Insight, Logicalis CEOs: Tech Data-Avnet Deal Will Be Major Win For Channel Partners

Tech Data's purchase of Avnet's technology business will allow the distributors to marry Tech Data's low cost structure with Avnet's technical expertise, according to executives of two of Avnet's top channel partners.

"I think Tech Data sees the value in what Avnet brings to the table," said Vince DeLuca, CEO of Logicalis U.S., No. 30 on the 2016 CRN Solution Provider 500. "I think they'll get the best of both worlds out of the acquisition."

Logicalis does hundreds of millions of dollars of business with Avnet each year, and DeLuca hopes the influence of Tech Data's low cost structure will free up money for the combined company to provide more technologically advanced, services-rich solutions. Tech Data plans to pay $2.6 billion for Avnet's data center-focused Technology Solutions (TS) business, with the deal expected to close in early 2017.

"We have a lot of regard and a lot of respect for both companies," said Ken Lamneck, CEO of Insight Enterprises, No. 15 on the 2016 CRN SP 500. "We're supportive of the move, and we don't anticipate any problems."

Even though Insight already has deep relationships with Ingram Micro, Synnex and Arrow, Lamneck said Insight plans to maintain virtually all of its existing business with Avnet and Tech Data, which totals in the hundreds of millions of dollars each year for both companies. Lamneck said he isn't worried about an erosion in support or margins since both companies already operate on a massive global scale.

DeLuca similarly believes that Tech Data can use its cost structure to influence Avnet without diminishing the quality of support provided by the distributor today. Logicalis has sourced through Avnet for at least a decade, DeLuca said, and has worked closely with the distributor in recent years around cloud computing enablement, platforms and marketplaces.

"I don’t plan on making any changes [in my distribution strategy] because of this," DeLuca said.

Although Logicalis doesn't envision making any distribution-related changes, DeLuca said he will reassess if there's a degradation in price or quality in the future.

The Tech Data-Avnet deal will also put pressure on other value distributors to look at how their operating margins are shaping up, DeLuca said, creating the potential for further consolidation. The convergence of on-premise data center technology with cloud -- coupled with the blurring of lines between value and volume distribution -- is causing distributors to reassess their strategy, DeLuca said.

"I'm anticipating a certain level of consolidation," DeLuca said.

The distinction between broadline and specialty distribution has definitely diminished over the past decade, Inisght's Lamneck said, as traditional volume players got access to value-focused vendors such as IBM and HP for the first time.

The change, Lamneck said, has been driven by shifts in business strategy by the vendors themselves. IBM, for instance, is much less focused on hardware than it was a decade ago and volume distributorsare building up more capabilities around specialty technologies.

Logicalis' DeLuca is also seeing a convergence between broadline and specialty distribution, which he believes is driven by vendor consolidation, the commoditization of infrastructure, and the increased relevance of software and public cloud.

The acquisition will considerably augment Tech Data's effort to build a higher-value business, Lamneck said, making it one of the largest players in both the broadline and specialty distribution businesses. Insight leans heavily on Avnet for quoting and configuration work, Lamneck said, making sure all of the data center products work together and clients are given an accurate assessment of what IT they need.

Insight relies on Tech Data for volume products such as desktops, notebooks, software and peripheral devices, Lamneck said, as well as a little bit of value products. Logicalis, meanwhile, currently uses Tech Data opportunistically in areas such as stocking and inventory when Avnet is unable to deliver the product or service, according to DeLuca.

Lamneck said Tech Data CEO Bob Dutkowsky and Avnet TS President Patrick Zammit both reached out to him yesterday to ensure that Insight had no concerns about the deal. Zammit also reached out to DeLuca yesterday to explain what was behind Avnet's decision to sell its technology business to Tech Data, DeLuca said.

"I see a lot of cultural synergies between the organizations," DeLuca said. "I think this is a good move."