5 Takeaways From The GTDC Summit On The Importance Of Distribution

A panel at the recent GTDC Summit gave solution providers the opportunity to get a first-hand look at vendor-distributor dynamics and how it might impact their own business.

Exploring How To Work With Distributors

The Global Technology Distribution Council, which brings together IT distributors and vendors to research channel issues and look at better ways to help channel-focused companies, used its annual GTDC Summit, held virtually this month, to look at issues impacting the global distribution community.

One major focus of the GTDC is exploring distribution trends and how vendors can better use distribution to reach the solution provider community in the face of challenging economic changes. During the GTDC Summit, this included a panel which featured a private equity company that invests in tech startups, three relative startups in various stages of working with distributors, and a distributor executive who explored the changing dynamics of working with distribution.

While the conversation focused on the vendor view of distribution, it nonetheless offered solution providers the opportunity to get a first-hand look at the vendor-distributor dynamics and how it might impact their business.

Distribution is an evolving business with a lot of moving parts, particularly when it comes to new vendors and new business types. Here is a look at those dynamics.

Get Distribution Involved Early

The channel, and the two-tier distribution model, can be an exciting place to factor in when investing in startups, said Scott Goering, vice president of Battery Ventures, a 37-year-old Boston-based investment firm that has invested in startups such as Nutanix and Cohesity.

When looking at an investment, a company’s go-to-market strategy is a key factor, Goering said.

“We’re not generally getting involved at the super-early stage where it’s just an idea and a whiteboard, but someone with a product and market,” he said. “And really scaling that across geographies and different sectors is a key part of what we’re looking for in a company.”

A technology developer should really start engaging with distribution and outside sales companies when they hit the $10 million revenue mark,” Goering said.

“From an internal perspective ... for the first few sales, we want the founders to be in the sales process. We want them to understand why people are buying their product and really nail that market fit. But from an external perspective, for the [distribution audience], I think it’s much more around, when is the company productized in a way that they can have multiple SKUs, that the pricing is sort of well understood, and that frankly they can support the ecosystem as they come through with opportunities.”

Looking At Engaging Distribution

Wireless edge networking specialist Cradlepoint, which earlier this month was officially acquired by Sweden-based Ericsson for over $1 billion, is in the midst of “heat-mapping” its distribution and go-to-market coverage, said Eric Purcell, senior vice president of global partner sales at the Boise, Idaho-based company.

“We’re really looking at our go-to-market with our distribution partners,” Purcell said. “I look at it by geo[graphy], by segment and by vertical ... and align our growth plan because we went from a device with a software license to a device that’s cloud-managed, that’s enabled by a SIM card. Every device that we deliver that’s managed by the cloud has a SIM card in it. So it’s a different type of go-to-market model, and we’ve been evolving ... our partnership. And we look to accelerate it.”

Cradlepoint has also been researching global market opportunities and readiness with an eye on how the company and its distribution partners can hold each other accountable, Purcell said.

“We’ve really looked at the maturity of the wireless infrastructure around 4G and 5G, the adoption around the world, the business landscape, the ease of doing business, how we can collectively work together from time to revenue and time to market when we go into new markets together,” he said. “And with that, we’re investing across the globe in a very prescriptive manner and have been supported by an incredible team. And we’re executing at a fast pace. And we can’t do that without the ecosystems that are in place today.”

Highlighting The Value Of Distribution

Pure Storage, a developer of all-flash storage technology and software for managing cloud-based storage, currently relies on two-tier distribution internationally, said Scott Goree, director and head of global distribution at the Mountain View, Calif.-based company.

However, Goree said, Pure Storage is only now looking at two-tier distribution for its U.S. and Canada business, with the federal government market being its initial potential two-tier distribution play.

“The challenge that’s presented is, going this long—and we’ve been transacting product for seven years and not having distribution in the U.S.—this lends itself to a view that distribution is a tax and not a value-add,” he said. “So there’s a perception that I’m trying to overcome internally with our sales leaders.”

Goree said he believes it is time for the industry to end the use of the term “distribution.”

“This is important for me as a vendor,” he said. “As I go in and talk to sales leaders [to] introduce distribution value to the go-to-market, there’s a lot of legacy thinking about what value the distributor provides,” he said. “You’ll hear ‘pick, pack, and ship,’ [but] those days are long gone. The traditional capabilities are still important, and we still need them, but that’s less than half of what the distributors are delivering in value. So we need a name change. I don’t know if it’s channel services provider. I don’t know if it’s aggregator. But as an industry, we’ve got to change the name.”

Evaluating Potential Channel Strategies For SaaS

Anaplan, a developer of a cloud-native SaaS application that digitally encodes business strategy and links it to operational plans, has been focused on a direct sales force, said David Tharp, vice president of the San Francisco-based company’s worldwide partner organization. Now, however, the company is seeing hypergrowth and facing the need to scale and improve efficiency and profitability, which tis pushing it to adopt a wider indirect channel strategy, he said.

Anaplan, which had its IPO two years ago, works with multiple large global systems integrators like Deloitte and Wipro, along with several regional channel partners, Tharp said.

“But our go-to-market motion has been the most complex and the most expensive model possible, which is the ‘sell with’ co-selling motion,” he said. “So partners are working with our direct sales team. And while that’s been good, and we’ve grown good practices with our partners, it’s time for us to evaluate our channel strategy because customers are ultimately going to want to buy Anaplan in different ways.”

As a result, Anaplan is looking at traditional indirect channels to market, Tharp said.

“And so we actually launched an MSP model as a pilot last quarter,” he said. “We’ll continue to evaluate and evolve that. So far, so good. And then we’ll continue to look at other models like resell and distributor models as part of the go-forward channel strategy.”

The idea of distribution in a SaaS-focused world is changing because the days of on-premises are over for the most part, Tharp said. SaaS vendors instead use a “land and expand” strategy where they initially land a sale in one part of company and then hopefully expand to other parts, he said. Such a strategy, if successful, leads to a focus on renewals.

“You don’t have to go back in every year two or year three of your contract to resell your software that they’re already under contract with,” he said. “Attrition, especially with renewals, is the kryptonite of a SaaS company. So we have to think about that in a distribution model. And that doesn’t mean you have to play the role of a servicer. But you have to be thinking about that in the value proposition for what we’ll no longer call a distributor, I think.”

One value distribution can provide to SaaS vendors is helping identify marketing blind spots and helping find new markets, Tharp said.

“In today’s world, where the pandemic and the geopolitical landscape has shifted which markets we want to go into for a variety of reasons, that’s a value-added service,” he said. “Just helping me do some market analysis, that I’d be all ears for.”

Distribution: One Foot In Digital Transformation, One In The Basics

Distributors are in the midst of a digital transformation aimed at helping them scale faster and move more quickly than in the past, said Cheryl Neal, vice president of strategy and vendor acquisition at Clearwater, Fla.-based Tech Data.

“So look to us as a distributor as you’re working out your own plans,” Neal said. “There’s a good chance we’ve already done it a little bit.”

At a time when the IT industry looks to move upstream in terms of technology, distributors still have to do all the basic functions that they have been doing.

“You still have to do all the logistics and all of that,” she said. “But now, there’s so much more to it. When you talk about logistics, and this applies definitely to the GSIs [global systems integrators], logistics include helping you as a vendor manage your compliance when you’re working with Third World countries. You have to work with a partner like a large global distributor that can help you manage some of that risk and help manage some of the VAT [value-added tax] and all of the craziness that goes along with that.”

Distributors like Tech Data have multiple types of customers, including company types such as ISVs, vendors in general, MSPs, cloud service providers and global systems integrators, Neal said.

“We all have our marketplaces, and [are] bringing it all together in a hybrid cloud environment,” she said. “There’s no better place to do that than with your distributor.”