What To Watch For In Distribution

One of the most enjoyable things about the evolution of the channel since the beginning days of this industry has been the debate over distribution.

ROBERT FALETRA Can be reached at (781) 839-1202 or via e-mail at rfaletra@cmp.com.

Mention it in a room full of executives, be they channel-minded or not, and each one has a different assessment of distribution's role, value and future. I've heard all the comments, and in the end, distribution remains.

But with all that has happened in this space over the past 25 years or so, the next five are going to be the most interesting yet.

I'm convinced of this because of the perfect storm I've written about in the past, where there has been too much focus in this industry on building a channel based on the 80/20 rule. Too many vendors have chased this model, and as a result, distributors got caught up in it, too, based on vendor programs that encouraged volume sales through fewer partners.

Now we are in the beginning stages of major partner acquisition strategies, which I think will be driven by the value and specialty categories of distribution, ultimately making them more powerful forces in the market. They will become a critical group to vendors that ultimately will realize the need to expand their channel rather than concentrate it.

When you look at the distribution space, there really are four main categories. Broadline distribution these days has a clear leader in Ingram Micro, which has a solid and deep management team.

The more interesting space to watch in the near future is going to be the value space, where Avnet and Arrow duke it out on a regular basis. Both companies have added to their management teams and have very interesting growth plans that include international development. The international space in general is beginning to consolidate more rapidly as companies like Symantec, Xerox and others cut the number of distributors they deal with globally.

The specialty distributors are also an interesting group, but they're hard to compare to one another because they focus on such different areas. What's particularly interesting about this large group is that it has generally been the main spawning ground for new VARs, which generally start up with a focus on a technical area. That often leads them to a specialty house that can help them understand where to focus their resources.

The fourth category of distribution is the small regional player that offers a personal touch to its VAR customers.

Of the four, it will be the value and the specialty players that just may create the most news in the next few years. But in any case, this industry wouldn't exist were it not for all these players and the operational efficiencies they provide.

Where do you see the future of distribution?
Make something happen. E-mail CMP Channel President Robert Faletra at rfaletra@cmp.com.