Answering 10 Burning Questions About ScanSource 'NewCo'

News of a proposed ScanSource subsidiary that would sell technology to end users in an agency model is only starting to capture the attention of the channel.

The yet-unnamed subsidiary, for now dubbed "NewCo," is indeed in development, ScanSource chairman and CEO Mike Baur confirmed last week at the Channel Partners Conference & Expo in Las Vegas. Baur, who also serves as interim president of ScanSource's tech services distributor (TSD) subsidiary, Intelisys, said NewCo will function as a separate business from Intelisys while using Intelisys as its exclusive TSD.

NewCo will buy books of business from agents who are looking to sell or liquidate. Furthermore, NewCo will develop platforms, tools and personnel that will manage and expand those customer bases.

ScanSource's Mike Baur

The announcement confirmed what Baur had already said at Intelisys' Club TPC trip weeks prior. Partners on the trip said they registered surprise when Baur said ScanSource was planning on creating its own customer-facing agency. After Baur publicly announced NewCo on the keynote stage at the Channel Partners Conference & Expo, discourse among agents reached a fever pitch.

Clarifying ScanSource NewCo

Chief among partners' concerns is Baur's admission that "channel conflict" would be a byproduct of NewCo. Baur said NewCo would improve upon where he said most agent rollups have failed — generating enough new bookings after the initial liquidity.

Related:ScanSource Launching Agent Subsidiary, Eying M&A Targets

"When we take that book of business, we can't just farm it. The suppliers don't want us to farm it to zero," he told Channel Futures.

Above: The Coffee with Craig and James podcast tackles the debate over ScanSource "NewCo."

Baur told us that NewCo will develop a process to ensure it avoids competition with Intelisys agents over prospective customers. He and multiple partners also responded to partner concerns about ensuring data siloes between Intelisys and NewCo.

Partners React

Ashley Rowland, co-founder of agency Adaptiv Advisors and the Technology Advisor Alliance, said partner responses run the gamut.

"Some people are outraged that a TSD partner would compete with their agents. Others are annoyed that Intelisys is being singled out because they say other TSDs do the same thing but market it differently," said Rowland, whose LinkedIn post about the deal generated more than 200 comments.

She said the most important takeaway is that technology advisors are demanding more transparency from their TSD partners.

"It’s bringing to light the fact that many TSDs or smaller TSDs groups also have agencies. This can be marketed as a good thing or marketed as a bad thing. It’s up for every technology advisor to decide for themselves. All of the reactions are valid," she said.

Channel Futures spoke to about 20 sources – ranging from Intelisys agents and suppliers, to its TSD competitors. Many of them (including some of Intelisys' most decorated partners) asked to speak on background.

Scroll through the 10 images above for deeper context on what ScanSource is launching, why it's doing it, and how the market is responding.