Technology distributors aren't sexy, but their strategic position supporting vendors and channel partners remains intact. The evidence? Year-to-date IT distribution sales in the United States are up considerably, according to Global Technology Distribution Council (GTDC) and NPD Distributor Track research.
1. Distribution Revenues: U.S. distribution industry sales this year are up nearly $2 billion compared to the first seven months of 2017, and $3 billion compared to the first seven months of 2016,
2. Revenue Growth: The 13-week revenue average tracked at 6 percent higher compared to the prior-year period (for the most recently reported week, August 12, 2018), which is more than double the forecasted 2018 U.S. GDP.
3. Aggregate Performance: Three-month moving average of distributor sales over the past 18 months surpassed $5 billion in the U.S., a new milestone
4. Hardware Sales: Bellwether categories such as all PCs, servers and tablets grew 15 percent in the first seven months of 2018 compared to the same period last year.
5. Software Sales: Commercial software and platform as a service accelerated 6 percent in the first seven months of 2018 compared to the same period last year, and the category’s overall growth rate has outpaced the distribution industry’s aggregate total hardware sales growth rate for the period.
6. Data Centers and Cybersecurity Revenues: Those solution areas are among numerous other bright spots, tracking at 5 percent and 7 percent growth over the past 12 months.
7. Product Diversity: Four hundred new vendors were added to distributor portfolios in the U.S. alone over the past 24 months.
The upbeat statements come roughly eight months after GTDC predicted 2018 looked like a promising year for distributors.
Distribution: The Challenges and Opportunities
Despite those strong financial indicators, IT distributors continue to face challenges on multiple fronts -- though those challenges also provide some opportunities as well.
Most major distributors now offer some sort of cloud aggregation services for VARs and MSPs to source SaaS, PaaS and IaaS services. Microsoft, in particular, increasingly promotes its cloud services through distributors.
Rival cloud providers like Amazon Web Services (AWS) and Google Cloud Platform (GCP) also have some distributor relationships -- though the AWS Marketplace is increasingly considered a distribution rival. Also, SaaS companies -- namely Salesforce, WorkDay and ServiceNow -- have largely overlooked distributors and typically prefer to work with global systems integrators (SIs), ISVs and boutique consulting firms.
Upstarts also are gaining ground. Key names to know include Pax8, a cloud distributor that's building "Stax" that allow MSPs and VARs to mix-and-match third-party cloud storage, security and management tools, among other product categories.