Distributor CEOs: 2015 Will Be A Good Year For The Channel

As 2014 slowly but surely comes to a close, next year is shaping up to be a strong year for the channel, CEOs of major distributors said in a series of recent interviews with CRN.

While all of the executives said that the future is hard to predict, especially in an industry that changes as rapidly as the IT channel, they said that they are all expecting growth over the next year. Much of their predictions were based on strong 2014 numbers, with many of the distributors posting double-digit, year-over-year growth in their most recent second-quarter earnings reports.

Mike Baur, CEO of ScanSource, said that 2014 was a "good year" for the company, with the numbers showing earnings jumping 135 percent over the year before to $81.8 million.

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"We think the business is healthy right now," Baur said. "I think there's momentum through 2015. I think now is the time to be doing some new things because we have some growth."

Helping drive this growth for ScanSource, he said, is the incredible flux in the industry, as solution providers turn to distribution more and more to help sort it all out. That is a trend Baur said he expects to continue going forward, and something ScanSource can continue to capitalize on if it stays focused and maintains customer trust.

D&H, already in its fiscal year 2015, also is seeing high growth numbers for the year so far. Co-President Dan Schwab said the business is already up 20 percent in the first four months of its fiscal year.

"D&H for me is very bullish ... We're outpacing the channel through our demand generation," Schwab said.

Given the improving economy and recent double-digit growth numbers, Synnex CEO Kevin Murai also said that he is expecting a positive year in 2015, though he said it can be difficult to predict.

"It's hard for us to [forecast growth], and, frankly, I would subscribe more to the third-party forecasts, but my assumption is that the economy is going to continue to be OK, and technology is going to continue to do better than that. And we're going to do better than that too," Murai said.

Avnet CEO Rick Hamada agreed that an improving economy was a major indicator for a healthy year ahead for distribution and the channel, in particular, highlighting recent GDP growth.

"Within technology, there's always winners and losers and new entrants and refreshes and lots of changes going on. When we think of the big picture as far as planning out our business, we're big fans that ultimately we believe that IT spend is a function of what is going on with overall GDP growth ... We believe that a healthy and growing economy lends itself to more general improvement in business investment and, of course, from a capital expenditure point of view. IT is a big part of that. From the very highest levels ... growth is good," Hamada said.

NEXT: Distributors Reveal What Technologies They See Driving Growth Through 2015

While the economic data can provide a good indication of the potential year-over-year growth for the distributor, Hamada said that Avnet turns to its suppliers and customers to pick out the technology and product trends in the marketplace. He said that decisions around those trends are what drives growth on a quarter-by-quarter basis.

For Avnet, Hamada said those quarterly technology trends the distributor is keeping an eye on for the start of 2015 include software defined networking, software defined storage, software defined data centers, hybrid solutions and solid state storage.

"Those are the things that play out on a more quarter-by-quarter basis, as opposed to the big picture. We always look at things multiple ways, but at the end of the day, the big picture in our planning assumptions are generally tied to where the economy expectations are," Hamada said.

Tech Data's Bob Dutkowsky said that the technologies he sees as key center around mobility, cloud, and big data and analytics. Wrapped around all of that, he said, is the growing importance of securing all that technology. For traditional technology, Dutkowsky said he sees the PC as a "born again product," and resellers can expect Tech Data to continue to focus on the technology, in addition to data center and software technology.

Synnex's Murai said that he sees key technologies on the consumer side and health care, as well as an upcoming opportunity around Server 2003 support as Windows XP expiration boosts begin to dwindle.

D&H's Schwab agreed that Server 2003 was a huge opportunity in 2015, though he said that D&H is still seeing the benefits of the XP support expiration in its small-business reseller clients.

Further, Schwab said that he saw particular opportunity around the Internet of Things and the adjacent technologies IoT brings to market.

While there are many areas of opportunity, Murai said that it is important to recognize that growth isn't homogenous, and there will be some categories that will be down while others skyrocket.

"There are going to be a number of categories that are going to be very high growth. There are going to be a number that aren’t going to do so well. How you have to navigate through that is you have to figure out where the growth is coming from and how to shift your resources to take advantage of that. But, there's a lot of exciting things happening," Murai said.

PUBLISHED SEPT. 18, 2014