Disruptive trends and global dynamics are forcing the broader technology distribution landscape to adapt and provide more connected digital services and experiences. As a result, we are seeing distributors transform into an even more critical segment across the high-tech ecosystem.
We've teamed up with the Global Technology Distribution Council to further discuss the insights they shared at Forum 2022 and break down how distributors have seen an immense evolution into a crucial piece of the high-tech industry. GTDC is a worldwide industry association dedicated to highlighting the value of our member distributors in a successful and healthy information technology channel. GTDC enables vital industry insights for those looking for a definitive view of actual tech trends and the central role of technology distributors.
What role do distributors play in the technology industry?
Distributors are uniquely positioned as an intermediary between vendors and partners. They ensure that technology products and services make it from the vendor to the resellers, system integrators, MSPs, and other key routes to market. This gives them the leverage to orchestrate the intricacies of getting technology from producers to the market, ensuring that it reaches satisfied consumers through efficient and value-added means.
Given such unique positioning, distributors are growing more into becoming masters of marketplaces, subject-matter expertise, training, and enablement programs, and a driving force for getting innovation into the hands of more users. New technologies are expanding the capabilities within distributors' remit, such as:
Analytics: Distributors can produce better forecasting and speedier deliveries, leading to savings for the distributors and the client, as well as supply chain data they can use to streamline operations further and increase sales
Internet of Things (IoT): IoT technology facilitates more accurate monitoring of orders and shipments while allowing simpler tracking of customer purchases, transportation, and the location of supplies.
Blockchain: While blockchain technology is usually associated with cryptocurrency, it can play a part in the high-tech ecosystem of distribution. The blockchain can facilitate tamper-proof record keeping by suppliers, manufacturers, and distributors, ensuring more robust audit trails and stock management in general.
By fulfilling this complex role, distributors can look for more innovative and effective solutions to bridge the gap between partners and solve business problems.
The history of distribution
The term "Logistics" was coined in English in 1810, and Ford was the first manufacturer to use an assembly line a little over a century later, in 1913.
In the mid-1900s, there was much focus on the field of logistics in terms of improving warehouse space, leveraging racking, and seeking efficient use of warehouse space. Specifically, the distribution of technology started in the late 1920s when distributors would sell radio parts to manufacturers in New York City.
In the sixties, computer systems began handling digital document transfer, almost 150 years after "logistics" was first coined. Fast-forward only around 70 years, and we are seeing a digital transformation, unlike anything that has come before in the supply chain management ecosystem, connecting distribution to the technology industry.
Today, the focus has shifted from an entirely hardware-oriented environment to one that embraces software as a service (SaaS) through cloud-hosted platforms for managing everything from stock and cost control to end users.
Distribution is no longer a largely manual process, with its primary value serving as “a bank and barn” (credit/finance and warehousing). While inventory management, logistics, and transactional support remain integral to channel operations, distributors are evolving into digital and technical orchestrators.
Why is distribution important?
The value of distribution is on the rise. Statista estimated that between 2020 and 2026, the global supply chain management industry would double in value, rising from around $15.58 to $30.91 billion.
But why is distribution important? One notable reason from recent years comes from the COVID-19 pandemic when distributors completely transformed their operations to ensure that supply chains didn't grind to a halt.
Of course, official statistics couldn't have predicted that we would immediately enter a global pandemic in the latter half of the 2020s, but this threat didn't impede the success of distributors; it achieved quite the opposite.
Instead, distributors helped build IT resiliency during a two-year period that saw annual revenues and new monthly sales records. Despite other challenges, including conflict on the continent and global recessions, demand for technology has ensured continued innovation and success in the worldwide supply chain ecosystem.
What are other important benefits of distribution?
The importance of distribution extends beyond the scenario outlined above, with global economies deriving numerous other benefits:
Less diversification of responsibilities
Manufacturers are skilled in designing and creating products. Distributors have many years of experience understanding how best to connect manufacturers with the best resellers. Utilizing this opportunity lets manufacturers focus on what they do best.
Increased sales channels
By using an IT distributor, manufacturers hand responsibility for finding resellers to the distributor. This can lead to broadened exposure without additional time or investment.
Better consumer and producer communications
Global distribution partners enable communication throughout consumer sales channels. Manufacturers and resellers can provide comprehensive tracking and information to their consumers about products, prices, promotions, and deliveries.
The Rising Value of Distribution
Overall, the value of IT distribution is increasing across the board. As technology expands exponentially, IT services firms increasingly leverage distributors to get their offerings into the hands of their end-users with greater efficiency and end-user satisfaction. Vendors can suffer financial shortfalls without engaging a distributor, including additional annual expenditures, invoice processing fees, and more.
Innovating through multiple channels using distributors
Distributors are no longer simply a means of getting a product from point A to point B; instead, they are increasingly innovating through multiple channels, from management and sales platforms to technical expertise and training and enablement programs.
Experts have pointed out that the distribution industry is at an "inflection point;" disruptive forces are transforming business as usual across the wholesale distribution ecosystem.
Digital technologies, such as automation, shifting customer demand, new business models, and other factors, are forcing wholesale distributors to react and change how they work to remain competitive.
Some of the biggest trends emerging across the distribution ecosystem are beginning to turn simple distributors into digital orchestrators in an ecosystem rapidly embracing technology for positive change.
How distributors orchestrate across the high-tech ecosystem
While distributors might fear the impact of the disruptive forces mentioned above, they are uniquely positioned to leverage this change as a positive force. Distributors have a unique opportunity to sit between the makers and the innovators of technology and the end user who leverages this innovation to drive business outcomes.
And thanks to the benefits of modern technology, new trends are beginning to emerge, enabling distributors to streamline operations, cut costs, and deliver a faster, more robust, and resilient service.
Successful distributors are learning that the key is to become an orchestrator at every point in the supply chain, including purchasing and sales, operations, pricing, messaging, and customer interaction.
The shift from distributor to orchestrator
The most responsive orchestrators combine several skills and opportunities to balance risk while improving their capabilities and operations:
Focusing on, rather than ignoring, disruptive trends, and ensuring that the workforce - in particular, management - is sufficiently trained to embrace and implement changes that address these trends, such as automation.
Emphasizing customer satisfaction and cost control, ensuring no unnecessary waste and expenditure in any part of the ecosystem.
Aggregating technology and services from many sources into solutions that partners can take to market in various business models (resale, subscription, as-a-service, etc.)
Bringing new technical and sales resources, drawing from varied talent pools and experiences, to drive innovation and a high-quality customer experience.
Understanding when to implement emerging and innovative strategies and technologies and when to recognize that a strategy is a non-starter.
Looking at your competition to understand their strengths and failings and applying positive learnings.
Recognizing that cost control and operations are not always in your direct control and that you may need to employ other resources, such as retraining for your workforce.
How are investment trends transforming distribution?
We've discussed the importance of embracing disruptive trends, particularly around new technology and process automation. As a result, large sums have been invested in digital platforms and marketplaces, empowering vendors, solution providers, and, ultimately, end-users.
Numerous high-profile examples have already been seen, and what's more, the valuations for distributors with established, strong partner networks are typically much higher, highlighting the importance of a channel partner program.
According to KPMG, distribution is no longer a case of simply moving a product from point A to point B. Instead, it is a crucial means of supporting financial advisors who connect distributors with investors. In addition, KPMG's recent report highlights how data-driven distribution is a new, key trend in delivering innovation in distribution.
What can we learn from distributors?
Numerous external factors affect distributors today, including geopolitical sensitivities and economic downturns, which may threaten innovation investment. But it's important to remember that many companies have thrived throughout recessions and that distributors have thrived even in the face of global events as significant as the COVID-19 pandemic.
One key message that should remain at the forefront is that disruption isn't always a threat. In fact, it is the product of resiliency. As examples have shown above, it's possible to consistently meet goals, even in the face of overwhelming adversity. Distributors continue to achieve resiliency and drive disruption in the supply chain.
Channel partners can be an extremely valuable resource for vendors and companies alike. Such partnerships provide numerous benefits, from boosting sales and creating additional revenue streams, to drawing on local presence, existing networks, and expertise.
That's why a high-quality channel partner program is an extremely valuable resource for any firm producing and selling technology. According to a 2022 Channel/Partner Marketing Benchmark Survey, 96% of respondents believe their revenue will increase this year, which they attribute to their partner ecosystems. So, why wait to implement a robust partner program that can advance your business?
Our team at Vation Ventures has decades of combined experience running channel partner programs for organizations of all sizes, from startups to Fortune 500 companies. Vation brings that expertise to the table to help distributors and their solution providers identify, connect and assess innovation and emerging technologies. Consider the following Vation services that can help distributors and their suppliers as they look to orchestrate the supply chain:
Market research – Our Intelligence team delivers market analysis, technology trends, and intel briefs through Research as a Service.
Channel readiness assessment – Our Vation Channel Certified program helps distributors assess a vendor’s profile for success in the channel and can help the vendor close the gaps in its offering.
Channels as a Service – Vation can step in and run an early-stage company’s channel program as it begins its growth journey and help connect them to distributors for GEO expansion at the right time.
Sales acceleration – Vation works with established vendors to help them generate pipeline through and with channel partners.
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