Specialist IT Channels to shine in digital era: Rich Hume, Tech Data

IT distribution in time will absolutely, unequivocally, serve the market in the physical and virtual world, says Rich Hume, CEO of Tech Data.

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Tech Giants HP, Apple, Cisco, Microsoft amongst hundreds of others rely on distribution conglomerates like Tech Data Corporation to accelerate the GTM of their technology products, services and solutions. 

Tech Data enable channels and resellers to efficiently and cost-effectively support the diverse technology needs of end users organizations across 100 plus countries. ChannelWorld spoke at length with Rich Hume, Chief Executive Officer, Tech Data Corporation on his India visit on the evolving ‘vendor- disty- channel’ landscape with growing business opportunities for channels around technical and business support services.

Edited Excerpts. 

You succeeded Bob (Robert M. Dutkowsky) a little over two months ago as CEO of Tech Data. Any major initiatives from your end that’s looking good for future?

I joined Tech Data around two and half years ago. There was an intent of transitioning to become the CEO which obviously happened almost exactly on the schedule that was laid out. When I came in, I had the responsibility for the regions, then I took on the responsibility to lead the acquisition (of Avnet), then head up the strategy and I had all of the organization with the exception of the support functions under my responsibility. 

The day I became CEO, the question was asked to me – ‘We know about your strategy and your operational execution, what will be different?’ I told them, frankly, that I spearheaded the strategy and operating plan for the company, and hence looked at the future as a reflection in the mirror because I was one of the primary, if not the primary, ideators of these initiatives. Bob and I are a lot the same with some small differences. Bob grew up in a sales organization while the first half of my career was spent in a finance shop. People engaging with us can see those subtleties and differences in the way we engage and react in what we do. However those subtleties certainly show around the major initiatives we are pursuing as a company. 

Tech Data continues its focus around a four pillar strategy to move into the future. We are investing in new technologies around cloud, analytics, IoT, security and services. The second one revolves around optimizing our global footprint which is really important for APAC region (with acquisition of Avnet). We are digitally transforming Tech Data as digital obviously is a great opportunity from sales perspective as well as repositioning into the enterprise perspective. The fourth pillar is around growing our portfolio and keeping a healthy mix in our overall product portfolio.

At a Glance : Tech Data Corporation

1

Executive Management

Robert M. Dutkowsky, Executive Chairman

Rich Hume, Chief Executive Officer

Charles V. Dannewitz, EVP & CFO

2

Scale of Operations

44 years in IT distribution

14,000+ employees worldwide

$36.8 billion in sales for fiscal 2018

100+ countries served

3

Business Areas

1000+ Market leading vendors

125,000+ IT reseller customers

150,000+ IT products sold

50,000 daily transactions 

In early 2017, Tech Data completed its acquisition of Avnet for $ 2.6 billion. What’s the report card in terms of integration of both companies’ channels? Does some cracks exist?

Tech Data did not have a presence in APAC region before the acquisition, although there were some activities in APAC which were mostly to align with Tech Data’s practices etcetera. We also have to align them within our IT landscape. The integration has gone extremely well and it is nearing completion before the end of this year. 

I think that we are ready to move forward and undertake whatever efforts are needed, and focus on integrating them with the rest of the team, who are focused on our strategic deployment. All the oars in the organization will be pulling to go and accelerate our strategy moving forward.

A major pain point for channels during M&A is the change of guard in terms of account managers, strategy of joint entity etcetera. Are your channels discontented or confident with the merger? 

I can look you in the eye and tell you with confidence, the support we got from vendors and customers is unprecedented in bringing together the two companies. Both constituencies see the value, and there has been very minimal disruption, if any. Literally if any at the customer level, had any size or order of magnitude to it. In Asia, we did not have that presence, as we were single threaded and we just picked up the Avnet TS piece.

Last few years witnessed HNA group buying Ingram Micro, Exclusive Group buying Transition Systems – to name a few. Does frantic M&A in IT distribution space indicate a crowded market, or is there still enough money?

It’s good for the market and I want to lead with an example. Prior to coming together, the margins in distribution were quite thin, as there isn’t a lot of bottom line opportunity. 

Tech Data had its own set of initiatives around new technologies and had a group of people focused on that strategy. Avnet TS, had its focus on the new technologies and so maybe both companies were proceeding in a marginal type of way. But bringing together the two you have a formidable group that can really help to advance the agenda for vendors and customers in a more accelerated way with added capabilities. 

That’s exactly why we bought Avnet TS. When you see the current market drift and our base capabilities, the two put together makes it powerful and industry leading, because of bringing both the skillsets together to engage in the market. I see it as healthy path, with regard to how things have transpired for us and for Avnet TS piece.

What term would you associate with Tech Data as a company - Distributor or VAD (Value Added Distributor)? You and competition like Ingram Micro are becoming more of Cloud aggregator companies for tech vendors and their channels.

Set the name aside for a moment and let’s discuss the realities of the current landscape. Around eight years back, when cloud came, everything was assumed to move to the cloud and the traditional work would disappear. Everyone was in pursuit of that strategy for a moment but today the market has sorted out as all major vendors have the same value proposition— it is called hybrid cloud. 

Some of the categories that were traditional hardware and were declining through time, are beginning to grow again. Hybrid is going to be the way forward. And that means the distributor has to serve the market in both the physical and virtual world. We, Ingram Micro, and others, are hard at work on really building our digital platforms. Internal to Tech Data, we call our platform StreamOne launched eight years ago. It has capabilities to grow, and in fact every year we feed more incremental investment into StreamOne. In time, I think that distribution will absolutely, unequivocally, serve the market in the physical and virtual world. As we come on that journey, clearly, there is an expectation that we will be more solution-oriented. Solutions aggregator might be a good term but not just in the virtual world, both in the hybrid world – physical and virtual.

How is Tech Data preparing its army of channel globally? It seems tough to maintain an equilibrium between the traditional channel partners (box pushers, hardware sales), and new ‘born in the cloud’ and MSP partners?

For the traditional  channels, it is more of a wait and see, and now as hybrid cloud emerges, they are really beginning to engage in a significant way on how they participate in that world. Some of the major cloud vendors are making big investments in turning on their capabilities through the business partner ecosystems. They are coming with the investments, skills and capabilities and we are working with that partner, advising them based on their core competencies how they should transition their business.

The second group is the born on the cloud partners, who are emerging fast. They are more single threaded on the virtual world and they are actually helping to push us to deliver our capabilities. At the end of the day, the traditional buy / sell relationships are becoming much more blurred. Within the marketplace, in the old world if one were to exist, you would see resellers and solution providers, now you see ISVs, systems integrators and MSPs— all coming together and the trade is happening in both directions. 

Lastly, StreamOne is built towards our partners using the same exact infrastructure to their marketplace and their end customers. White labelling StreamOne, and then you have the integration and transparencies with the APIs and the vendors, into the StreamOne, into the reseller portals, which is StreamOne white labelled all the way to the end-users.

... Most of the time, the Cust- Sat or net promoter score are better when they are served through the channel ecosystem versus those customers served directly. That’s because the channel has perfected the art decades ago on how to make the complex into simple and remove the friction that generally exists in the cycle of a direct engagement.
Rich Hume
Chief Executive Officer, Tech Data Corporation

In the digital transformation world, partners face the challenge to move beyond just talking to CIOs, but interact with LOBs, CSOs or CFOs as buying power and IT budgets have shifted at their customer end. How does Tech Data help channels grapple with these new buyers and also new business models like OPEX?

When you look at why the shift is going on, it is because of the new technologies, all these application-based information, all the analytics-based information and there is capability now that doesn’t necessarily require the CIO to be in the middle of things. It is a major challenge for not only the partner ecosystem but also for our vendors and they traditionally have the same relationship patterns that we had. 

Calling on the CFOs to sell them an analytics-based predictive forecasting tool, requires you to know about what the CFOs do. We encourage our vendors to be aware of what’s going on and then encourage them to think about their specialization, or functional category within industry. In large markets throughout the world, we provide industry specialization modules, as we can help you with all the healthcare/ financial services assets. We stood up these practices, internal to Tech Data, to help train those partners who want to engage within the dimension of industry or functional selling. We see it as a major facilitating and training effort, to give them some competency to move into that realm. 

What would be your list of successful mantras for IT channels? Do you foresee System Integrators becoming popularly known as digital integrators?

The successful mantra of moving to the future is to have a very candid point of view on what the core competencies of the partner’s enterprise might be, and then a study of their local markets and where they have the support and perhaps ecosystems around them to help them pursue a market. Pick one, build the capability, and then go drive that business. Certainly within the digital realm, everything is digitizing today. We tell partners and talk with them, and carry out different type of workshops and engage to help them think about the future of the business.

System Integrators play a huge role whenever a new technology comes to the forefront. They are at the forefront for first of a kind implementation. Consider smarter cities, or smart buildings, consider road maintenance/ toll charging etc. The system integrators lead them. Most of the deployment of the front end of the technology curve are custom engagements. As the system integrator and the ecosystem around them learn, then the packaging of offerings and solutions starts. And when the packaged thing becomes SKU’ed then it reaches the masses.

The talk of analytics and IoT for the past half a decade and more— all the work on the front end have been done by system integrators. Large shops, small shops and now in the very near future, we will see it being monetized across the masses. Once it becomes a packaged offering, that’s when the broader channel is able to come and bear its leverage on deploying it.

A prevalent fear factor amongst channels is the resistance to explore non-hardware IT as they believe that CIOs can spin off a cloud or a workload off Amazon or Azure. With the demand for on-premise (hardware-centric) infra on a way down, is there a future for channels?

Channels have a future as big tech vendors actually are coming to us today for help. If they (tech OEMs) would take over the world, they would not be coming to us for help. One piece people forget to think about, is the customer. With the customer, all vendors have a limit relative to the amount of sales and technical resources they can bring to bear in the market. They draw a line and say these customers one through X are going to be served our capabilities, then customers X plus one through the next thousand are going to be served by the channel. 

In the physical world and the virtual world, that has not changed. Only the way to serve those customers is changed. Gone are the days of being able to come on and add on an incremental physical server or maintain the data centre; now are the days of building services around those core cloud offerings that allow customers to extract more value, and being able to come in and advise on using data and analytics to go and drive a better business outcome for that particular enterprise that you are serving. So, there is an extraordinary amount of work for the channel to do. It’s just a matter of really understanding what opportunities each of the solutions provider or systems integrator or reseller wants to focus on, going forward.

Another thing which is generally true across the landscape is net promoter score at the end user level or customer satisfaction or however you want to measure it. Most of the time, the Cust- Sat or net promoter score are better when they are served through the channel ecosystem versus those customers served directly. That’s because the channel has perfected the art decades ago on how to make the complex into simple and remove the friction that generally exists in the cycle of a direct engagement. 

Rich Hume’s Success Mantras for Enterprise  IT channels

1

Have a candid point of view on core competencies, study local markets, and seek support from ecosystem (OEM & Disty).

2

Pick one competency at a time, build the capability, and then go drive that business in entirety.

3

System Integrators are always at the forefront for first of a kind implementation of new technology.

4

The market is drifting from horizontal solutions to more vertical solutions that will serve partner ecosystem well.

5

Selling to LOB (beyond CIOs) is a vertical thought that requires partners to have domain expertise of that vertical.

6

There is a world for generalists and specialized channels, but the real value and big growth in future lies in specialisation.

Do you feel specialist channels on a particular vertical or tech domain will be the flavor? Or generalist ‘PC to cloud’ partners will excel?

The market is moving away from the horizontal solutions to more vertical solutions. By definition, focusing on some level of segmentation will serve the partner ecosystem well. Certainly there is going to be a lot of horizontal work; but the new thing, the growth area is around the vertical work. Like the need for an LOB selling, well, that’s a vertical thought, if you are going to sell to a line of business, they want you to bring that presentation in the context of their industry. I believe there is a world for both, for specialization, is where the real value will be, where the real profits will be and where the growth will be moving forward.

Channels always expect big margins from you amongst other things like trainings, deal registrations. What do technology OEMs you have alliances with expect from you?

The tech vendors are expecting for us to, in a much accelerated way, help them to get their new things to market. With evolution of the virtual world, they want to move more towards a run-once relationship, where things previously got created processes in the physical world – country by country. Now the engagement is at a global level where distributor and vendor agree on the strategy and the program to deploy it globally. If you think about our marketplace, it is a run-once platform. If this were three decades ago, Europe will have its own flavor, parts of Asia will have another flavor, the United States will have another flavor. All the vendors will engage locally with their agenda. Now it’s engage globally and come down and have everyone aligned to execute locally.

The big technology trends you see in 2020.

We don’t have to look further beyond the trends that are alive right now. Big Data, Analytics and IoT are going to run for decades in front of us. Cloud is a reality moving from hype to reality for most industries at large. Enterprise Mobility will see increased demand with 5G connectivity becoming mainstream soon.