How is the role of the distributor evolving?
CRN takes a dive into how the relationship with vendors and resellers has changed, and where is the market heading
Channel distribution has evolved dramatically in its 40-year existence since the days of moving boxes from warehouses following major events such as the introduction of cloud and the Covid-19 pandemic.
Distributors have had to adapt to various changes thrown at them, often with doomsayers predicting the end of the sector.
Still, distribution has always prevailed, and adjusted "beautifully," as Westcoast MD Alex Tatham describes.
"Cloud was thought to be the thing that effectively moves everyone out of distribution. What you found was distributors set themselves up as an easy way of managing some quite complex transactional models, and some quite difficult conversations as people migrated to the cloud," he says.
Emphasis on recurring revenue and an advisory role
For some, the growth of cloud has given rise to cloud-focused distributors morphing their business practices to focus on recurring revenue, explains Aaron Watts, VP of sales at Pax8.
"We sit in a market where we operate against some of the world's largest providers. They haven't built huge multinational supply chains, where they become the masters that pick, pack and post physical products.
"With distribution today there's a huge amount of emphasis on recurring revenue, service and the explosion of SaaS over the last seven or eight years. The way in which distribution needs to serve partners is very different."
Watts explains distributors need to focus on the ongoing lifetime value they can deliver to a partner as their role is no longer determined based on the speed and availability of product in the digital world.
Instead, what's to be prioritised is partner engagement and adding value both in terms of ability to sell more to existing customers but also bringing new customers to their ecosystem.
Building on this, Rakesh Parbhoo, global CTO & SVP MEA at Westcon-Comstor, states the role distributors now play in helping partners develop their businesses, be they vendors or customers, is more crucial.
While he maintains the function of delivery fulfilment and supporting the partner base hasn't gone away, Parbhoo says the role of distributors today includes an advisory aspect.
Distributors should be there to help partners cut through the noise of the abundance of complex technology available and get down to the nitty gritty of what business solutions end users need.
"If you look at the cybersecurity space," he says, "there are so many offerings. If every partner has to do that themselves they can't scale. I think we bring scale to the channel.
"We still need the traditional warehousing, logistics supply chain capabilities, but you've got to do so much more than that now with the changing technologies.
"It's about software, services or consumption. And we need to help the channel navigate all of that and be better at guiding them to where the opportunities are."
Matthew Sanderson, SVP for UK&I at Ingram Micro, agrees the distribution landscape now covers services at a greater level.
"The role has somewhat shifted from product-centric to service-centric, focusing on delivering value and outcomes to customers," he says.
Nick Bannister, VP of sales for Arrow's enterprise computing solutions business in the UK&I and ANZ echoes that distributors have developed to usher partners to the right technologies.
"The channel businesses that thrive are those that have become advisors and consultants, creating a greater opportunity for collaborative relationships to drive growth.
"A distributor plays an important role in this dynamic. The breadth and depth of experience we have across our vendor relationships, and the expertise that comes with this is invaluable to our channel partners. Our expertise can support the resources and plug the skills they lack in-house."
As Westcon-Comstor's Parbhoo mentions, distributors today assist their vendors as well as their partners, something Frank Vitagliano, CEO of the Global Technology Distribution Council (GTDC) has also deciphered, describing them as "ecosystem orchestrators".
"What I mean by that is the ecosystem which is made up of all of the players in the IT space, requires somebody in the middle managing all of that, improving and providing the services both upstream to the vendors, and downstream to their customers that nobody else can provide.
"And so distribution has evolved to do that. A major part of it has been the emergence of their services and capabilities that go beyond just the hardware."
Vitagliano explains how in the past, distribution was solely about hardware.
"That's changing," he says. "The percentage of hardware is shrinking. But it'll never go away, there will always be a need for endpoint devices. But over time, what's happened is distributors have increased their focus on providing other types of services. And that has been a major change."
Keep reading to find out what trends these distributor leaders think will steer the market for the next few years...
How is the role of the distributor evolving?
CRN takes a dive into how the relationship with vendors and resellers has changed, and where is the market heading
Where is the market heading?
The distribution leaders we spoke to picked several key areas to lead distribution into the future, Telecoms, services, as well as value-added distribution being name dropped like it was a competition.
But one of the standout areas was data.
"We see the rise of data as being a huge component to enable our partners to sell more to either new or existing customers," says Pax8's Watts.
While the GTDC boss adds: "I think one of the most significant trends is data.
"The ability to mine the data, and then provide both the vendors and their customers insights based on the data."
Automation was also highlighted as a key trend.
"I see the future of distribution being much more about automation. Much more about serving the customer where they want to be and when they want to be," thinks Parbhoo.
"Whether they want to have an in-person conversation or they want to do something online to the marketplace."
A game changing trend that has burst onto the scene the last few years has been the introduction of cloud marketplaces.
According to a Westcon-Comstor survey of almost 300 channel partners in the UK and Australia, partners are looking to distributors, and in particular distributor marketplaces, to help manage a complex multi-vendor portfolio.
Yet it found that less than half (49 per cent) of partners are using distributor marketplaces.
Those partners who have started to utilise these platforms cite self-serve stock availability (49 per cent), online ordering (49 per cent) and pricing (42 per cent) as the biggest advantages.
They are still looking for better access to customer data (55 per cent), market data (39 per cent), and customer success training (46 per cent) out of their marketplaces.
Cloud marketplaces will be a major part of the future of distribution, Vitagliano believes.
"Every distributor is working on some form of platform. Their platform is really significant because not only is it a marketplace, but it also enables them to streamline the business process, starting with the vendor, right on to the solution providers.
"Over the next 18 months, what you'll see is, every distributor, if they haven't already, will begin to demonstrate massive investment in these platforms, because that's how people want to do business.
"It enables them to streamline logistics, sales, training, and financing. You've got to make it easy, because one of the most consistent requirements that we've had in the channel for a long time is ease of doing business."
Although there can be a few drawbacks to distributor cloud marketplaces, such as limited choice, costs and security concerns, the respective Watts from Pax8 and TD SYNNEX firmly believe cloud marketplaces are the way forward.
"From a digital distribution perspective, I think you're going to start to see the drop off of the term distribution, and you're going to start seeing a move towards ecosystem and marketplaces," says Aaron Watts.
"We're here to serve our vendors, which are upstream partners, and we're here to serve our downstream partners. The way in which we do that needs to continuously move with the direction and travel of the market which is this high demand and high consumption of SaaS solutions."
David Watts, managing director of TD SYNNEX UK&I, says that while it's complex and expensive, a cloud marketplace is a must.
"I think ultimately, marketplaces are essential for distributors.
"My bold claim would be distributors are best placed to run the best marketplaces. The reason why I think that is because it's in our DNA to deal with a great breadth of customers.
"We deal with all the hypercalers and we can represent lots of vendors within the solutions that people are trying to build because we deal with most of the tier-one vendors and lots of other vendors too."
What does the future hold? Distributors have their say...
How is the role of the distributor evolving?
CRN takes a dive into how the relationship with vendors and resellers has changed, and where is the market heading
‘The future is bright'
In a snap verdict answer, the distributor leaders across the board see the future of distribution as a bright one.
"When people have talked about whether distribution is valid, there are more distributors in Europe now than there have ever been. And distribution is bigger than it's ever been," says Watts of TD SYNNEX.
Tim Griffin, CEO of Exertis UK, is also positive in his prediction of the business.
"I see it as a healthy future. It's a bright future. I think it's one that's predicated on the complexity of system society and predicated on the complexity of the supply chain, which means that both vendors and resellers retailers are going to depend on distribution for many years to come."
Having previously worked in the reseller space at Softcat, Distology CPO Lance Williams admits he used to repeat the ominous doom of distribution. But now firmly stands by its future.
"When I was at Softcat I absolutely jumped on the bandwagon that distribution was losing importance and was regurgitating stuff I read in the media.
"But now being in distribution, and particularly in a cybersecurity distributor, there's no flipping way.
"The channel distributor performs such an important job for both vendors and channel partners, that if it was removed, I don't know how you replace it."
This is the fourth article in a series of features exploring distribution in the channel. Take a look at previous articles on vendor frustrations, the rise of value-added distribution, and distributor challenges.