Distribution Roundtable: Don’t Call Us Distributors Anymore

The nation’s top distributors told CRN that the word ‘distribution’ doesn’t begin to cover all they do, with an array of services and solutions that touch every part of the IT ecosystem, from vendors to end-user.

The expansion of the cloud, and the demand for everything-as-a-service has changed the very nature of traditional distribution from “the barn and the bank” to a multi-faceted services organization that swoops in to help businesses scale by augmenting the capacity of the channel to deliver solutions to end users, the nation’s top distributors told CRN in an exclusive roundtable discussion.

“Distribution's a misnomer now. We're really solutions aggregators,” said Kevin Kennedy, senior vice president of advanced solutions with distribution behemoth Tech Data. “Whether you're talking about cloud. infrastructure, software, no longer are we the barn and the bank. We're solutions aggregators. We're putting together multi-vendor solutions on every level, from the infrastructure through the software layer, to the cloud. We're solutions aggregators. We're also digital change agents. We're really -- from the vendor out to the partner -- we're helping the whole digital transformation thing come to life because we're the few that touch every piece of the pie, all the way down to the end user.”

Kennedy’s comments came at a CRN Roundtable titled "The Changing Face of Distribution" which also featured senior executives from Ingram Micro, D&H Distributing and Pax8.

This new reality has spawned a business model that forces both MSPs and distributors to come to terms with the fact that sales are determined by how willing the customer is to renew at the end of every month. Solution provider Dean Edouarde, executive vice president with UGM Enterprises, Inc., in Los Angeles, Calif., said this shift has required “wholesale change” of how they carry out transactions.

“You don’t like Netflix? You cancel it. So that is also a new phenomenon for running a business, which is, you are pretty much 30-days cancelable, everywhere around,” Edouarde said. “First was to get over the shock of that statement … You have to get comfortable with the fact that our job is to provide hopefully superior service, but certainly service that meets or exceeds their expectations of what they signed up for so they don’t go somewhere else.”

Benjamin A. Niernberg, senior vice president of sales and services with MNJ Technologies, an MSP in Buffalo Grove, Ill., said this shift to services has sent MSPs clamoring for help from distribution with transforming their businesses at the very same time they are helping customers themselves transform. So the first place he saw distribution change was how it helped with billing.

“Answering your phone and shipping a product on time wasn’t good enough anymore. There needed to be true value for what we do for our customers, and in turn there needed to be true value for what distribution did for us” he said. “We had built our businesses as a cap ex, 30 day, eat what you kill purchase and sale cycle. So as society changed the way we consumed product, then our manufacture changed the way they wanted their end users to consume product, there are business ramifications for how we do that, both cashflow, billing systems, all of these things we didn’t have to encounter.”

Patrick Booth, president of CCB Technology, an MSP in Racine, Wisc., that has been family owned for 30 years, said the days of his Dad using the family basement to store boxes for sale to the end-customer are long gone. He said distributors have responded to the shift by pouring their own resources into building out services, which helps to give him confidence and a partner when it’s time to sell those solutions to end users.

“The coolest thing about disty is that they have not sat on their hands. They have evolved, and they’ve been growing,” he said. “Disty has come alongside and said we’re not just pushing product, we’re actually pushing solutions with you. We’re here. I don’t have to spend the money to do it. They’re pouring the money into it for me. That’s the key to anything. They’re helping me make it easy. Not just on the product. That’s what we started with. Now we’re delivering the solution behind the product and helping train the customer, but also equip them to help them go further with the product.”

That change does not just apply to enterprise customers or large MSPs, Peter DiMarco, vice president of VAR sales at D&H, which works with small to midsized businesses ,said on their end it comes down to working with every part of the “ecosystem” from end-to-end.

“We're really connectors. …We have to connect all the dots,” DiMarco said. “We have some very creative things to do in open marketplace, bills, applications, solving those problems is what we do right across every element in the ecosystem.”

D&H Distributing recently introduced its next-generation cloud platform with PSA integration, along with new hardware integration for its Device-as-a-Service business and expanded its collaboration offerings new as-a-service options,

Tim FitzGerald, vice president of cloud channel sales North America for Ingram Micro Cloud, said for him, there’s no single word that adequately describes all of the services distribution is expected to deliver to the many parts of the IT supply chain that its business now touches.

“I don't know that there's one term because, as I mentioned earlier, the types of different companies that we're connecting together are all different,” he said. “They consume our value in different ways and in different mixes. I seem to land on something along the lines of ‘ecosystem developer.’ We're bringing together providers of IT and consumers of IT. This happens to be in IT solutions, but we, again, sit in the middle and operate and bring value in lots of different ways between providers and consumers.”

Ingram Micro recently enhanced its Ingram Micro Cloud Marketplace with new capabilities to help solution providers and ISVs more easily do business with each other.

Even in their public filings, distributors are loathe to describe themselves as such. Synnex has struck the word from their 10-K filing. In its last annual report before being taken private, Ingram Micro spent 150 words explaining its business before mentioning that it is a distributor, and while Tech Data still tells investors it is a distributor, it describes its services, support, and solutions in far greater detail.

“To really understand how distribution is changing, you have to understand what the consumer is doing. Those small businesses that resellers sell to,” said Michael Diamond, an analyst who researches two-tier distribution for The NDP Group. “Those businesses have to change to match that consumer behavior. Then the partner trends change based on that too, then the distributors change based on that. So you have to look at it as a domino effect. If younger generations are demanding 24 by 7 ordering and they’re buying from anyone, anytime, well that means that you need 24 by 7 web servers and you need a web application firewall to protect that, then you need mobile application development, so you are ordering from your phone, which brings in things like dynamic security testing software.”

As the only born-in-the-cloud distributor, red hot Pax8 has a front row seat to the disruption its own model has caused among its rivals. Chief Channel Officer Ryan Walsh said even when Pax8 started, the term “distributor” didn’t seem to capture everything the company offered.

“So we called ourselves different things, but what was anchored with our partners was they still related to distribution. We just had to say it's tied to cloud,” he said. “We talk about it and it needs to be reinvented, but there's this notion, I think you're absolutely right, that you're pulling together solutions, you're bringing something to market now that needs to be delivered faster, quicker. Those things are very different in terms of how we do it and I don't know where there's a better term because we tried to find something different and it didn't work.”

Back in Los Angeles, Edouarde said the change in distribution was one of the catalysts behind his decisions to change how he refers to his own business.

“I don’t think we would call ourselves an MSP anymore,” he said. “I think we would call ourselves a BSP – a business service provider, because quite frankly, more and more of what we do is having to do with SaaS models or PaaS models and reselling things like Azure and AWS, in terms of back up and recovery. So when Tech Data calls himself an aggregator, I would say that might be a true vision of where distributors are going.”