical skills to serve the market,” added Hume. “Avnet TS was a good asset for us to acquire, to significantly build our technical capabilities and allow us to further accelerate our move into the solutions space.”
Hume took the top job at Tech Data in June 2018, however, he has been with the distributor for two and a half years, playing a key role in the company’s acquisition of Avnet TS which closed in February 2017.
With the acquisition of Avnet TS, Tech Data went from a US$26 billion business to a US$36 billion titan, adding the Asia Pacific to the distributor’s regional mix of Europe and America.
“When I joined the company I was immediately given the responsibility of negotiating and closing the Avnet TS acquisition deal,” said Hume. “I also had responsibility for integrating the Avnet TS business with that of Tech Data’s.
“With such a large asset coming onboard our business, we obviously had to take a step back and think about our strategy and our strategic priorities. I was given the responsibility to lead the strategy. The integration is going well.”
Furthermore, “as it relates to executing the strategy I was one of its primary authors,” added Hume. “My immediate priority, therefore, was to complete the integration process.
“In addition to that to make sure that we execute the operating plan that we had committed.”
As Hume revealed, the integration of Avnet TS into Tech Data is going well but declined to give a precise date as to when the process will be completed by, other than declaring certainty it would be finished before the end of 2018.
As for strategy, Hume explained he had a four pillar strategy for a successful Tech Data.
The first of these pillars was to invest in new technologies such as cloud, analytics, security, AI and IoT.
“Even within the core of the business, we would take advantage of new technologies such as hyper-converged infrastructure and so on,” said Hume.
Another priority was to make sure the distributor accelerates its deployment of the strategy relating to those new technologies.
Delving deeper, the next pillar centres around digitally transforming Tech Data into the distributor of the future.
“There is a lot of benefit in driving digital transformation,” said Hume. “It is one of those technologies where you actually get double the benefit of improved customer experience while at the same time improving efficiency and productivity.”
The third of Hume’s pillars focuses on optimising Tech Data’s global footprint, which included the addition of the Asia Pacific region into the company’s reach through the Avnet TS acquisition.
“The Asia Pacific region is a small part of our global footprint but it provides a great market potential for us to grow our business going forward,” said Hume.
Finally, Hume’s fourth pillar relates to growing the distributor’s portfolio and continuing to add and subtract things to make sure that its business stays relevant through time.
“I do not think the industry has ever seen a point like they have right now relative to technology transitions,” said Hume. “Each of our vendor partners is absolutely going into areas where they have not been before.
“The impact of consumerisation on IT has been unprecedented. All of this change that has occurred requires a new set of capabilities to move technology into the future.”
Hume explained that the distributor prides itself on being able to adapt to the changing market.
“We find ourselves adapting once again but at a much larger scale than what has been done in the past,” said Hume.
Specific to Southeast Asia, Hume stated that the strategy was aligned with the distributor’s corporate strategy.
“It is around deploying the next generation of technologies through these SBUs,” said Hume. “It is also around growing our portfolio not only in those new categories but also in areas where we do not have our capabilities completely filled out.”
In regards to the wider Asia Pacific market, Hume pointed out that since the acquisition of Avnet TS, the region represents only about three per cent of Tech Data’s global footprint.
“We are anxious to accelerate our growth in the Asia Pacific because it is a good market to invest in,” said Hume. “We have businesses across ASEAN, India, Australia and New Zealand. It would be our intention and primary focus to drive growth within that existing footprint.”
At a local level, Chu revealed Tech Data’s vendor strategy, stating that “our focus is to offer the best value-add capability to support our partners so that they can be successful,” adding, “our partners add value themselves and we will help train them in this new area.”
“We would get ourselves certified and trained by the vendors before we recruit the new partners or train and enable our existing partners,” added Chu. “Meanwhile, we would support them with services and present together with them to the end-user to ensure they are successful.
“Our capabilities in the e-commerce, as well as the cloud marketplace, open up a lot of autonomous business opportunity for us. We want to be very selective.
“We want to look for vendors who meet our return on invested capital target. If we did not do this we would be overwhelmed with a lot of stocks and that is not what we want to go through.”
Meanwhile at a global level, Hume explained that what is most critical for Tech Data is that they are making available to customers the leading edge technology in every category.
“We make sure that our line card is by far the most robust in the entire industry,” said Hume. “Traditionally in the IT space, each country or region built out its own capability and went to market locally with that capability.
“As we move into the cloud realm as a vendor or distributor we are building run once capability. We have one marketplace globally called StreamOne.
“When you see the capabilities being standardised on a global basis many times it is now raising the business dialogue to the global level because decisions between vendors and distributors need to be made there in order to deploy.”
Hume explained that when looking for what vendors to on-board, it is important to consider the latest technology growth trends.
“When you think about what types of vendors you would like to on-board with the backdrop of these technology growth areas you are first taken to the traditional vendors who are all aligning with that strategy,” explained Hume.
“In addition to that, there are other vendors emerging such as born-in-the-cloud vendors with a software-as-a-service (SaaS) offering to specialised niche security vendors.”
With the advent of cloud and its run once capability, it is streamlining the transition from vendor partnership agreements to local and regional rollouts.
“We are all learning with the advent of the cloud with its run once capability,” said Hume. “We also look to identify a global template from a contract perspective and then roll them down into the regions.
“This is happening both on the vendor side as well as the distribution side.”
The process entails a high-level discussion of the terms and conditions for cloud-based products before it is driven down through the markets very quickly.
Furthermore, there could be some customisation that takes place locally but “most of these agreements can be handled in the way that I have articulated,” said Hume.