Technology distributors are pursuing new markets and the result is a rosy financial outlook for the industry, the 2018 Outlook report released recently by the Global Technology Distribution Council (GTDC) found.
Now in its second year, the report, which is based on interviews with over 50 technology channel executives, highlights a sense of optimism on the part of technology vendors and their distributors. Seven out of ten vendors predict that they will increase revenue through distribution by a double-digit percentage this year (compared to a little more than half last year. The growth can be attributed to a combination of improved economic health in the world and the broader availability of digital technologies that enhance productivity.
“All of the report findings essentially confirm the fast-evolving value that distributors continue to deliver – well beyond point-to-point products and services that essentially defined the industry’s earlier years,” GTDC CEO Tim Curran said. “Comprehensive multivendor solutions are now undeniably imperative. Vendor partners ‘get this’ and are finding dynamic new ways to work with distributors in addressing increasingly complex channel and end-customer requirements. We expect 2018 to be a pivotal year.”
Getting the right technologies, including cloud, security, Internet of Things (IoT), and data center, in place and on offer will be critical initiatives for technology distributors. In the report, Michael Urban, corporate vice president, strategy, Transformation and Global Vendor Management at Tech Data, explained:
Digital is changing just about everything in the enterprise today, and distributors must evolve to the needs stemming from that change. In particular, our customers want to engage with us in a completely different way than ever before. They want to engage on a highly sophisticated platform, which allows them to learn, shop, buy and even post-service their customer needs. They want us to provide them with marketplaces that can stand up as their own franchise and have transparency all the way to their end user.
Tech distributors consider cloud a key investment for the second year in a row, but security has been added as the next most pressing concern. Cloud touches nearly every aspect of technology for distributors today. Meanwhile, three quarters of those surveyed report that security vendors will be the most active category for vendor partnerships in 2018. “Distributors are doubling down on cloud platforms, and actively and proactively working with a number of new security vendors,” said Curran.
Not every big trend in technology distribution will continue though. In the past, direct sales were a key initiative for many technology OEMs, but that time is waning. Last year, 7.3% of those surveyed said that they expect to increase direct sales, but this year that figure had dropped to only two percent. Meanwhile, 64% indicated that indirect sales would grow this year, compared to 61.8% last year.
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That’s good news for distributors who can offer customers help with multivendor solutions and who keep on top of new offerings, Curran said. In addition to hardware, technology distributors are offering software, applications, platforms, and services more than ever before. In the past year, the GTDC has identified 600 new technology vendors—and manufacturers and designers can find it challenging to identify, design in and source the products they need
“With the plethora of new vendors coming to the market, including security, cloud and IoT vendors, customers are faced with wanting to get best product available but realize it’s a lot of work,” Curran said. “All of the new things are complicated and that’s why the market looks to a distributor for knowledge, for help to integrate and build solution incorporating new products. A lot of change is going on and the distributors are right in the center.”
How do you see your relationship with your technology distributors evolving? Let us know in the comments section below.
— Hailey Lynne McKeefry, Editor in Chief, EBN