Tech Data Americas boss says core broadline business allows it to feed and grow its higher-margin value-added distribution business for the data centre.
LAS VEGAS – It’s no secret that Tech Data, and most of its broadline distribution peers, have been working hard for the last few years to blur the lines between the traditional broadline and value-added distribution models. At the distributor’s fall TechSelect conference here, Joe Quaglia, president of the Americas for Tech Data, made it clear just how far that transition has come.
“Tech Data is the largest value-added distributor worldwide,” Quaglia proclaimed. “We have over $9 billion of data centre product sold through our reseller community and on its way to the end customer. It’s the fastest-growing part of our business, and it’s the most profitable part of our business.”
In an interview with ChannelBuzz.ca after the keynote, Quaglia said the comparison was between Tech Data’s data centre business (largely comprised of its Advanced Infrastructure Solutions unit) and the value-added distribution units of competitors. He declined to break it down further geographically to discuss how AIS stacks up against Tech Data’s VAD competitors in the Americas or in Canada.
Today, the VAD business represents about 35 per cent of Tech Data’s overall distribution business, while its core distribution is about 65. Quaglia said he sees both sides continuing to grow, but the value-added side continuing to gain ground.
Quaglia said the distributor’s strategy is to use the cash flow and efficiency of its “core” broadline or volume business to invest further both in the VAD business and increasingly in value-added services.
Those services include technical services, call centre, marketing, renewal support, supply chain services, reverse logistics and other services that might not be a massive part of Tech Data’s business today, but carry with them greater margin opportunities than either of its either core areas.
“We’re talking about 40 points of margin here,” Quaglia said. “Most of us at Tech Data don’t know how to say those words.”
Quaglia said the services business has been there for some time, but hasn’t been as formalized and structured as it is now within Tech Data, and certainly hasn’t been marketed to its reseller base in the way the distributor plans to market it going forward, including a streamlined offering around taking vendor-supplied MDF and building end user demand campaigns for customers.
Over the last few years, the distributor has launched a number of major initiatives to build out the VAD business, expand its services offerings, and strengthen its core distribution business. Now, he said, the focus is on staying the course and on executing.
“The first thing we think about has to be execution, and our ability to adapt every day,” Qualiga said. “We need to think about what next yer is going to look like. We need to get these bit initiatives we’ve funded fueled and launched.”
With several of his major vendors in flux – Lenovo swallowing IBM’s server business and soon Google’s Motorola cell phone business, while major vendors HP and Symantec seek to redefine their businesses by each splitting into two distinct businesses – Quaglia said he sees opportunity for the distributor when there’s chaos in the market.
“When they come to us and say they’re going to make big strategic moves, we’re here to support them 100 per cent,” Quaglia said. “We’ll both support their channels and help them navigate the sometimes choppy waters of these big changes.”