CEO: Tech Data Will Be Destination Of Choice For Software Vendors

Tech Data CEO Bob Dutkowsky sees the distributor's quarterly earnings success as a payoff on many of the big bets it's made in recent years, from strategic acquisitions to focusing on emerging technology plays, like tablets and digital signage, to add to its core segments.

Dutkowsky's biggest bet, yet, however? That's software, which comprises about 17 percent of Tech Data's overall business now, but is an area where Dutkowsky believes Tech Data can be a game-changer. As such, the distributor plans to release a number of new tools and programs in the coming year to make the distribution of software licenses easy, even for VARs that shy away from messy licensing in favor of equipment sales.

"We'll be the most efficient, least costly, most reliable distributor of software out there," Dutkowsky said in a CRN interview Monday. "You will see us bring these things to the market, see them a piece at a time and then put it all together."

It's a topic to which Dutkowsky has returned several times in recent weeks. Beyond tools and services, Tech Data will also look to sell more software from its existing vendors, and attract new vendors, including independent software providers.

"We'll be the destination of choice for these vendors who develop software solutions and who are in the marketplace today looking for an efficient route to market," he said. "We hear VARs today who say, I'll sell the hardware and let someone else do the software. It's too hard to do and too error prone. But once we get our solution into the market, they'll want to sell the software."

Software sales also make Tech Data more attractive from an investment standpoint, said Dutkowsky, because processing software licenses is an efficient use of cash that allows Tech Data to spend more of its cash on hand keeping its hardware shelves stocked.

Software, along with tablet computers and digital signage, were among the technology areas Tech Data singled out during its third quarter earnings call Monday. Earnings handily beat Wall Street expectations, with profit at $50.46 million (up 17 percent from $43.14 million a year ago) and sales at $6.16 billion (up 9.2 percent from $5.64 billion a year ago).

Tablets were on Tech Data's list of fast growing technology segments for the first time this quarter, and tablet sales are only going to go up as tablet computers make enterprise inroads, Dutkowsky suggested.

"I think you're going to see, in the next six months, all of the players coming out with tablet technologies and stepping their games up," he said. "Everyone's going to get better at it. You have one company that's the first mover that has the advantage, and everyone then tries to one up him. This is a market that has lots of room for multiple players, and we have all of them on our line card."

Digital signage, data center and mobility, including smartphones, are also key growth areas moving forward, Dutkowsky said, and Tech Data will look to add technologies and vendors to its line card to support that growth.

"A few short years ago, we didn't even sell VMware, and today we are VMware's largest distributor in the United States," he said. "When we go, we go all in, and we take advantage of all the vendor has to offer."

Tech Data also bought five companies this year, bringing its three-year total of acquisitions to 12. Dutkowsky said the distributor will continue to seek companies throughout the world that make sense from an operational perspective.

Next: Cisco's Spooky Forecast, HP's Apotheker

During the conference call, Dutkowsky told analysts that Cisco's disappointing Q2 forecast -- and any softness in Cisco's business -- wouldn't necessarily bear out on Tech Data, even though Cisco is one of Tech Data's largest and most strategic vendors.

"When Cisco reports maybe some overall softness, underneath that is strength in a lot of segments," Dutkowsky said later to CRN. "For the segments we focus on for Cisco, Cisco represents a quarter of strength. The opportunities we have with Cisco are big."

Tech Data's biggest vendor, however, remains HP, which accounts for 28 percent of Tech Data's overall business. Tech Data, according to Dutkowsky, will have moved about $6 billion worth of HP products by the end of the year, and he expects the relationship to continue to thrive, even with channel uncertainty about Leo Apotheker coming on as HP's new CEO.

"HP is very important to us, and we're also very important to them, and we want to make sure that the relationship we've worked on for years continues," Dutkowsky said. "I have every confidence that will happen. We have relationships in every business unit, and we're an important route to market for them."