Where's Distribution Headed?


I get this question in the market more than any other. It generally comes from the vendor community although solution providers at the cutting edge of the market often ask it as well.

It's a question that has come and gone during every major technical and business model shift since the PC era began in the 1980s.

But is this time different? Is it a bigger challenge than ever? Can distribution find a role in the world of cloud computing where most of the world buys computing power much like it does electrical power?

The answer to all three questions is yes in my opinion. It seems to me that in order to predict the future of distribution you have to first answer some questions around the value that distributors offer and look at some of the innovations they are bringing to market that could help them in the future.

At the most basic level, distributors are efficient at moving a physical product from point A to point B so the question becomes, will there be a need for that in the future? I think it's hard to argue that over the next five or 10 years the need to move hardware is going away. In terms of software, we haven't really been moving it around physically for a number of years so I'm not sure a lot changes there.

There are a host of other things distribution does that adds value. One of the most important is providing credit to solution providers. Might there be other ways to inject credit into the market? Of course, but there is efficiency and, therefore, savings as a result of the distribution credit system.

One of the most fundamental questions that has to be answered in this debate is, when will everyone buy computing power like they do electricity? The answer to that is probably never. Cloud computing is real and it is undoubtedly going to change much of what we know today about building, selling and supporting computing power. But in most of our lifetimes it has zero potential to be the only way technology solutions are sold and purchased.

But the supply chain is changing and distribution is going to be challenged to add value in a world where warehousing and physically shipping product will become less important, no doubt. But there is constant innovation within distribution as well.

Synnex recently launched a service that tracks software licensing and warranty renewals at the customer level for solution providers and offers a way to manage renewal revenue that has proven difficult to capture in the past. RenewSolv is an online portal that lets solution providers keep track of software licensing, warranty renewals and subscription-based SaaS products from multiple vendors.

This is an example of the type of value-add that will be required in the future. There is no doubt that some of the services distribution has offered vendors in the past will be eliminated. But is this any different than what has happened in the past, or what happens as markets mature and morph?

It's hard to argue that distribution is going away because of cloud computing. In some ways you have to wonder if this shift doesn't give distribution an opportunity to launch higher-margin services.

Cloud computing is going to be a major force in the market, but it won't be the only one. Will it change much of what we know today over time? You bet. But distribution has been dealing with the pressures of the market for four decades. This isn't its first hurdle, and it's not going to be the last, either.

BackTalk: Make something happen. Robert Faletra is CEO of Everything Channel. You can contact him via e-mail at robert.faletra@ec.ubm.com.