Blurring Lines of Distinction

Today, however, the logistical capabilities of Agilysys compare favorably with those of say, Bell Micro, while the technical sophistication of Ingram rivals that of GE Access. Blurring lines of distinction? No doubt, but not as much as a cursory look would suggest. Real contrasts between distribution companies remain, only they are more subtle than before.

Take relationships with manufacturers, for example. In the recent past, Sun dealt exclusively with GE Access and Arrow's MOCA division. Now it sells gear in the United States through Tech Data. Big change? Sure. But Tech Data doesn't have access to the full breadth of the Sun line. Higher-end midrange products are still the exclusive domain of those distributors that help vendors manage "closed" distribution networks, which require reseller authorization. Unless you're authorized, don't bother asking.

"I believe one model is highlighted by a high number of transactions, high number of customers and high number of suppliers, and one model is highlighted by a more focused or limited line-card strategy, a more limited number of customers, etc.," says Rick Hamada, president of Avnet's Technology Solutions group. The idea that broadline companies don't add value to the products they ship, however, is nonsense, he says, a commonly held misperception. The work that Ingram does trying to help various customers develop new lines of business in key segments such as storage, government or even security rivals the same kind of work that Avnet, Arrow and Agilysys do. That doesn't mean, however, that companies can be all things to all people.

Arrow found that out when it tried to simultaneously run both a high-volume, broadline distribution business unit (Gates/Arrow) in addition to its core business. That didn't work, so Arrow sold that part of its business off.

"We found we couldn't invest in both places," says Mike Long, president and COO of Arrow NACP. "We could not be sort of a midlevel player in [one] world and maintain the status we had to maintain on the enterprise side. So that really forced us to invest differently."

Tech Data has found that out, too. In Europe, for example, it sells both IBM and HP gear through what outwardly more closely resembles a closed, midrange distribution model, epitomized by low transactional volumes and high-touch product integration. Here in the United States, where it emphasizes a high-volume business, things are somewhat different. Insiders at the company have discovered that what works well for one type of business unit in one geography may not work well for another. That makes integration tough, but not impossible.

"Broadline distribution is really quite different," explains Tech Data CEO Steve Raymund. "We've not only diversified the products we sell, but the customers, the programs, etc. We're creating little niche divisions within our companies that are tailored to support the specific requirements of a given community of resellers. So the folks that are buying Gateway processor enterprise servers from us are very different than the resellers buying ink and cartridges from our supplies division. Yet they both co-exist under the same roof."

At the end of the day, some people still think the distinction between various types of distributors boils down to whether or not they sell products that require reseller authorization. Still others believe distinctions are more fundamental, such as the type of value individual companies offer.

"We provide different types of value for different types of products," says Anna McDermott, CEO of GE Access. "But distribution by itself is value or nobody would be utilizing it. So you just have to understand what type of value is necessary to make a product or a technology successful through the supply chain." In McDermott's case, she considers her company a specialty or niche distributor due to its limited product focus, which revolves around midrange Unix servers, security and storage software.

As their businesses evolve along different lines and take different paths, one commonality among distributors remains: They are all, in the words of Avnet's Hamada, "a variable-cost indirect-sales channel." "We only get paid when we sell something," Hamada says.