Tech Data Exec on Digital Transformation & the Evolving Channel

You can’t have a conversation in the channel these days without transformation quickly emerging as the central theme. Partners are transitioning from break-fix and managed services to solutions and business outcomes. Vendors are similarly transforming technology-wise, in addition to revamping channel programs to meet the needs of today’s partners. End users are transforming from passively accepting the offerings provided by OEMs to demanding those same manufacturers provide business-specific solutions that are easy to use and scale.

IT distribution is not exempt from this transformation. Broadline distributors are wheeling and dealing in M&As to acquire or expand services and solution offerings and revamping their own channel offerings to reflect the new dynamic of IT. Because disties sit in the middle of the IT ecosystem, they have to walk a fine line of supporting traditional offerings as well as looking into their crystal balls to predict where the channel will pivot next.

Joe Quaglia, President of Americas at Tech Data, sat down with Channel Futures to discuss the disty’s new strategic focus and the initiatives it’s pursuing, including its acquisition of Avnet’s Technology Solutions Group late last year. Quaglia says Tech Data’s strategy is based on its belief that next-generation, third platform technologies such as security, cloud, analytics, mobile, and hyper-converged infrastructure are going to be what drives growth in the next three to five years in every corner of the channel. And, he says, the distributor’s future fortunes are dependent upon its ability to help partners through this transformation.

“In order for us to go deep and accelerate our support of the next-generation partner, we felt we needed to get bigger in the data center. We needed to increase the amount of deep knowledge that’s required to help our partner community transform from the second to the third platform,” Quaglia told us. “When you put all of that together, the single strategy that was chosen was to buy Avnet Technology Solutions.”

Digital Transformation: Just Another Tech Wave?

Tech Data has weathered tech waves before, from the evolution of mainframes to client servers to PCs to mobile and cloud. And while the digital transformation is different in terms of business models and solution offerings that focus on business outcomes, he says at the end of the day, this wave is not all that different.

“IT is being consumed in a different way, but it still requires a deep knowledge of how to implement end user solutions; they’re just coming in a bit of a different form today. The net result is we still have to increase productivity, we still have to be faster as companies, and we still have to have intelligence to help us make decisions. The [difference is that the] way that IT is helping companies do that today is far more innovative than what it’s ever been in the past.”

The era of product-focused distributors is far behind us, says Quaglia, and today Tech Data’s business is all about building solutions that meet business outcomes to enable partners to evolve. The disty sees its role as going beyond technical and consultative support to providing what it calls ‘practice building’ to help partners create horizontal specialties in technologies like security and analytics and move from physical delivery models to virtual or cloud delivery models.

As Tech Data evolves from a product SKU focus to a solution-based one, its goal is to provide partners with end-to-end solutions that range from the device level all the way through advanced technologies such as hyper-converged infrastructure. To that end, it recently regrouped its offerings into two solution-based portfolios: Endpoint Solutions and Advanced Solutions.

But partners come in every size and shape these days, and Quaglia says Tech Data’s sales channels are organized in a way that allows them to support a variety of markets.

“I have an enterprise business, a commercial midmarket business, a commercial SMB business, a retail business, and a services business. It’s important because the needs for those partners and the demands of their customers require certain levels of skills and service levels.”

The Growing Importance of the SMB Market

For eight quarters in a row, Tech Data’s SMB business has grown more than 20 percent quarterly, says Quaglia. Like many manufacturers, the distributor is focusing heavily on the SMB market, which has historically received a fraction of the attention vendors and disties place on enterprise customers. That means a rethinking of Tech Data’s primary value proposition to its SMB partners and a recognition that they require different levels of support when it comes to supplementing skills gaps or establishing nationwide delivery or service organizations.

Quaglia says most vendors he works with are doubling down on investments in the indirect sales channel, especially in the SMB and midmarkets.

“Our job is having the technical and consultative practice building skills is to train these partners and take them through the evolution of this transformation so they can take advantage of these programs. From everything I’ve seen, vendors are investing more in their partner programs because they just can’t get access to that channel. They’re relying on Tech Data to do that for them.”

Predicting the Future

When we asked Quaglia to do a bit of fortune telling and predict what the channel will look like in five years, he says we’ll still have a small market for traditional resellers and go-to-market strategies, but that the digital transformation will mean more pressure on disties to provide end-to-end solutions incorporating next-gen technologies on a global scale and place importance on providing superior customer experiences and improved operational efficiencies. The driver for this? Quaglia says it’s all about IoT and data analytics 

“Think about five years from now, how many billions of devices will be connected. Already today, they’re predicting 30 billion by 2020. Let’s assume five years out we’ve got 50 billion devices connected out there, and that most companies have made this leap to digital transformation. Products are being delivered in terms of digital rather than physical.”

The demand for actionable business insights derived from the explosion of data collected via connected devices will drive increased adoption of analytics and automation as partners increasingly help their customers meet business goals such as increased productivity and improved service levels. Quaglia says we’re in the very first, early stages of maximizing the IoT revolution, and the first truly practical use cases are beginning to emerge.

“As time goes on, we’re going to learn to incorporate those technologies to take this level of intelligence and automation to a completely different level.”