Increased cloud usage drives sales, but also complexity and reliance on partners and distributors.

Lynn Haber

July 9, 2020

5 Min Read

Global Technology Distribution Council (GTDC) research, released this week, finds that distributor investments in digital services and cloud marketplaces positions them to compete and be invaluable to vendors and partners now and in the future. This comes in spite of challenges and the work ahead as digital transformation and cloud become the new normal for businesses.

If cloud and digital transformation were certainties before the global COVID-19 pandemic hit, the criticality of a business economy even more reliant on a substantial remote workforce just made it indispensable.

Keep up with resources for supporting partners and customers during the COVID-19 crisis.

Gartner predicts spending on IT will fall by 8% in 2020 compared to 2019. But the firm expects spending on public cloud to grow by 19% year over year. Not only do more businesses rely on cloud to stay viable during the pandemic, but in its aftermath, industry analysts expect about 30% of the remote workforce to continue to do so in some capacity.

Conveniently, GTDC conceived its report – Thriving in the New Normal – a look at what distribution is doing in the digital era, last year. Then the pandemic hit and made the study, conducted from March through June of this year, that much more relevant.


GTDC’s Frank Vitagliano

“The trends we’re seeing now [in the pandemic] coincide with the investments that distribution was already making,” Frank Vitagliano, GTDC CEO, told Channel Futures. “Distribution has longstanding processes and capabilities that have stood the test of time. Now, on top of that, they’re making investments in digital transformation support. And they’re leveraging operational excellence they’ve refined over the years. Combined, this puts them in a good position to be critical to the overall supply chain.”

Here are six key trends in the Global Technology Distribution Council report’s findings. The first three are tied to the global pandemic, while the others reflect broader changes in the information and communication technology (ICT) industry and how distribution is positioned. This also impacts vendors, channel partners and business customers.

1. The growth of cloud coincides with distributor investment. The growing work-from-home workforce relies on cloud for data access, security, collaboration and more. This bodes well for the years of investments that distribution has made in their cloud marketplaces, platforms, services and support.

Look no further than the recent announcement by Apollo Global Management upon finalizing its acquisition of Tech Data. The $5.4 billion deal is being followed by a $750 million investment in state-of-the-art enhancements. Projects include automation, platforms and analytics, and building a hyperscalable digital business platform and cloud-based digital marketplace. Also, much smaller distributor Climb Channel Solutions recently told Channel Futures that the strategic direction for the company in the next 90 days is to launch a self-service cloud marketplace.

Build-it-and-they-will come thinking doesn’t apply to cloud marketplaces and services.

“Investments that distributors are making must include training their people in cloud support, applications, etc, in this new world,” said Vitagliano. 

2. SMBs cannot survive without digital innovation and the partners that provide it. Survival for SMBs across all verticals depends on leveraging digital innovation. And to transform their businesses, they need VARs, MSPs, systems integrators and other third-party advisers. These advisers help with technology selection, integration, administration and management, and security. The lion’s share of partners rely on their distribution partners.

In a “no-touch”, social distancing time, customers are demanding …

… more online services and capabilities. 

3. ICT professionals and line-of-business (LoB) leaders need each other like never before. Rogue LoBs that shunned their IT counterparts while buying cloud and technology to do their jobs may be coming back into the fold.

“The uneasy relationship between tech spenders (HR, marketing, finance, etc.) and tech administrators (ICT professionals, CIOs, CTOs, etc.) has improved,” the report authors said.

As businesses scrutinize their spending more closely, they are putting processes in place that improve cooperation and engagements between the LoB and tech teams. This is good for partners.

“For partners, the fracture in who they’re working with, who is responsible for budgets, how does a deal get funded, was confusing,” said Vitagliano. 

4. Tech innovators cannot thrive alone. The value of innovation is tied the support of third-party partners. This is because they offer vertical reach, vendors, geographic reach, cross customer sets and capabilities. This reliance by tech innovators on the partner ecosystem continues to increase, and at an earlier stage in these tech innovators’ maturity.

5. No one brings complex technology together better than distribution. Distributors understand how to help partners who cater to end customers with product selection and integration, pricing and deal financing. They also know technology support and other factors critical to solution integration.

Distributors have proven their worth dealing with complex technologies in the physical world. In the digital world, things work differently, the Global Technology Distribution Council report notes.

“The ability for a distributor to help their customer – the solution provider – purchase, provision, manage and consume all the cloud subscriptions that the partner’s customer depends on, despite the fact that it’s coming from multiple vendors – each of which has its own payment schedule, its own renewal terms, its own termination policies, and who knows what else – someone has to have the ability to aggregate and orchestrate all of that. That’s what distribution does.”

Today, distributor marketplaces boast hundreds of applications and options. In the future, they will likely offer thousands.

6. Challenges distributors are addressing. Distributors offer vendors and technology advisers many services. These include logistics, tech support, marketing help, financing and more. These services are still vital to customers in the cloud; but, the returns distributors get from the sale of these services are under pressure. So change is underway.

Among other things, distributors are switching to deliver customer value in the form of XaaS (everything as a service). Over time, sales of software subscriptions – which already account for 23% of all software sales through distributors in the U.S., according to The NPD Group – and accompanying services could turn out to be a more profitable business than traditional distribution sales.

About the Author(s)

Lynn Haber

Content Director Lynn Haber follows channel news from partners, vendors, distributors and industry watchers. If I miss some coverage, don’t hesitate to email me and pass it along. Always up for chatting with partners. Say hi if you see me at a conference!

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