In the recently released Tech Distribution 2025 report from the Global Technology Distribution Council (GTDC), a core finding is that not only is distribution here to stay, but the morphing distribution industry will continue to be a major cog in the IT supply chain for many years.

That’s because the evolving building blocks of distribution’s value to the high-tech ecosystem remains foundational to providing services and solutions in the digital era. The Tech Distribution report authors name three key building blocks of distribution: component and systems distribution, solutions distribution and digital distribution.

GTDC’s Frank Vitagliano

“When you look at, what I call “smart money,” such as private equity money, Warren Buffet money, etc., they’re looking at the capabilities that distributors have built and they are voting with their dollars, and that’s pretty significant,” Frank Vitagliano, CEO at the GTDC, told Channel Futures. “It underscores what’s going on in the marketplace and how distribution is viewed as a major component of the IT supply chain and will be for years to come.”

M&A in distribution has been alive and well over the past few years, including the most recent acquisition move by Apollo Global Management to acquire Tech Data for $5.4 billion.

The Tech Distribution 2025 report delves into three key areas: the value of distribution to its customers, such as vendors, OEMs, channel partners — even end users; what services continue to offer value, which need to change; and key growth areas and core competencies for distribution going forward.

Data for the report was conducted, compiled and analyzed by Vation Ventures, from June-October 2019. The report findings are based on feedback from OEMs, vendors – both traditional and emerging tech – venture capital firms, distributors, resellers, systems integrators and end users.

Vitagliano points to three key report findings.

The first significant finding is that 61% of survey participants reported that expected annual growth through distribution will be 10% or greater through 2025. Breaking that number down further, 42% of respondents expect to see business growth through distribution between 10% and 20%, while the remaining 19% expect to see business growth through distribution greater than 20%.

“That’s a big number. Usually it’s in the mid- to high single digits,” said Vitagliano.

Based on some industry interviews, various sectors engaging with distribution expect their corresponding indirect business to outpace their direct business.

“That’s a sea change where many companies emphasized going direct, yet ultimately learned it was much more efficient and cost-effective to leverage distribution and their channel customers — especially in reaching and serving small or midsize businesses as well as larger enterprises in niche vertical markets,” according to the report.

A second takeaway Vitagliano points to is anticipated growth areas. There were no surprises in the lineup: security, cloud (SaaS, IaaS, PaaS), AI/ML, big data/analytics, IoT and more.

“The areas that we’re constantly hearing about as the hot spots — they are confirmed in the data. This is significant because it validates where distributors have been making some huge investments,” he said. “These are clearly the areas that matter to everyone these days.”

The last key takeaway from the report, is that while emerging technologies are important, the core competencies that distribution has built over the years …

… still remain significant. These are the things that the distributors have done really well over the years, and they still matter.

“They matter a lot,” said Vitagliano. “It’s partner enablement, partner recruitment, the marketing and lead-generation programs they’ve put in place, the presale technical support, professional services support — those items are still viewed as extraordinarily important as time goes on.”

Delving into those three eras of distribution – components and systems, solutions, and digital – that span over at least the last 50 years, components and systems represents vendors finding help getting their products to market. Distribution offered inventory management, logistics, transactional support, financing creating operational excellence.

In the 1990s,the next phase, solutions distribution became more of an era that offered technical excellence, offering integration services for multivendor solutions, data center offerings, channel development, channel logistics and technical support, for example.

“Certainly, the data center and infrastructure experienced that where solutions were put together by distribution and they would complement what the solution providers did — and, in many cases, the distributor was the solutions provider,” said Vitagliano.

The current era – digital distribution –represents big change for the industry. It’s represented by the cloud, and as-a-service marketplace, AI/ML, IoT, and all the emerging technologies. Distribution is currently making investments in these areas.

“But the core competencies that were built by distribution over the years, now distribution is adding on to those core competencies,” said Vitagliano.

The three report conclusions: