Business growth

Meet the future, it’s much like the present

The IT industry industry may be changing but the channel is as resilient as ever writes Billy MacInnes
Image: Stockfresh

10 January 2020

It’s strange to think that 2025 is less than six years away, that we’re not far off being a quarter of the way through the 21st century. Stranger still to think we’ll be a fifth of the way through it in less than a month’s time. I must admit that I hadn’t really been thinking along those lines at all but reading a report from the Global Technology Distribution Council (GTDC) entitled Tech Distribution 2025 helped push me in that direction.

The report includes the secondary heading: Drilling into the industry’s direction, evolving services & increasing channel value (which is a bit of a spoiler if you ask me as it takes away any suspense the reader might have been feeling). According to Vation, which conducted the research, it held in-depth interviews with “leaders from all dimensions of the technology ecosystem”, along with detailed survey responses from “more than 50 top executives on the most important drivers for distribution partnership success today and expectations over the next five years”.

Much of what the report contains will not come as too much of a surprise to those who have championed the channel cause over the years (although it may have done so if it had been published 25 years earlier).

Keeping up

The three main conclusions of the survey are: distributors have effectively evolved over the years to keep pace with the changing requirements of the IT industry; distributor core competencies will remain crucial in the future and cannot be easily replicated, if at all, by any other IT ecosystem participants; distributor value is on the rise and expected to thrive and gain momentum through 2025 as respective business models and portfolios transform.

The first two points are pretty much what the channel has been saying in its own defence for years whenever the indirect model has been under attack from those arguing the direct model was going to replace it. It didn’t happen in the last century and it looks unlikely to do so any time soon in this one. We can argue that the main reason for this is that distributors have evolved with the market to preserve and maintain their role within it, but you can also make a fair fist of suggesting that for all the talk of radical changes in the IT market, it hasn’t been able to evolve to the point where it can do without them.

Not only that, it looks as if distributors are going to become even more prominent if the report is correct in its summation that distributor value is rising and “expected to thrive and gain momentum through 2025 as respective business models and portfolios transform”. The report adds that the findings “point to distributors as increasingly strategic partners. If distributors continue to be agile and build new capabilities for the digital era, they will continue to grow at an accelerated rate”.

Now, the more cynical among you might wonder if an organisation called the Global Technology Distribution Council would say that, wouldn’t they, but it also makes the very strong point that distributors have been in existence for 85 years, beginning with what it describes as the Components & Systems Era of 1930-1990. If you view distribution in terms of that legacy, it becomes harder to believe it is in any real danger of being swept away in the near future.

The GTDC’s positive view of the future for distributors is buoyed by the finding that 42% of those surveyed believe their distribution business would grow between 11% and 20% by 2025 and close to a fifth (19%) predicted the figure could be greater than 20%.

Competent to the core

Another source of optimism could well be that, according to the report, “in many cases, based on industry interviews, the various sectors engaging IT distributors expect corresponding indirect sales to outpace direct business, if applicable. This represents a sea change where many companies had previously emphasised going direct, yet ultimately learned it was much more efficient and cost effective to leverage distributors and their channel customers”.

But it’s also significant, as the report notes, that through all the creation of new and enhanced services, the core competencies developed over decades from operational excellence in distribution volume to delivering integration services with technical excellence in value models have proven to be enduring. It argues that the era of digital distribution which we are now embarked upon “will further capitalise on the ‘building blocks’ of previous eras”.

There’s the rub. For all the talk at the end of the last century and the beginning of this one of ‘the end of distribution’ and the ‘death of the channel’, the underlying strength of the model endures because it’s close to impossible to replace it. And if you accept the timeline put forward in the report, it’s only 10 years and a few weeks until distribution celebrates its centenary.

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