Top Distribution Trends of 2023: Cloud, Commissions and E-Commerce
The evolving relationship between distis and hyperscalers. Margin questions at the TSDs. That and more in this roundup.
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Service providers in IT and telecommunications recognized the tech services distributors (TSDs) who are kicking butt and taking names.
For contact center provider Nice, Intelisys claimed the title of Top Technology Solutions Distributor. Intelisys also landed top honors from Five9. It wasn’t the only distributor making waves in the CCaaS space, however, as Telarus won Dialpad’s award for brokerage of the year.
In network and carrier services, Telarus stayed atop Nitel‘s list of top tech services distributors. It also rose to the highest AT&T Alliance Channel tier. The recognition came after Telarus bought TCG and TelAdvocate.
Cloud, data center and security services Tierpoint named Avant its Distribution Partner of the Year. While the most partner bookings came through Avant, Bridgepointe won Breakout Partner of the Year, and Telarus got a nod for its pre-sales team.
Avant also won top cloud distributor for Cox’s RapidScale, while Telarus grew in a big way. At the same time, Innovative Business Solutions‘ won for top connectivity distributor and top overall Cox distributor of the year, showing that the “smaller” TSDs can still pack a punch.
What it means: These supplier awards don’t always paint the fullest picture, but they offer little hints as to the technological strengths of the different TSDs. For example, Telarus has maintained a strong telco footprint for years, and that only continues to grow, while Avant looks strong in cloud and Intelisys is doing well in contact center. The bigger question, however, is if the technological differentiation between these TSDs will widen or shrink. Colorado-based Innovative Business Solutions has branded itself as the cable and connectivity-focused TSD, and its niche play has paid off. But even so, it has signed more cloud communication suppliers to its portfolio.
What to watch for: Channel Futures will be watching to see where the national TSDs are investing in sales engineers and onboarding new suppliers. We’ll also be watching to see who gets recognition from cybersecurity suppliers, which are relatively new to the TSD model.
Vendors across the IT and telecommunications markets recognized top margin-based distributors.
In the world of cybersecurity, TD Synnex won Barracuda Networks’ Americas Distributor of the Year. SonicWall ended up recognizing both Ingram Micro and TD Synnex as North American distributors of the year.
For software and computing behemoth Microsoft, TD Synnex and Ingram Micro won different niche and regional awards.
For HPE Aruba Networking, ScanSource returned in a big way, claiming North American Distributor of the Year.
In the area of telecommunications, Ingram Micro, ConectUS Wireless and Arrow Electronics took home some hardware from Verizon.
In the meantime, large systems integrators like CDW, Insight Enterprises and SHI International landed in many of these awards lists. Some of these partners leverage their own direct contracts with these vendors and to some extent are functioning as distributors.
Why it matters: The diversity of these suppliers and the distributors winning awards with them shows just how expansive the battleground is. Companies like Ingram Micro and TD Synnex, long associated with hardware logistics, are playing in cybersecurity and mobility. And for HPE Aruba – a vendor perhaps more traditionally associated with network infrastructure equipment – and ScanSource – a distributor traditionally regarded as more boutique – is rising.
What to watch for: How will the “traditional” disties perform with the SaaS providers? Moreover, how will those providers categorize those disties in relation to upstart, born-in-the-cloud players like Pax8 and AppDirect?
Earnings calls from ScanSource, CDW and Arrow pointed to improving supply chain conditions.
ScanSource, for example, said it pulled in $40 million at the end of 2022 due to earlier-than-expected inventory availability. That being said, Cisco noted that its total backlog still grew year-over-year.
“I don’t know if we’ll ever see it go back to normal. I think you might see Cisco carrying a backlog in the teens [long-term],” Cisco chief financial officer Scott Herren said on an earnings call.
Why it matters: Partners have told Channel Futures that the supply chain has influenced their vendor recommendations more than ever. Some of them have elected to refer different suppliers on the basis of which one offers a shorter wait time.
What to watch for: Supply chain headwinds have undoubtedly lightened, but the logistical challenges that hampered partners and their customers in 2022 are by no means at an end. Partners spent much of last year on their toes improvising on ways to meet client demands, and it will be interesting to see if any of those improvised habits stick in the long term. For example, large vendors long associated with hardware are eyeing ways to attach more software and services to their offerings and create more flexibile consumption models. Perhaps the bad taste of hardware backlog will drive more adoption in that area.
Distributors are introducing more financial resources that help partners with cash flow.
Christine Horton wrote about TD Synnex’s new suite of UK leasing and financial services. TD Synnex Capital lets partners integrate a payment solution or “tech-as-a-service” model for products they sell.
Exclusive Networks also noted that it wants to develop financial services “more than we’ve done.”
Why it matters: Programs offer more flexibility to partners, especially as those partners are tinkering with new business models. For example, a reseller partner may be selling a subscription but needs an upfront payment in order to cover its shift to recurring revenue. These financial programs can be a differentiator for distributors as they demonstrate that they are more than just logistics companies, but rather, partner enablement vehicles.
What to look for: Where will the onus of financial programs fall: distributors or vendors? Cisco expanded its financial options in May, noting that more partners are experiencing economic uncertainty. Channel Futures will be watching to see where in the channel value chain these programs tend to arise.
Telarus and Avant both bolstered their pre-sales consulting tools for technology advisors.
Avant in May revamped its Pathfinder platform. Notably, partners can toggle between a customer-facing version of the app that they can use with their own branding in front of a client, and a non-customer-facing side containing more internal information.
Telarus rolled out the second module of SolutionVue. The first module helped partners run discovery on their customers’ cybersecurity environments, matching their needs to prospective vendors. The new module tackles cloud and data center.
Why it matters: Technology services distributors are making the case to partners that they are more than the supplier contracts they hold and the commissions they pass through. Platforms like SolutionVue and Pathfinder both reflect hefty investments in money and time from these companies to give partners more resources and make themselves indispensible.
What to watch for: Will ScanSource-owned Intelisys put out a competing product? Channel Futures is also trying to ascertain the amount of partners that are using TSD pre-tools for customer engagements, yet registering those deals with other TSDs.
ScanSource’s latest earnings call expressed publicly a trend in the agent channel: that technology services distributors like Intelisys feel pressure to increase the percentage of the commissions they pass through from vendor to subagent.
ScanSource CEO Mike Baur pointed to the commissions battle as the reason Intelisys’ end-user billings are growing faster than its net sales. Namely, he said Intelisys has kept pace in some respects with rival TSDs that are giving more commission points to sales partners.
“As smaller TSDs want to take customers that we sell to today and lure them over, they’re willing to take little or no margin to move the customer over,” Baur told Channel Futures.
Why it matters: Distributors are courting agents with the opportunity to gain higher margins on their deals. That gives partners plenty of lucrative choices for where to take those two deals, but questions remain about the long-term value of those choices. TSDs are responding to partners’ demands for higher-pass through, but these entities remain for-profit businesses that are finding equilibrium between their investments and their revenue sources.
What to look for: TSDs will find that equilibrium in different ways. Some will make acquisitions to leverage economies of scale. Some simply won’t make the investments in people and platforms that others are making. Channel Futures will be watching to see if TSDs roll out more public-facing packages and tiers. Certain TSDs tie support levels to pass-through percentage, but will those practices grow more mainstream?
Distributors are working to tap deeper into their partnerships with public cloud providers.
Ingram Micro announced in March that it had become the first global AWS distributor to earn an AWS Migration Competency.
In the meantime, TD Synnex expanded its AWS partnership by bringing its AWS public sector business to Europe. TD in the last year has also geographically expanded its Google Cloud business.
Why it matters: Executives from both distributors said their assortment of AWS certifications and resources can help bridge the gap for smaller MSPs who want to do more business migrating their customers to the cloud.
What to watch for: Cloud marketplaces are growing at a “dizzying speed,” according to Canalys. The research firm says these marketplaces are putting pressure on traditional distributors. Look for the distributors to add more professional services capabilities for cloud as a way to create new value for their partners.
New platforms abound in the distribution world.
Pax8’s new marketplace captured the attention of the MSP world. Pax8 said the platform will turn it into a customer acquisition for partners, creating storefronts for its resellers.
At the same time, Ingram Micro Cloud replaced the Ingram Cloud Marketplace with its Xvantage platform. Part of its charter was to provide a single platform for partners to deliver cloud and hardware solutions for their customers.
Why it matters: Pax8’s CEO said its marketplace exists to combat the threat of SaaS vendors selling directly to customers. At the same time, he claimed Pax8’s born-in-the-cloud identity has allowed it to adjust to this challenge faster than traditional hardware distributors.
For Ingram, its new platform can make it more indispensible to its traditional hardware reseller customers who have diversified their portfolios into cloud and want to transact on a single platform.
What to watch for: Multiple MSPs told Channel Futures that they are waiting to see how the Pax8 marketplace integrates with other platforms they use. Although they said they like the idea of accessing everything in one place, they’re wary of the disruption it could cause to their existing relationships.
“I like it being part of one ecosystem rather than all the vendors having a different program for doing it … or no program for doing it,” one MSP told Channel Futures’ Jeff O’Heir. “But there are concerns. Consolidation in the marketplace has many effects, both positive and negative.”
On the traditional disti side, it will be interesting to see if TD Synnex offers a rebuttal to Ingram’s platform.
B2B e-commerce provider AppDirect announced the acquisition of Chicago-based services distributor TBI in February.
The transaction came after months of speculation about which party would acquire TBI. AppDirect has purchased multiple TSDs over the last few years, including WTG, Telegration and MicroCorp. Those entities comprised AppDirect’s AppSmart TSD business, which has now taken on the full AppDirect branding. AppDirect executives said they envision a “relationship-driven marketplace,” in which technology advisors (agents) guide end customers through the company’s platform.
Why it matters: TBI represented one of the final remaining independently held tech services distributors with national reach. A year prior, Avant purchased PlanetOne and Telarus bought TCG. The deal puts California-based Sandler Partners in a position to preach its combination of scale and independence.
For AppDirect, buying TBI improved its technology portfolio by bringing in a distributor with a rich heritage working with the “Big 5” carriers. AppDirect has built a reputation around SaaS, including with Google and Microsoft. Landing one of the industry’s oldest TSDs enhances its credibility in the telecom world.
What to watch for: Channel Futures is watching to see how TBI customers and partners mesh with the company going forward. Will TBI’s more loyal partners agree to funding and exclusivity with the AppDirect Invest program? Where will former TBI employees fit in the org chart compared to folks from other TSDs AppDirect has acquired. And where else might AppDirect look for an acquisition?
IT, cloud and services distributors are signing cybersecurity suppliers and enhancing their security resources.
TD Synnex formed a partnership with MSSP Chorus to support UK resellers on managed security services. That accompanied a larger TD Synnex cybersecurity ecosystem initiative.
Pax8 is rolling out a cybersecurity program complete with a long list of vendor partners.
And Avant and its TSD peers continue to add security service and software providers, including companies like Xcitium.
In the meantime, security-focused distributor Exclusive Networks said it is growing grew faster than the overall cybersecurity market.
Why it matters: The distributors listed have been delivering cybersecurity for years now, but their portfolios are growing more diverse.
Avant senior director of security Stephen Semmelroth told Channel Futures his company is identifying vendors that fit more advanced use cases and new purchasers for partners to target.
What to look for: How is the share of channel-led sales increasing at the various cybersecurity vendors?
UK & Ireland managing director Paul Eccleston said the growth will continue, as vendors “need to rely on the channel more consistently.”
“Our solution provider partners are generally in the end-user customer, every day, most days, certainly every week — and vendors can’t do that. And if they’re having to trim their budgets, then they’ll be able to do that even less,” Eccleston said. “Therefore, they’ll lean the channel even more. I think we’re already seeing that. They need a bit more from the channel and from distribution, and we’ve got to be ready to accept that and take it forward.”
Distis and TSDs are hiring like mad this year, but two appointments stuck out in a big way.
Pax8 scored a huge win by landing former Datto exec Rob Rae. The long-rumored team-up brought over one of the more revered figures in the MSP community.
In another move with a tie-in to cloud marketplaces, Marty Bauerlein signed on as D&H Distributing‘s chief commercial officer. Bauerlein came over after leading AMD’s North American distribution and VAR channels, but he has also worked for Ingram Micro and Tech Data. His new areas of oversight include the D&H Cloud Marketplace.
Why it matters: These two individuals are towering figures in their respective areas. It’s a sign that these upstart distributors are playing with some deep pockets and grand ambitions. Century-old D&H regards itself as the third largest broadline IT distributor behind behemoths Ingram Micro and TD Synnex, but it is looking to push them. Pax8 by many accounts is on its way to an IPO, and it is making investments in both platforms and personnel. D&H and Pax8 landing Bauerlein and Rae, respectively, also shows the attractiveness of cloud marketplaces and the impulse for high-profile channel leaders to ride that wave.
What to look for: Will the wave of high profile investments, both in people and platforms, continue across these distributors?
Distis and TSDs are hiring like mad this year, but two appointments stuck out in a big way.
Pax8 scored a huge win by landing former Datto exec Rob Rae. The long-rumored team-up brought over one of the more revered figures in the MSP community.
In another move with a tie-in to cloud marketplaces, Marty Bauerlein signed on as D&H Distributing‘s chief commercial officer. Bauerlein came over after leading AMD’s North American distribution and VAR channels, but he has also worked for Ingram Micro and Tech Data. His new areas of oversight include the D&H Cloud Marketplace.
Why it matters: These two individuals are towering figures in their respective areas. It’s a sign that these upstart distributors are playing with some deep pockets and grand ambitions. Century-old D&H regards itself as the third largest broadline IT distributor behind behemoths Ingram Micro and TD Synnex, but it is looking to push them. Pax8 by many accounts is on its way to an IPO, and it is making investments in both platforms and personnel. D&H and Pax8 landing Bauerlein and Rae, respectively, also shows the attractiveness of cloud marketplaces and the impulse for high-profile channel leaders to ride that wave.
What to look for: Will the wave of high profile investments, both in people and platforms, continue across these distributors?
Overarching themes of investment and business model evolution pervade the 11 technology distribution stories Channel Futures deems most influential in 2023 thus far.
Halfway through the year, Channel Futures is looking back on the activity shaping the information communications and technology (ICT) channel. Distributors of all kinds – services, cloud, SaaS and hardware – are working to stay relevant with the latest trends.
In IT distribution, cloud and e-commerce cast a heavy shadow. Cloud hyperscaler marketplaces loom as a rapidly growing 800-pound gorilla, serving as a key vehicle for many software vendors. Born-in-the-cloud distributors and incumbent “disties” are making their own efforts to give partners (and in Pax8’s case, end customers) a one-stop-shop for all of their technology needs. And some distributors are building services that go beyond procurement and logistics.
Distribution Stories Tell Tale of Evolution
The tech services distributor channel, which sells managed services from network, communications and security providers, is reckoning with its own evolution. On one hand, some TSDs are putting major capital into building new tools and platforms. On the other hand, many TSDs are passing on more margin to their sales partners.
Channel Futures recapped 11 key trends based on different articles its editors have covered this year. Check out these distribution stories in the slideshow above, learn about why they matter to partners, and see what people should be watching out for in the rest of 2023.
Want to contact the author directly about this story? Have ideas for a follow-up article? Email James Anderson or connect with him on LinkedIn. |
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