Tech Data forms four pronged strategy for success

Global distributor Tech Data has transformed into an end-to-end IT distributor with an offerings portfolio that spans from endpoint devices to the most advanced data center solutions and next-generation technologies

By Nivedan Prakash & Sandhya Michu

The introduction of new technologies and capabilities is combining to change the dynamics of distribution, as traditional models become redefined. In the last eight years, Tech Data has been preparing to meet the demands for third-platform technologies, including cloud computing, big data and analytics, AI, IoT. A big part of this strategy was bolstered by Tech Data’s recent US$ 2.6 billion acquisition of Avnet Technology Solutions (TS) business.

The company had acquired Avnet TS, which closed February 2017. Rich Hume, Chief Executive Officer, Tech Data, who took the top job in June 2018, had played a key role in the acquisition. A key advantage of the combined companies is a larger geographic footprint, including a presence in Asia-Pacific, a new market region for Tech Data and bringing new capabilities of both physical and hybrid cloud world.

“We knew that as we moved forward we needed to have more technical skills to serve the market. Avnet TS was a good asset for us to acquire, to significantly build our technical capabilities and allow us to further accelerate our move into the solutions space,” says Hume.

Betting big on the healthy growth of IT in enterprises, the company has taken a four pronged strategy to stay relevant and ahead in the changing dynamics of distribution. At the global level, the company has four pillars strategy. Investing in new emerging technologies such as IoT, analytics, cloud, security and services is its core focus followed by utilising digital capabilities to accomplish it. The third piece of its strategy is optimising its global footprints, including in Asia Pacific and India.

“When we completed the acquisition of Avnet TS, one of the things we liked the most was that it gave us an entry point into Asia Pacific. However, it is bit small at this time; APAC is about 3 per cent of Tech Data’s total business. Presently, we have more significant market positions in Europe and North America than APAC. Hence it gives us great opportunities,” he explains.

The fourth and last pillar is growing the products and services portfolio. “When we think about portfolio it’s like staying in a good health so you want to do things to your body that will allow you to be more nourished and healthy and at the same time you change your lifestyle to get rid of bad things. This is the life of a distributor so we live on the edge as it relates to financial returns in the distribution segment and continuously do things that prove healthy for business and also we want to be more relevant to our customers and vendors in the market,” he asserts.

Reinventing with right capabilities
To enter into today’s solution business, a more intensive set of technical capabilities is required. In order to stay relevant, Tech Data understood that it did not have right mix of resources with its franchise to be able to pursue to these new areas of growth. Therefore, the acquisition of Avnet TS helped Tech Data in adding big chunks of additional skills and capabilities, predominately within the value space. Hume informs, “The buying of Avnet TS was a targeted investment specialty in your specialised business and solutions units that will allow us to be relevant in new areas. In my views as we move forward we needed to have more technical skills to serve the market. Avnet TS was a good asset for us to acquire, to significantly build our technical capabilities and allow us to further accelerate our move into the solutions space.”

According to him, the market is finally settling out as a hybrid cloud world, which means the need of infrastructure that will set the demands and some of those demands will shift to the virtual world. It is important to build the right capabilities to deliver services, physically as well as virtually.

Re-sellers should re-position their business. Tech Data has, for the past eight years, developed its own cloud marketplace, called StreamOne, to benefit partners during this transition, offering virtually through the cloud what was once the domain of physical goods. Avnet TS is focused in the cloud world as infrastructure-as-a-service and Tech Data on software-as-a-service. Combined synergies are able to pull these two assets together under one architecture.

“When you look at large companies like Microsoft to have a strong need for SAAS with Office 365 and infrastructure as a service capability with Azure, that marketplace is ready built for those types of activities. We see a very bright future within that marketplace and emergence of new breed of MSPs and SIs,” he says.

Adoption of StreamOne
When Tech Data took over Avnet, it had the opportunity to put its cloud platform StreamOne into the market.

“We are in the process of rolling out all of our eCommerce capabilities in Asia Pacific and India. This will allow to expand their franchise and even their vendors relationship. A big business segment in a data center is called value velocity, which is a stockable type of a sale that will be able to allow India to pursue those opportunities. We will make the StreamOne marketplace available up and running and begin to monetise the in personal computing and data center areas,” he mentions.

New areas
To leverage this new era of advanced technology and changing distribution models, Tech Data has reorganised into specialised business units such as cloud, analytics, artificial intelligence, security and the Internet of Things.

Hume opines, “There is no such IoT solution that will exist without a data element. However, we see firms including Tech Data using tools and capabilities around big data to improve business outcomes. The company is heavily banking on big data and IoT for business outcome.”

“For those who are wondering when the promise of IoT will arrive, companies should focus on big data, data management and analytics. This foundation is necessary for transition to an IoT solution, and one can continue to build layers of business. When you think about areas like cloud, security, big data and AI you can’t lose the sight of the fact that now greater than 90 per cent of the applications development work is going around cloud-first. So when you don’t focus on competency around cloud then all of these workloads and new capabilities designed around cloud-first will be hard to compete with,” he concludes.