Ingram Micro and other prominent distributors don’t seem to be sweating Tech Data and Synnex’ $7.2 billion merger.

Tech Data and Synnex earlier this week dropped the bomb that they will be combining forces to create an approximately $57 billion company. However, their rivals are calling the massive consolidation a major validation of their industry.

Kirk Robinson, U.S. chief country executive at Ingram Micro, offered an optimistic outlook on the Tech Data merger in an interview with Channel Futures.

Ingram Micro’s Kirk Robinson

“What an awesome time to be in this industry. I’m just excited. It’s always evolving and changing, whether it’s the technology or the landscape,” he said.

Robinson spoke to Channel Futures not long after meeting with Ingram’s Trust X Alliance, an exclusive group of IT solution providers. He told us what he told the partners: The channel will benefit from the merger.

“The conversation we had with the partners was, ‘This should be good for for everybody,'” Robinson said.

Robinson said resellers will remain loyal to Ingram, especially Trust X members who pay to collaborate with the distributor. He said Ingram will stay the course as Tech Data goes through the integration process.

“From our point of view, there’s a healthy respect for our competition, but we know they’re going to be quite busy,” Robinson said. “When a merger likes that comes together, they’re going to be busy for a while.”

Five Years Prior

This isn’t the first time Tech Data  acquired another distributor. The company in 2016 announced its purchase of Avnet’s technology services unit. The $2 billion-plus transaction bolstered Tech Data’s Asia-Pacific presence and gave it additional firepower in its quest to unseat Ingram in the market.

However, Robinson said that Tech Data’s previous acquisition panned out quite well for Ingram Micro. Ingram hired former Avnet employees who fit very well with its culture.

“We’re a very competitive team, and when we saw Tech Data buy Avnet, we posted some of the best numbers the company has ever seen,” Robinson said.

Do resellers and manufacturers feel positive about the merger? Robinson said it differs based on the reseller’s perspective. Similarly, vendors will differ based on their existing relationships with the Tech Data and Synnex. They’ll need to evaluate the overlap, Robinson said.

A Changing Landscape

Michael Schwab, co-president of Pennsylvania-based D&H Distributing, called the Tech Data acquisition one of the biggest he has ever seen in the industry. Like Robinson, he also expressed a positive outlook. For him, the deal represents a serious validation of the distribution industry.

“From my perspective I’m not sure distribution’s ever been valued as highly as it is today, [as well as] the role we play in helping the manufacturers and reselling partners facilitate their success,” Schwab said.

D&H’s Michael Schwab

Avant Communications CEO Ian Kieninger agreed that consolidation represents a “maturing market.”

However, the acquisition also indicates a key shift in the market that partners dare not ignore. Schwab said cloud-based services and solutions matter just as much as product delivery now.

“IT equipment historically was perhaps a little more transactional. You had routers and switches and notebooks and servers. We would have the product in inventory. We would be competitive in our go-to-market pricing. You would essentially measure success on top-line revenue and our ability to grow each and every year,” he said.

Now distributors and their partners need to enhance their offerings to include more than just hardware.

“We want to continue to lean in to make sure our sell-out capabilities are more than the hardware itself, but all the integrated, value-oriented services that go along with that,” he said.

MNJ Technologies Chief Operating Officer Benjamin Niernberg observed the same trend.

“We are changing at a pace that’s faster than ever before, and the need…… to continue to pivot from traditional hardware sales to service provider sales and cloud sales is more omnipresent than it’s ever been,” Niernberg said.

Schwab, whose distributor specializes in the SMB space, said D&H is working to ensure that it keeps trust at the center of its relationship with partners. He said that for VARs and MSPs who work with Synnex and Tech Data, their questions may be similar to what a consumer might ask about their bank getting acquired.

“Is the service level going to be as good as it was? Are the people that I work with still going to be part of that organization? All of those uncertainties become more of a reality as time goes on,” he said.

In addition, he said partners want to ensure that they have access to good choices for product acquisition and service resources, as well as enough downstream credit.

Partner Perspective

MNJ Technologies is a VAR-turned-MSP that partners with Synnex, Tech Data and Ingram Micro. However, it does most of its business with Synnex. COO Benjamin Niernberg said the announcement surprised him, but he also said he understands the appeal of combining.

MNJ Technologies’ Ben Niernberg

“We’ve seen massive consolidation in the technology space, so to see the first big distribution arms merge to strengthen and — let’s be honest — compete against Ingram, which was the largest, was no surprise,” he said.

He said MNJ could benefit from the combined company’s improved  geographical reach.

“From a global standpoint, Tech Data has further reaches than Synnex. It gives us more power there,” Niernberg said.

In addition, Synnex and Tech Data compliment each other with their OEM relationships. For example Tech Data has a strong Dell EMC relationship and an older relationship with Cisco. On the other hand, Synnex holds a strong HP relationship and Lenovo.

“It’s bringing together companies that have varying strengths in different technologies,” Niernberg said.

Niernberg said Tech Data and Synnex possess very different cultures. He said he is “cautiously optimistic” that the merger will go smoothly and not cause any issues for end users.

“Synnex has always had a customer-first culture and has done whatever they can from the top of their executive management to help enable that. I think that’s a strong culture within that organization, and I will be curious to see if that will continue.”

He pointed to recent acquisitions by HPE and Palo Alto as examples of “massive consolidation in the technology space.” He agreed with Schwab that the industry is moving toward more of a focus on solutions.

“I’m not so sure how much consolidation can continue to exist, but I think it’s just the nature of the industry. … I think you’ll continue to see companies that have varying strengths merge together to compete in that space,” Niernberg said.

Master Agent Perspective

Kieninger said the shift from premises-based hardware to cloud-based solutions is changing the game for the agent channel. Telecom agents will need to embrace more of a consultative approach to their customers, relying less on pure product sales.

Avant Communications’ Ian Kieninger

“Because of this, the way in which these solutions are taken to market will require a different type of channel partner, or for legacy partners to evolve their business models,” Kieninger said. “…As more cloud-based technology providers bill customers directly, partner commission models have flourished and now become vogue for the channel community.”

Kieninger pointed to the distributor ScanSource’s landmark 2016 acquisition of the master agent Intelisys. Kieninger said the move acknowledged the pivot away from pure hardware sales.

“It was a smart move for ScanSource to find a business model focused on cloud-based distribution underpinned by a residual commission model. A model which ScanSource’s CEO said could soon be worth more than their entire hardware distribution business,” Kieninger said.

Kieninger said the future looks bright for the channel partner community.

“This community continues to evolve while providing more sophisticated expertise and support than they have in the past,” he said. “IT leaders and CIOs will look to these companies for guidance and support as they make buying decisions for next generation technology.”