The Whys and Ways of IT Distribution

The Whys and Ways of IT Distribution

Steve Raymund

Chairman EmeritusChairman EmeritusGlobal Technology Distribution CouncilGlobal Technology Distribution Council

and and

Chairman and CEOChairman and CEOTech Data CorporationTech Data Corporation

Steve Raymund

Chairman EmeritusChairman EmeritusGlobal Technology Distribution CouncilGlobal Technology Distribution Council

and and

Chairman and CEOChairman and CEOTech Data CorporationTech Data Corporation

Distribution Value Proposition Distribution Value Proposition

— Containers vs. piecesContainers vs. pieces

— 1000s daily1000s daily

— Limit exposureLimit exposure

— Coverage and reachCoverage and reach

— Offload account Offload account management, support management, support

— Solution selling, variable Solution selling, variable cost structurecost structure

— JIT delivery, Qty. 1+JIT delivery, Qty. 1+

— OutsourceOutsource

— Working capital sourceWorking capital source

— Personalized servicesPersonalized services

— Offload SG&AOffload SG&A

— Consolidated Consolidated purchasespurchases

OEMsOEMs VARsVARs

BenefitsBenefits

Break bulk, ship small Break bulk, ship small

ordersorders

Manage IT ordersManage IT orders

Credit shieldCredit shield

Sell to 100,000+ Sell to 100,000+ resellersresellers

Sales and tech supportSales and tech support

Full assortment, Full assortment, one-stop shopone-stop shop

ServicesServices

Evolution of IT Distribution Evolution of IT Distribution

Direct model not sufficient to meet overall demand

75 days of supply (45 + 30 at reseller)

Focus on pick, pack and ship

Credit services key

Direct model not sufficient to meet overall demand

75 days of supply (45 + 30 at reseller)

Focus on pick, pack and ship

Credit services key

Niche market specialization begins

50 days of supply (35 +15 at reseller)

Service offering expands (end-user delivery, tech support, education, etc.)

Niche market specialization begins

50 days of supply (35 +15 at reseller)

Service offering expands (end-user delivery, tech support, education, etc.)

Streamlining the channel: Full drop- ship to end users

25 days of supply (no DOS at reseller)

E-business entanglement

Collaborative Supply Chain Management

Streamlining the channel: Full drop- ship to end users

25 days of supply (no DOS at reseller)

E-business entanglement

Collaborative Supply Chain Management

Direct Or Direct Or Indirect?Indirect?

What’s your core What’s your core competency?competency?

What are your fully loaded What are your fully loaded costs by channel?costs by channel?

What’s your ROI by What’s your ROI by product by channel?product by channel?

What Questions Are You Considering? What Questions Are You Considering?

BTO vs. ProprietaryBTO vs. Proprietary

R & DR & D

Intellectual propertyIntellectual property

Component volatilityComponent volatility

Gross marginGross margin

SG&ASG&A

Differentiation vs. Differentiation vs. commoditizationcommoditization

Competitive success factorsCompetitive success factors

What’s it cost?What’s it cost?

ABC fully loadedABC fully loaded

Margin better on Margin better on direct, costs direct, costs much highermuch higher

Where does Where does direct make direct make sense?sense?

Channel Strategy

Ahead

BTO in Enterprise?BTO in Enterprise?

The Direct Issues and Success Factors The Direct Issues and Success Factors

— JIT (Intel price JIT (Intel price strategy favors higher strategy favors higher inventory throughput)inventory throughput)

— Higher order value = Higher order value = lower sales cost lower sales cost

— End-user self service is End-user self service is criticalcritical

— Low margins may not permit Low margins may not permit multiple participantsmultiple participants

Do you have the Do you have the competencies to execute?competencies to execute?

Will additional logistics Will additional logistics infrastructure investment infrastructure investment generate the right ROI?generate the right ROI?

It comes down to two questions….It comes down to two questions….

Small order size = Small order size = small $ per customer small $ per customer

BTO in SMB?BTO in SMB?The Direct Issues and Success Factors The Direct Issues and Success Factors

= HIGH...= HIGH...

— Support costsSupport costs

— Marketing costsMarketing costs

— Sales costsSales costs

— One-to-one One-to-one

logistics costslogistics costs

NEEDS...NEEDS...

— Complete product Complete product recommendationsrecommendations

— IntegrationIntegration

— DeploymentDeployment

— SupportSupport

— UpgradesUpgrades

MULTIVENDOR solutions MULTIVENDOR solutions are best suited to... are best suited to...

Generate MARGINS sufficient to Generate MARGINS sufficient to cover costs cover costs andand

make PROFITmake PROFIT

ProprietaryProprietary

— Higher SG&A $ and Higher SG&A $ and higher margin $higher margin $

— Maintaining channel Maintaining channel loyalty loyalty

— Focus on core Focus on core competenciescompetencies

— Creation of Creation of intellectual propertyintellectual property

— Product Product differentiationdifferentiation

— Demand creationDemand creation

The Direct Issues and Success FactorsThe Direct Issues and Success Factors

Where’s the Best ROI and Why?Where’s the Best ROI and Why?

OUTSOURCE OUTSOURCE the non-core the non-core competencies competencies

OUTSOURCE OUTSOURCE the non-core the non-core competencies competencies

Manufacturing Manufacturing

Credit services Credit services

Demand capture Demand capture

Transactional selling Transactional selling

Logistics Logistics

Multivendor solutions deploymentMultivendor solutions deployment

Manufacturing Manufacturing

Credit services Credit services

Demand capture Demand capture

Transactional selling Transactional selling

Logistics Logistics

Multivendor solutions deploymentMultivendor solutions deployment

Where Do We Go From Here?Where Do We Go From Here?

GOALSGOALS

Pricing efficiencyPricing efficiency

Minimal work-in-progressMinimal work-in-progress

Minimal inventory Minimal inventory in channel in channel

Great demand generation, Great demand generation, capture, solution selling, etc.capture, solution selling, etc.

GOALSGOALS

Pricing efficiencyPricing efficiency

Minimal work-in-progressMinimal work-in-progress

Minimal inventory Minimal inventory in channel in channel

Great demand generation, Great demand generation, capture, solution selling, etc.capture, solution selling, etc.

““Virtual Single Virtual Single

Supply-Chain Supply-Chain

Company”Company”

The New ParadigmThe New Paradigm

Collaborative Supply Collaborative Supply

Chain ManagementChain Management

— Requires joint commitmentRequires joint commitment Vendors, distributors Vendors, distributors and and solution providers solution providers

— Three critical focus areasThree critical focus areas Procurement (more rapid time to market)Procurement (more rapid time to market) Promotion (clear consensus on what to sell)Promotion (clear consensus on what to sell) Pricing (strengthening our mutual processes)Pricing (strengthening our mutual processes)

Optimized Results Ahead

Taking a Lesson From Our PastTaking a Lesson From Our Past

0

20

40

60

80

1980s 1990s 2000s

Inventory progressInventory progress

Vendor and Vendor and distributor distributor contacts contacts negotiate negotiate outcome outcome

Vendor contact Vendor contact addresses or addresses or

escalates escalates issuesissues

Distributor Distributor alerts alerts

vendorvendor

PRICING becomes PRICING becomes the challenge the challenge

Pricing process Pricing process

Resolution OR Resolution OR lost sale?lost sale?

Day

s o

f S

up

ply

Day

s o

f S

up

ply

VAR sales contact VAR sales contact alerts alerts internal internal purchasing purchasing

departmentdepartment

Reseller alerts Reseller alerts distributordistributor

TOGETHERTOGETHER We Can Drive We Can Drive Unprecedented Efficiency Unprecedented Efficiency

Seamless “One-Company” Market StrategySeamless “One-Company” Market Strategy

TOGETHERTOGETHER We Can Drive We Can Drive Unprecedented Efficiency Unprecedented Efficiency

Seamless “One-Company” Market StrategySeamless “One-Company” Market Strategy

TOGETHERTOGETHER We Can Drive We Can Drive Unprecedented Efficiency Unprecedented Efficiency

Seamless “One-Company” Market StrategySeamless “One-Company” Market Strategy